424B4 1 tv525543-424b4.htm FORM 424(B)(4) tv525543-424b4 - none - 51.2841958s
 Filed pursuant to Rule 424(b)(4)
 Registration No. 333-232440​
7,857,145 Shares
[MISSING IMAGE: lg_prosight.jpg]
Common Stock
This is an initial public offering of shares of the common stock of ProSight Global, Inc.
We are offering 4,285,715 of the shares to be sold in this offering. Affiliates of each of The Goldman Sachs Group, Inc. and TPG Global, LLC are offering an additional 3,571,430 shares in this offering. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.
Prior to this offering, there has been no public market for our common stock. Our common stock has been approved for listing on the New York Stock Exchange under the symbol “PROS”.
We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting and disclosure requirements.
Investing in our common stock involves risk. See “Risk Factors” beginning on page 24 to read about factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Initial public offering price
$ 14.00 $ 110,000,030.00
Underwriting discount(1)
$ 0.91 $ 7,150,001.95
Proceeds, before expenses, to ProSight Global, Inc.
$ 13.09 $ 56,100,009.35
Proceeds, before expenses, to the selling stockholders
$ 13.09 $ 46,750,018.70
(1)
See “Underwriting (Conflicts of Interest)” for a description of compensation to be paid to the underwriters.
The selling stockholders have granted the underwriters the option, to the extent that the underwriters sell more than 7,857,145 shares of common stock, to purchase up to an additional 1,178,570 shares from the selling stockholders at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares against payment in New York, New York on July 29, 2019.
Goldman Sachs & Co. LLC
Barclays          ​
BofA Merrill Lynch
Dowling & Partners
Keefe, Bruyette & Woods
           A Stifel Company
SunTrust Robinson Humphrey
Citizens Capital Markets​
Prospectus dated July 24, 2019.

TABLE OF CONTENTS
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F-1
We, the selling stockholders and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
Neither we, nor the selling stockholders or the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
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Through and including August 18, 2019 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
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CERTAIN DEFINED TERMS
In this prospectus, unless otherwise specified or the context so requires:

“AZ DOI” refers to the Arizona Department of Insurance;

“Goldman Sachs” refers to The Goldman Sachs Group, Inc.;

“Gotham” refers to Gotham Insurance Company, a New York corporation and a wholly-owned subsidiary of New York Marine;

“GS Investors” refers to ProSight Parallel Investment LLC and ProSight Investment LLC, which are Delaware limited liability companies and affiliates of Goldman Sachs;

“insurance subsidiaries” refers to New York Marine, Southwest Marine and Gotham;

“New York Marine” refers to New York Marine and General Insurance Company, a New York corporation;

“NY DFS” refers to the New York Department of Financial Services;

“NYMAGIC” refers to NYMAGIC, Inc., a New York domiciled, publicly-traded specialty commercial insurance acquired by us on November 23, 2010 by merging one of our wholly-owned subsidiaries with and into NYMAGIC, and which was subsequently renamed “ProSight Specialty Insurance Group, Inc.”;

“PGHL” refers to ProSight Global Holdings Limited, a Bermuda exempt company which, prior to the reorganization described in the prospectus, is ProSight’s parent holding company;

“ProSight Global” refers to ProSight Global, Inc., a Delaware corporation and the issuer of the shares of common stock offered in this initial public offering;

“PSIG” refers to ProSight Specialty Insurance Group, Inc., a New York corporation, which is a wholly-owned subsidiary of ProSight Global and our intermediate holding company;

“PSMC” refers to ProSight Specialty Management Company, Inc., a New York corporation and a wholly-owned subsidiary of PSIG;

“selling stockholders” or “principal stockholders” refers to the GS Investors and the TPG Investors;

“Southwest Marine” refers to Southwest Marine and General Insurance Company, an Arizona corporation and a wholly-owned subsidiary of New York Marine;

“TPG” refers to TPG Global, LLC, together with its affiliates;

“TPG Investors” refers to (i) ProSight TPG, L.P., a Delaware limited partnership controlled by TPG Advisors VI, Inc. and (ii) TPG PS 1, L.P., TPG PS 2, L.P., TPG PS 3, L.P. and TPG PS 4, L.P., which are Cayman limited partnerships, controlled by TPG Advisors VI-AIV Inc., TPG Advisors VI, Inc. and TPG Advisors VI-AIV Inc.; and

“we,” “us,” “our,” “ProSight” and the “Company” refer (i) prior to the reorganization described in this prospectus, to PGHL and its consolidated subsidiaries and (ii) upon and following the reorganization, to ProSight Global and its consolidated subsidiaries.
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Presentation of financial and other information
The consolidated financial information included in the prospectus is of PGHL and its consolidated subsidiaries. Prior to the completion of this offering, we will effect the reorganization described in “Organizational Structure,” pursuant to which PGHL will merge with and into ProSight Global, Inc., with ProSight Global surviving the merger. As a consequence of this reorganization and merger, the then-outstanding Shares of PGHL (comprising 6,014,144 Shares of PGHL) will be exchanged for 38,851,369 shares of common stock of ProSight Global. Unless otherwise indicated, as used therein, “Shares” refers to PGHL’s P Shares, D-2 Shares, F-2A Shares, F-2B Shares and F-2C Shares, share equivalents and any other of PGHL’s outstanding equity securities.
In this prospectus, we present certain “non-GAAP” financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The non-GAAP financial measures used in this prospectus are underwriting income, adjusted operating income, adjusted operating return on equity, adjusted loss and LAE ratio, adjusted expense ratio and adjusted combined ratio.
We calculate underwriting income by subtracting losses and loss adjustment expenses (“LAE”) and underwriting, acquisition and insurance expenses from net earned premiums. Because underwriting income represents the pre-tax performance of our insurance operations, we believe that underwriting income is useful in evaluating our underwriting performance without regard to investment income. We define adjusted operating income as net income excluding net realized investment gains and losses and the income tax expense resulting from implementation of the Tax Cuts and Jobs Act (the “TCJA”), which was signed into law on December 22, 2017. Adjusted operating return on equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. We use underwriting income and adjusted operating income as internal measures of performance, together with other measures of performance in accordance with GAAP, because we believe they provide management and other users of our financial information useful insight into our results of operations and our underlying business performance, by excluding items that are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future. Underwriting income and adjusted operating income should not be considered in isolation or viewed as substitutes for net income calculated in accordance with GAAP. Other companies may calculate underwriting income or adjusted operating income differently. Accordingly, these measures may not be comparable to similarly titled measures of other companies. For a reconciliation of net income calculated in accordance with GAAP to underwriting income and adjusted operating income, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations —  Reconciliation of Non-GAAP Financial Measures.”
Adjusted loss and LAE ratio, adjusted expense ratio and adjusted combined ratio are defined as the corresponding ratio (calculated in accordance with GAAP) excluding the impact of the WAQS (as defined below). As part of the 2017 sale transaction to divest our U.K.-based Lloyd’s of London business, which is described elsewhere in this prospectus, New York Marine, as reinsured, entered into Whole Account Quota Share Reinsurance Agreements (the “WAQS”) with third party reinsurers to maintain reasonable underwriting leverage within New York Marine and its subsidiary insurance companies during a transition period following the U.K. divestment. During 2018 and following the transition of the U.S. business back to New York Marine, the WAQS were terminated. Previously ceded written and unearned premium, net of the ceding commission, was reversed. Loss reserves on premium earned prior to the cut-off termination remain ceded loss reserves. For additional detail on the impact of the WAQS on our results of operations see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Our Results of Operations — The WAQS.” We use these adjusted ratios as internal performance measures in the management of our operations because we believe they give our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Our adjusted loss and LAE ratio, adjusted expense ratio and adjusted combined ratio should not be viewed as
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substitutes for our loss and LAE ratio, expense ratio and combined ratio, respectively. Other companies may calculate adjusted loss ratio, adjusted expense ratio or adjusted combined ratio differently. Accordingly, these measures may not be comparable to similarly titled measures of other companies.
The financial results of the U.K.-produced business are presented as discontinued operations in our consolidated financial statements.
Market, Industry And Other Data
This prospectus includes certain market and industry data and statistics, which are based on publicly available information, industry publications and surveys, reports from government agencies, reports by market research firms and our own estimates based on our management’s knowledge of, and experience in, the insurance industry and market segments in which we compete. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. In addition, certain information contained in this prospectus, including information relating to the proportion of new opportunities we pursue, represents management estimates. While we believe our internal estimates to be reasonable, they have not been verified by any independent sources. Such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the captions “Risk Factors,” “Special Note Regarding Forward-Looking Statements and Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Trademarks and Trade Names
We own or have rights to certain trademarks and trade names that we use in conjunction with the operations of our business. Each trademark, trade name or service mark of any other company appearing or incorporated by reference in this prospectus belongs to its holder. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, such other companies.
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Prospectus Summary
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before deciding to invest in our common stock. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included in this prospectus.
Our Company and Business Overview
We are an entrepreneurial specialty insurance company that since our founding in 2009 has built products, services and solutions with the goal of significantly improving the experience and value proposition for our customers. In our view, property and casualty insurance companies and the independent agents who typically distribute their products have operated under a model where carriers have little direct connectivity to their customers and as a result, often have a limited ability and incentive to understand and service customers’ needs, or to innovate and adapt as those insurance needs change. As such, insurance products have often been viewed by customers as a commodity and the value they provide has historically been difficult for customers to accurately assess. However, technological advances better allow customers to discern and demand value, and we believe the ability of the industry to respond to this changing customer dynamic has become increasingly challenged. In light of this, we founded ProSight, with capital commitments from affiliates of each of Goldman Sachs and TPG as a different type of insurer that leverages customized technology infrastructure, underwriting expertise and unique niche focus to develop products, services and solutions that deliver distinct value to customers in the manner they prefer.
Our Company is led by a highly experienced and entrepreneurial team with decades of insurance leadership experience at ProSight and other leading insurers. We write property and casualty insurance with a focus on underwriting specialty risks by partnering with a select number of distributors, often on an exclusive basis. We have a diverse business mix covering specialty niches within the seven customer segments in which we operate. We market and distribute our insurance product offerings in all 50 states on both an admitted and non-admitted basis.1 We are focused on delivering consistent underwriting profitability with low volatility of underwriting results.
For the three months ended March 31, 2019, we wrote $255.8 million in gross written premiums (“GWP”), had a loss and LAE ratio of 60.5% and our stockholders’ equity was $426.9 million. For the three months ended March 31, 2018, we wrote $249.4 million in GWP, had a loss and LAE ratio of 60.8%. We focus on profitable growth, having generated a return on equity of 13.4% for the three months ended March 31, 2019.
For the year ended December 31, 2018, we wrote $895.1 million in GWP, had a loss and LAE ratio of 59.5% and our stockholders’ equity was $389.8 million. For the year ended December 31, 2017, we wrote $836.3 million in GWP, had a loss and LAE ratio of 64.6% and our stockholders’ equity was $376.0 million. We generated a return on equity of 14.0% for the year ended December 31, 2018.
We currently underwrite risks across seven customer segments, which represent various sub-sectors of the broader economy. Within each customer segment, we carefully identify underserved niches where we have strong expertise while avoiding easily commoditized segments within the market. Typically we only engage with one distribution partner for a given niche and endeavor to work jointly with distribution partners in developing products, services, and solutions that serve the ultimate needs of our customers. This allows our distribution partners to go to market with a differentiated set of products and solutions to attract customers and expand their businesses. In addition to working with a select group of third party distribution partners, we have developed two additional channels that are designed to enable us to engage with our customers and grow our business. ProSight Specialty
1
Insurance companies writing on an admitted basis are formally admitted or licensed to operate by the applicable state insurance agency. Admitted products' rates and forms are highly regulated, and coverages tend to be standardized. Carriers writing on a non-admitted basis are not subject to the same degree of regulatory oversight as admitted carriers, and their business is underwritten with more flexible policy forms and rates. See “Business — Industry Overview.”
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Insurance Brokerage is our owned brokerage arm and ProSight Direct is our proprietary, online direct-to-customer platform. Each niche is highly specialized and we utilize the distribution channel that is most suited to serve that particular niche while remaining committed to high underwriting standards.
Technology is a critical component of our business and we have purposefully developed an efficient, flexible and scalable operating platform. This enables us to respond to market opportunities in a targeted fashion, developing tailored systems that serve distribution partners and customers in our niche lines. The key features of our technology, which support our business model are: (1) We are not burdened by multiple legacy systems and are therefore able to quickly respond to changing industry dynamics and focus our IT investments on innovation. (2) Our core customer-facing policy administration and billing systems, “ProSight Premiere”, have been architected and developed by us, and are internally maintained, to meet the needs of our growing insurance business. (3) Through our exclusive enterprise data warehouse and financial reporting system “ProSight Climber GPS”, we have the ability to access and mine data to manage our business and help inform our underwriting and reserving decisions on a real-time basis. (4) Our application programming interface-enabled (“API-enabled”) core systems and strong mobile development capabilities allow our customers and agents to interact with us in an easy and efficient manner. Our interactive platform, ProSight Online, is available to all of our customers and allows them to view policy, billing, claims and loss information, all from a mobile device. (5) Our unified cloud infrastructure enables us to operate our platform efficiently, deploy new services rapidly, and scale for the future.
Our Customer Segments and Niches
We currently write insurance coverage in seven customer segments across a broad range of specialty lines of business. Our customer segments currently include: Media and Entertainment, Real Estate, Professional Services, Transportation, Construction, Consumer Services and Marine and Energy. Within each customer segment, we have multiple niches which represent similar groups of customers. We believe having deep expertise in these niches across our organization is critical and therefore, we have aligned various functional areas at the niche level, including underwriting, operations and claims. We focus on small- and medium-sized customers, a market segment which we believe has been, and will continue to be, less affected by intense competitive dynamics of the broader property and casualty insurance industry.
Over time, the composition of business within our customer segments evolves as we identify certain niches that present opportunities to develop distinct customer solutions with attractive profit potential and others that were at one time attractive but may become less so. We believe our ability to remain nimble during changing market conditions is one of our key competitive advantages.
The following exhibit illustrates our customer segments and corresponding niches, and presents the GWP and percentage of total GWP written in 2018 within each of our customer segments and “Other”.
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[MISSING IMAGE: tv511282_chrt-org2.jpg]
Note:
GWP includes business from certain niches that are no longer part of our ongoing business. All GWP from exited niches are included in “Other” which consists of  (1) primary and excess workers’ compensation coverage for Self-Insured Groups (2) niches exited prior to 2018, many with a concentration in commercial auto, (3) fronting arrangements in which all premium written is ceded to a third party, (4) participation in industry pools, and (5) emerging new business customer segments.
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We operate primarily in casualty lines and have limited exposure to property catastrophe risks. Catastrophe losses and LAE2 have affected our overall loss and LAE ratio by 0.8% on average over the last five years. We actively use ceded reinsurance across our book of business to reduce our overall risk position and to protect our capital. We write minimal assumed reinsurance business, with 99.4% of our GWP for 2018 written on a direct basis.
The following exhibit illustrates our mix of business by GWP from all customer segments across each of our lines of business and distribution channels.
2018 GWP from Customer Segments by
Line of Business
2018 GWP from Customer Segments by
Distribution Channels(1)
[MISSING IMAGE: tv511282_chrt-pie1.jpg]
[MISSING IMAGE: tv515797_chrt-pie4.jpg]
(1)
Retail of 33% includes 15 niches, Wholesale of 12% includes 3 niches, and MGU of 53% includes 17 niches written through 14 MGUs.
Total 2018 GWP from Customer Segments: $770.9 million
Our Competitive Strengths
We believe that the following competitive strengths have supported our success to date and provide a foundation for future growth:

Focus on profitable niches of the market where we have industry leading expertise and can deliver value to our customers.   We have been selective in developing our niches within customer segments for which we have in-house expertise and will continue to focus on providing differentiated products, services and solutions that truly serve customer needs and offer attractive and profitable growth opportunities. We have a strong focus on fragmented and underserved markets which we believe have an attractive risk-adjusted return profile. We choose to avoid markets that are susceptible to commoditization by incumbent industry participants. We have specific and unique expertise such as underwriting knowledge and data, loss mitigation techniques, customer access, and claims handling for each niche that we believe are difficult to replicate. We believe that this expertise enables us to accurately price risk, deliver profitable underwriting results and retain this profitable business. For 2018, we achieved an 82.6% premium renewal retention on business that we classify as eligible for renewal. We have aligned our organization accordingly such that our underwriting, operational and claims personnel are dedicated to specific niches within a given customer segment, which differentiates us and we believe is an important component of our financial performance.

Creation of products, services and solutions that deliver a high value proposition to our customers.   We believe we will continue to succeed by proactively developing what
2
“Catastrophe losses and LAE” are any one claim, or group of claims, equal or greater than $1.0 million related to a single PCS® designated catastrophe event. PCS® is Property Claim Services, a Verisk company. PCS® has defined catastrophes in the United States, Puerto Rico, and the U.S. Virgin Islands as events that cause $25.0 million or more in direct insured losses to property and affect a significant number of policyholders and insurers. PCS® investigates loss events in those regions to determine whether the damage meets the threshold necessary.
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we refer to as “differentiators,” which can be in the form of products, services, or solutions that are tailored to our customers. We often partner with our customers and distributors when developing differentiators and leverage their particular knowledge of their own needs and the needs of their customers, respectively. Unlike typical insurance companies, we co-own the intellectual property associated with the differentiators developed with our distributors during the term of our contractual relationships, allowing for a better alignment of incentives. We have dozens of differentiators across our niches, with many differentiators applicable to multiple niches. Examples of our differentiators include a customer solution called SecureFleet®, which provides video camera devices for commercial vehicles to monitor driver behavior and manage claim activity. In our Media and Entertainment customer segment, we have a differentiator called Complete®, which is the industry’s first comprehensive film completion guaranty that combines insurance coverage with a completion bond. We believe our customers place meaningful value on the collective offering of differentiators we provide, which distinguishes us in the market. In addition, we aim for and achieve an exceptional customer service experience, as supported by thousands of survey responses since June 2017 with 86% rating the experience as “awesome” and 98% as “awesome” or “good”.

Sophisticated underwriting tools that deliver prompt underwriting responses and profitable results.   We have developed a multi-faceted pricing strategy that is tightly integrated into niche development, from inception to maturity. Pricing begins when a new niche is identified and submitted for internal review and approval by underwriting and actuarial management, which we believe produces a filtering mechanism that helps us pursue only the opportunities best aligned with our strategy. For those niches that make it through the submission process, targets and metrics are established immediately to monitor the early development of the niche. We believe such monitoring allows for early detection of anomalies which can then quickly be remedied by the underwriting team. We employ our ProSight Climber GPS application to conduct such monitoring and review of our underwriting and reserving decisions on a real-time basis. We are highly selective in choosing which new opportunities to pursue; we estimate that we decline approximately 80% of the opportunities we evaluate. We believe that this comprehensive and collaborative approach results in profitable growth for us.

Long-standing and selective relationships with our distribution partners.   We have designed an innovative distribution model with a highly targeted customer focus by engaging a limited number of distribution partners. For each niche, we partner with either a single or a select group of specialist distributors who have a deep understanding of our customers and their risk profiles. In many of our niches, our agency and brokerage relationships are structured so that we work with a particular distribution partner on an exclusive basis. More than 70% of our 2018 GWP was produced on such an exclusive basis. Our goal is to structure distribution relationships so that we are aligned with the distributor towards achieving scale and underwriting profit in our customer segments, and they are compensated accordingly. By offering exclusivity and an aligned compensation structure, we incentivize our distributors to deliver value to our customers and offer them an advantage over generalist agents.

Highly entrepreneurial culture and management team with a track record of success.   We have a seasoned and entrepreneurial management team with decades of experience. Each member of our management team has served in a senior leadership role at a major insurance company prior to joining ProSight and our founders all have extensive careers in underwriting. Our current leadership team has founded and built ProSight from the ground up and has strong alignment of interest with shareholders.
Our Chief Executive Officer, Lawrence Hannon, is a founding member of ProSight and has more than 28 years of underwriting and operational experience in the insurance industry. Prior to becoming our Chief Executive Officer in May 2019, Mr. Hannon served as our Chief Operating Officer.
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Our Chief Underwriting Officer, Robert Bailey, is a founding member of ProSight and has more than 29 years of underwriting experience in the insurance industry.
Our Chief Financial Officer, Anthony S. Piszel, joined ProSight in 2012 and has more than 38 years of experience in the financial services industry including as Chief Financial Officer of public companies.
Our Chief Legal Officer, Frank D. Papalia, joined ProSight in 2011 and has over 32 years of legal and business experience in the insurance industry
We have instilled this entrepreneurial mentality throughout all levels of our Company. Our employees are encouraged to be proactive, to service our customers and distributors and ensure the success of our Company. We believe our people are our greatest strength, and we work consistently to foster a culture emphasizing customer focus, professional growth, accountability, and performance. This mentality is built into the mechanisms of our employee assessment and compensation.

Deep investment in and innovative approach to technology.   Technology is a core competency of ProSight and at the heart of how we deliver our high value customer proposition. We have an exclusively configured, scalable, and digitally-enabled technology platform built for growth, data integrity, and efficiency, which allows us to deploy the necessary technologies to respond quickly to business opportunities. We have invested in the development of a modern core insurance system for policy administration and billing that forms the foundation of our customer facing digital technologies. As a result, we can rapidly develop flexible, customer facing solutions. We have demonstrated our ability to develop and deploy digital products for our agents and customers that are delivered via the web over desktop and mobile devices. We consider our ability to meet ever increasing customer demands for anytime, anywhere access as a competitive strength compared to traditional and emerging carriers.

Scalable platform built for continued growth.   We have built our systems, processes and technology platform to be easily scalable with limited incremental marginal cost, as we see multiple opportunities to grow our business at a rate that is well in excess of the broader P&C insurance industry. Our licensing, infrastructure and applications have been designed to support a significantly larger book of business, and also have the ability to manage a high volume of small business customers through ProSight Direct. We currently have a competitive expense ratio that can decrease over time as we expand our premium base and diversify our distribution channels that are available to cover the largely fixed costs of maintaining this infrastructure. Our absence of legacy infrastructure and systems means we can direct our spending towards expanding our technology innovation rather than maintenance and upkeep of outdated technology.
Our Strategy
Our objective is to leverage our competitive strengths to achieve profitable and sustainable growth. We have built a large, diversified and seasoned in-force book of business. Our strategy is built on the following principles:

Utilize our specialized products, services and solutions to continue our growth trajectory in markets where we exhibit expertise.   We have been selective in developing our target niches and will continue to focus on providing differentiators within niches that we believe offer attractive and profitable growth opportunities. We expect future growth to come from three primary areas. (1) We have robust growth opportunities in existing niches where we seek to deepen our presence. We have historically experienced profitable growth in these lines. (2) We expect to selectively enter new niches within our existing customer segments, particularly those where we have developed expertise and a new adjacent niche provides a unique opportunity. (3) We expect to remain nimble during changing market conditions and enter new customer segments as we identify a sector of the
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marketplace that presents an attractive opportunity. Generally, we believe that our differentiation and the value propositions we generate for our customers through our niche-by-niche growth strategy creates a profit opportunity for us.

Expand multi-pronged distribution network to best serve our customers in the most efficient and effective manner.   We deliver our products through three channels: (1) third party partnerships via retail agents or managing general underwriters (“MGUs”) with whom we customarily have long-standing relationships; (2) our owned brokerage arm, ProSight Specialty Insurance Brokerage; and (3) our proprietary ProSight Direct technology platform. We do not experience any channel conflicts as each one of our specialized niches is only distributed through one channel. When developing a niche we choose the channel that is most suited to reach the target customer.
While our third party partnerships are well established, we believe ProSight Specialty Insurance Brokerage and ProSight Direct are new opportunities that will provide future opportunities for growth and we continue to build out their capabilities.
ProSight Specialty Insurance Brokerage is our owned brokerage platform that focuses on expertise, limited distribution, and differentiation. We developed this channel to reach customers for customer segments where we are not able to find a strong distribution partner that is a perfect fit to reach the end customers for our innovative products. We have written $16.6 million of premium through our ProSight Specialty Insurance Brokerage channel in 2018, the first full year of its operation.
ProSight Direct is a technology platform that transforms the insurance purchasing experience, enabling prospective customers to purchase insurance through a streamlined, easy-to-use application. ProSight Direct provides an end-to-end experience that simplifies the customer lifecycle from quote to claim, and provides “anytime, anywhere” access for managing all aspects of their insurance, including managing certificates of insurance and the claims process online. Our current strategy within this channel includes partnering with affinity organizations where we can provide collaborative marketing capabilities to one another.

Maintain strong underwriting discipline and profitability.   We seek to maintain underwriting profitability while pursuing sustainable growth through a robust risk selection process. Our underwriting teams are led by experts in the niches we serve and we target niche markets that are homogeneous blocks of actuarially credible businesses that have performed at favorable loss ratios. In 2018, 87% of our GWP from customer segments represent niches that have been written by us for five or more years. We have experienced stable loss ratios and limited claims volatility in these niches since 2014. We will continue to focus exclusively on business with an attractive risk-adjusted return profile and will not participate in markets that are commoditized and where we cannot add incremental value. Transactions involving approximately 60% of our annual GWP from customer segments are executed by ProSight underwriters who are experts in their specific niche. Transactions involving the remainder of our GWP are handled by our MGUs, subject to the authority that the Chief Underwriting Officer (“CUO”) has delegated to them. All of our underwriting authority delegated to MGUs is subject to stringent guidelines and regular audits. Our strong focus on underwriting expertise has led to favorable financial results. For the three months ended March 31, 2019, we generated net income of  $13.7 million and adjusted operating income of  $13.6 million which resulted in an adjusted operating return on equity for the same period of 13.3%. For the year ended December 31, 2018, we generated net income of $53.7 million and adjusted operating income of  $55.3 million which resulted in an adjusted operating return on equity for the same period of 14.4%. Our portfolio has delivered a net loss ratio of 64% since ProSight’s inception.
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Leverage our technology platform to drive operational efficiencies and digital capabilities.   We have built an IT platform that encompasses a streamlined core system suite, customized digital solutions, and scalable and resilient cloud infrastructure. We have made significant investments to build out robust data capture capabilities that allow for a dynamic rate and loss management process as datasets evolve. Additionally, our flexible platform is able to seamlessly underwrite and onboard new business as we continue to expand. We believe we are well positioned to grow in an evolving shared economy with our exclusive technology infrastructure. Our expense ratio can decrease as we expand our business, as our platform provides us with a high degree of operational leverage. We plan to maintain and expand our technology leadership by developing new tools and applications for our distribution partners and customers.

Maintain our strong balance sheet.   We believe a conservative balance sheet is foundational to our ability to deliver superior financial performance and returns. We have continuously maintained a rigorous reserving approach and monitor loss emergence and developments on a monthly basis in addition to our detailed quarterly reviews and daily monitoring by executive management. We protect our capital by utilizing high-quality reinsurers, setting retentions appropriate to the extent and nature of exposures we wish to retain, maintaining a strong enterprise risk management framework, closely monitoring regulatory and market developments, and adapting our approach to achieve our underwriting and risk management goals. We also follow a conservative investment portfolio management philosophy consistent with our objective to achieve consistent and predictable profitability through a careful analysis of risk and return. We believe that our investment portfolio provides sufficient liquidity to pay for the liabilities relating to the risks we underwrite while achieving attractive returns on investment. We have a high-quality, well-diversified investment portfolio with 94.9% invested in fixed maturities and an average credit quality rating of  “A” as of March 31, 2019. We also will seek to maintain a competitive rating with A.M. Best, where our insurance subsidiaries are currently rated “A-” (Excellent) (Outlook Stable), which is the fourth highest of 16 ratings assigned by A.M. Best to insurance companies. Maintaining a strong rating from A.M. Best enables us to easily demonstrate our financial strength to policyholders, which is often a critical factor in the decision to purchase insurance. This rating is intended to provide an independent opinion of an insurer’s ability to meet its obligations to policyholders and is not an evaluation directed at investors with respect to our securities.
Recent Developments
We are currently finalizing our unaudited interim consolidated financial statements for the three months ended June 30, 2019. While our unaudited interim consolidated financial statements for such period are not yet available, based on the information currently available, we preliminarily estimate the following:

Gross written premiums are expected to be approximately $235 million for the three months ended June 30, 2019, an increase of 5.5% compared to $223 million for the three months ended June 30, 2018. Excluding Other, gross written premiums are expected to be approximately $230 million for the three months ended June 30, 2019, an increase of 10% compared to $207 million for the three months ended June 30, 2018.

The combined ratio for the three months ended June 30, 2019 is expected to be approximately 98%, composed of a loss and LAE ratio of approximately 63% and an expense ratio of approximately 35%. The combined ratio for the three months ended June 30, 2018 was 97%, composed of a loss and LAE ratio of 60% and an expense ratio of 37%.

Net investment income for the three months ended June 30, 2019 is expected to be approximately $17 million, an increase of 12% compared to $16 million for the three months ended June 30, 2018.
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Net income from continuing operations for the three months ended June 30, 2019 is expected to be approximately $8 million, which includes one-time expenses of approximately $7 million related to the transition of our previous Chief Executive Officer. Adjusted operating income for the three months ended June 30, 2019 is expected to be approximately $14 million. Net income from continuing operations and adjusted operating income were $15 million and $14 million, respectively, for the three months ended June 30, 2018.

Shareholders’ equity is expected to be approximately $455 million as of June 30, 2019, compared to $427 million as of March 31, 2019.

Adjusted operating return on equity is expected to be approximately 12-13% for the three months ended June 30, 2019, compared to 15% for the three months ended June 30, 2018.
The preliminary financial information above is unaudited and there can be no assurance that it will not vary from our actual financial results for the three months ended June 30, 2019. The preliminary financial information above reflects estimates based only on preliminary information available to us as of the date of this prospectus, has not been subject to our normal quarterly closing procedures and adjustments, and is not a comprehensive statement of our financial results for the three months ended June 30, 2019. Accordingly, you should not place undue reliance on these preliminary estimates, which should not be viewed as a substitute for full quarterly financial statements prepared in accordance with GAAP. We caution you that these preliminary results for the three months ended June 30, 2019 are not necessarily indicative of any future period and that actual results may differ materially from those described above. You should read this information together with “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Consolidated Financial Data” and our consolidated financial statements and the notes thereto included elsewhere in this prospectus. The preliminary financial information above has been prepared by, and is the responsibility of, our management.
Reconciliation of adjusted operating income
Adjusted operating income is a non-GAAP financial measure that we use as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and underlying business performance, by excluding items that are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future. Adjusted operating income should not be considered in isolation or viewed as a substitute for our net income calculated in accordance with GAAP. Other companies may calculate adjusted operating income differently.
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Adjusted operating income for the three months ended June 30, 2019 and 2018 reconciles to net income as follows:
Three Months Ended June 30
($ in millions)
2019
(Estimated)
2018
(Estimated)
Net income
$ 8 $       15
Income tax expense
3 3
Income before taxes
11 18
Transition expenses and Net realized investment (gains)
7 (1)
Adjusted operating income before taxes
18 17
Less: Income tax expense on adjusted operating income
4 3
Adjusted operating income
14 14
Adjusted operating return on equity
12 – 13% 15%
Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects that you should consider before making a decision to invest in shares of our common stock. These risks are discussed more fully in “Risk Factors” in this prospectus. The following is a summary of some of the principal risks we face:

We rely upon third-party agents and vendors to distribute certain business on our behalf. Our distribution model therefore relies partially upon the expertise, creditworthiness and performance of certain of our key agents. Such agents may not perform as anticipated, or may be acquired or terminate their agreements with us, which could have an adverse effect on our business results and operations.

Our loss reserves are based on estimates and there is no precise method for evaluating the impact of any specific factor on the adequacy of reserves and actual results are likely to differ from original estimates. Accordingly, our loss reserves may be inadequate to cover our actual insured losses, in which case our profitability could suffer.

Our risk management policies and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk, which could adversely affect our bussiness of results of operations.

Technology breaches or failures of our or our business partners’ systems, including but not limited to cybersecurity incidents, could disrupt our operations and result in the loss of critical and confidential information, which could adversely impact our reputation and results of operations.

Adverse changes in the economy could lower the demand for our insurance products and could have an adverse effect on the revenue and profitability of our operations. Factors such as business revenue, government spending, the volatility and strength of the capital markets and inflation can affect the business and economic environment and our ability to generate revenue and profits.

Access to capital and market liquidity may adversely affect our ability to take advantage of business opportunities as they arise and to fund our operations in a cost-effective manner.

We may not be able to effectively start up or integrate new product opportunities. New product launches as well as resources to integrate business acquisitions are subject to
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many obstacles, including ensuring we have sufficient business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens and planning for internal infrastructure needs.

Our results of operations and revenues may fluctuate as a result of many factors, including cyclical changes in the insurance industry. During weak markets characterized by lower prices, it may be difficult for us to grow or maintain premium volume levels without sacrificing underwriting profits. In addition, our overall profitability can be affected by volatile and unpredicted developments including rising levels of loss costs, catastrophes, new types of claims or changing judicial interpretations. Fluctuations in profitability may not reflect our long-term results and may cause the price of our securities to be volatile.

We compete with a large number of companies in the insurance industry for underwriting revenues. Competition could cause the supply and/or demand for our insurance products to change, which could affect our ability to price our coverages at attractive rates and thereby adversely affect our underwriting results.

A downgrade in our Financial Strength Ratings from A.M. Best could negatively affect our results of operations, as such ratings are a critical factor in establishing the competitive position of insurance companies.

Natural and man-made catastrophic events have adversely affected our business in the past and could do so in the future.

The effects of emerging claim and coverage issues on our businesses are uncertain. Such unexpected and unintended issues may emerge as industry practices and economic, legal, judicial, social and other environmental conditions change and could harm our business and materially and adversely affect our results of operations.

Concentrations of our insurance policies and other risk exposures may adversely affect our results of operations.

Negative developments in the economic, competitive or regulatory conditions affecting the workers’ compensation insurance industry could adversely affect our financial condition and results of operations.

Global climate change may in the future increase the frequency and severity of whether events and resulting losses, particularly to the extent our policies are concentrated in geographic areas where such events occur.

We may have exposure to losses from acts of terrorism as we are required to provide certain coverage for such losses.

Our ultimate financial obligations to the buyers of our U.K. operations may be greater than expected, which could adversely affect our profitability.

The failure of any of the loss limitation methods we employ, such as adhering to maximum limitations on policies written in defined geographical zones, limiting niche size for each customer, establishing per-risk and per-occurrence limitations for each event and employing coverage restrictions, could have a material adverse effect on our financial condition and results of operations.

Pricing for our products is subject to our ability to adequately assess risks and estimate losses, including the models that we use to do so. Given the inherent uncertainty of models, the usefulness of such models as a tool to evaluate risks is subject to a high degree of uncertainty that could result in actual losses that are materially different than our estimates which may adversely affect our financial results.
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Reinsurance may not be available or affordable and may not be adequate to protect us against losses, which could be material. Risk retentions in various lines of business expose us to potential losses. In addition, our reinsurers may not pay on losses in a timely fashion, or at all.

Our investment results and, therefore, our financial condition may be affected by changes in the business, financial condition or results of operations of the entities in which we invest, as well as changes in interest rates, government monetary policies, general economic conditions, liquidity and overall market conditions.

The historical performance of our investment portfolio should not be considered as indicative of the future results of our investment portfolio, our future results or any returns expected on our common stock. A significant amount of our assets is invested in marketable securities and subject to market fluctuations.

Changes in the method for determining the London Interbank Offer Rate and its potential replacement may affect our cost of capital and net investment income.

Our business is dependent on the efforts of our principal executive officers because of their industry expertise, knowledge of our markets and relationships with our distributors and we may be unable to find acceptable replacements should any of them cease working with us. We may be unable to attract and retain other qualified key employees.

Third-party vendors we rely upon to provide certain business and administrative services on our behalf may not perform as anticipated, which could have an adverse effect on our business and results of operations.

Employee and third-party error and misconduct may be difficult to detect and prevent and may result in significant losses.

Any significant interruption in the operation of our facilities, systems and business functions could adversely affect our results of operations. We rely on multiple computer systems to interact with customers, issue policies, pay claims, run modeling functions, assess insurance risks and complete various important internal processes including accounting and bookkeeping. Any issues with such systems could materially impact our company and interrupt our general business.

Increasing regulatory focus on privacy issues and expanding laws could affect our business model and expose us to increased liability.

We will incur increased costs as a result of operating as a public company, and operating as a public company will place additional demands on our management.

Any failure to protect our intellectual property rights could impair our intellectual property, proprietary technology platform and brand. In addition, we may be sued by third parties for alleged infringement of their proprietary rights.

Changes in accounting policies and future pronouncements may materially affect our reported financial results.

Our failure to accurately and timely pay claims could materially and adversely affects our business, financial condition, results of operations and prospects.

If actual renewals of our existing contracts do not meet expectations, our written premiums in future years and our future results of operations could be materially adversely affected.

We are subject to extensive governmental regulation, which may adversely affect our ability to achieve our business objectives. Moreover, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition, results of operations and reputation.
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New regulations may affect our business, financial condition, results of operations and ability to compete effectively.

We are an insurance holding company and our ability to receive dividends from our insurance subsidiaries is subject to regulatory constraints.

We could be adversely affected by recent and future changes in U.S. federal income tax laws.

We may suffer losses from litigation, which could adversely affect our business and financial condition.

Goldman Sachs, which is one of our principal stockholders, is regulated as a bank holding company that has elected to be treated as a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). We are and will continue to be deemed a “subsidiary” of Goldman Sachs under the BHC Act until Goldman Sachs is no longer deemed to control us for purposes of the BHC Act. Our status as a “subsidiary” of Goldman Sachs for purposes of the BHC Act may limit our business activities.

Our principal stockholders will continue to have significant influence over us following the completion of this offering, and their interests could conflict with those of our other stockholders. The Stockholders’ Agreement among us and the principal stockholders will, among other things, provide that the principal stockholders will initially designate four of the ten members of our board of directors.

As long as our principal stockholders own a majority of our common stock, we may rely on certain exemptions from the corporate governance requirements of the NYSE available for “controlled companies”. If we elect to rely on such exemptions, our stockholders will not have certain of the protections afforded to stockholders of companies that are subject to all the corporate governance requirements of the NYSE.

Our principal stockholders could sell their interests in us to a third party in a private transaction, which may not lead to your realization of any change-of-control premium on shares of our common stock and would subject us to the influence of a presently unknown third party.

We do not anticipate declaring or paying regular dividends on our common stock in the near term, and our indebtedness could limit our ability to pay dividends on our common stock.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, of Delaware corporate law and of state insurance laws, may prevent or delay an acquisition of us.
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to public companies in the United States. These provisions include:

reduced compensation disclosure requirements;

an exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting; and

an extended transition period to comply with new or revised accounting standards applicable to public companies.
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We will remain an emerging growth company until the earliest to occur of:

the last day of the fiscal year in which we have annual gross revenues of  $1.07 billion or more;

the date on which we have issued more than $1.0 billion in non-convertible debt in the previous three years;

the date we qualify as a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates is $700 million or more; and

the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
We have availed ourselves of reduced reporting requirements in this prospectus. In particular, in this prospectus, we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. We expect to continue to avail ourselves of the emerging growth company exemptions described above. In addition, we may but do not expect to avail ourselves of the extended transition period for complying with new or revised accounting standards. As a result of these exemptions, the information that we provide to stockholders will be less comprehensive than what you might receive from other public companies.
Our History and Structure; Principal and Selling Stockholders
We were founded in 2009 by members of the current management team and secured capital commitments from affiliates of each of Goldman Sachs and TPG. We established our insurance operating platform and acquired our insurance subsidiaries through the acquisition of NYMAGIC in 2010.
We write insurance out of three subsidiaries: New York Marine, Gotham and Southwest Marine. New York Marine is admitted in 50 states, Washington D.C., Puerto Rico and the Virgin Islands. Southwest Marine is licensed in 49 states and Washington D.C. and it is eligible to write on a non-admitted basis in New York. Gotham is admitted in New York and it is eligible to write on a non-admitted basis in 49 states and Puerto Rico.
The insurance subsidiaries participate in a risk sharing pool managed by PSMC. This structure allows us to leverage the efficiencies of having a single vehicle managing operations and providing back-office services across our business. All premiums, losses and expenses written by our insurance subsidiaries are pooled and then are allocated to these three insurance subsidiaries in accordance with their respective pool participation percentages. The pool participation percentages are 80% for New York Marine, 15% for Gotham and 5% for Southwest Marine.
In November of 2011, we formed a Bermuda holding company structure and acquired several entities in the U.K. to build our own Lloyd’s syndicate. Our principal objective was to achieve greater capital and tax efficiency for our growing U.S. niche business. We also considered opportunities to use this as a platform to extend our niche strategy to the U.K. and Europe. By 2015, however, we determined that we would not be able to profitably achieve our objectives due to two principal factors. Firstly, a significant driver of the success of our U.S.-sourced business is the extensive control and oversight of our niche specialized internal and external underwriters. In contrast, in the UK, the regulatory framework required us to operate the syndicate as an independent entity, largely excluded from oversight by the U.S. management team. As a result, our Group Chief Underwriting Officer could not serve on the board of directors of the U.K. entities nor have final underwriting authority for non-U.S. sourced business. In addition, given the growing predominance of the U.S. underwritten business in the syndicate, the syndicate was required to develop an organic and independent growth strategy for U.K.-sourced business. The independently underwritten U.K. business did not execute upon our niche strategy, and generated unacceptable loss ratios and acquisition costs. Secondly, while we had success in writing and reinsuring profitable U.S. sourced business into our syndicate, the U.S. business had become a disproportionately high percentage of the total syndicate book, and therefore our U.S. underwriting entity was treated as an independent Lloyd’s coverholder. As such, we were required to
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deploy redundant control and underwriting resources in the U.K. to oversee our U.S. book. This resulted in an unacceptable increase in the syndicate expense ratio. Given the uneconomic loss and expense costs associated with operating in Lloyd’s, in 2015 we began evaluating an exit from the Lloyd’s market and the repatriation of our U.S. business. The exit timeframes were extended due to capital constraints in our U.S. underwriting entity and protracted exit negotiations. In 2017, we entered into a two-phase sale transaction, which closed in October 2017 and March 2018. See “Organizational Structure” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Our Results of Operations.”
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As of the date of this prospectus, PGHL is our parent holding company. The diagram below depicts our current organizational structure:
[MISSING IMAGE: tv509807_chrt-flow1.jpg]
Prior to the completion of this offering, we will effect the reorganization described in “Organizational Structure,” in which PGHL will merge with and into ProSight Global, with ProSight Global surviving the merger. The current holders of PGHL’s equity interests (other than holders of the P Shares) will receive, as merger consideration, 38,851,369 shares of ProSight Global’s common stock in accordance with the provisions of PGHL’s bye-laws. Immediately following the merger, but prior to the completion of this offering, our principal stockholders will hold approximately 98.1% of our common stock and the remaining 1.9% will be held by certain minority investors, including certain members of our management (the “management and other investors”).
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Immediately following the completion of this offering, our principal stockholders will hold approximately 80.3% of our common stock, 1.4% will be held by the management and other investors and the remaining 18.3% will be held by public stockholders. The diagram below depicts our organizational structure immediately following this offering:
[MISSING IMAGE: tv525543_chrt-flow2.jpg]
Our Corporate Information
ProSight Global, Inc. was incorporated as a Delaware corporation on February 24, 2010. Our principal executive office is located at 412 Mt. Kemble Avenue, Suite 300, Morristown, NJ 07960 and our telephone number is (973) 532-1900. Our website address is www.prosightspecialty.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus.
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The Offering
Common stock offered by us
4,285,715 shares.
Common stock offered by the selling stockholders
3,571,430 shares (or 4,750,000 shares if the underwriters exercise their option to purchase additional shares in full).
Common stock to be outstanding immediately after this offering
42,999,097 shares.
Use of proceeds
We estimate that the net proceeds to us from this offering will be approximately $51.6 million (after deducting underwriting discounts and commissions and estimated offering expenses payable by us).

We intend to use the net proceeds from this offering for general corporate purposes.

We will not receive any of the proceeds from the sale of shares by the selling stockholders. See “Use of Proceeds.”
Conflicts of Interest
Certain affiliates of Goldman Sachs & Co. LLC, an underwriter in this offering, own in excess of 10% of the Company’s issued and outstanding common stock and are participating as selling stockholders in this offering. Under the rules of FINRA, Goldman Sachs & Co. LLC is deemed to have a conflict of interest with us. Because of this conflict of interest, this offering is being conducted in accordance with FINRA Rule 5121. See “Underwriting (Conflicts of Interest).”
Listing
Our common stock has been approved for listing on the New York Stock Exchange.
Proposed ticker symbol
“PROS”
The number of shares of our common stock that will be outstanding after this offering is based on 38,851,369 shares of common stock outstanding as of March 31, 2019 (after giving effect to the merger of PGHL with and into ProSight Global described under “Organizational Structure”) and excludes:

4,500,000 shares of common stock reserved for issuance under the 2019 Equity Incentive Plan described in “Executive Compensation — Equity Plans — 2019 Equity Incentive Plan”, including:

668,135 restricted stock units (“RSUs”) initially granted under the 2010 Equity Incentive Plan described in “Executive Compensation — Equity Plans — 2010 Equity Incentive Plan” and converted into RSUs based on our shares of common stock upon the merger of PGHL with and into ProSight Global;

183,095 2019 annual long-term incentive awards, 50% of which are time-vesting RSUs and 50% of which are performance-vesting RSUs, granted to management in connection with this offering;

1,302,198 supplemental RSUs, 100% of which are time-vesting RSUs, granted to management in connection with this offering;

250,000 founders grants, 100% of which are time-vesting RSUs, granted in connection with this offering to Messrs. Hannon and Bailey; and
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26,399 non-employee director RSUs (other than RSUs granted to non-employee directors designated by the principal stockholders, if any, which shall be determined by the Board of Directors), which are fully vested on grant, granted to our non-employee directors in connection with this offering; and

1,000,000 shares of common stock reserved for sale under the 2019 Employee Stock Purchase Plan described in “Executive Compensation — Equity Plans — 2019 Employee Stock Purchase Plan.”
Unless otherwise indicated, all information in this prospectus assumes:

the consummation of the merger of PGHL with and into ProSight Global, as described under “Organizational Structure”, which will occur after the date of this prospectus and prior to the completion of this offering, and, in connection with the merger, the amendment and restatement of our certificate of incorporation, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part; and

no exercise by the underwriters of their right to purchase up to an additional 1,178,570 shares of our common stock.
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Summary Consolidated Financial Data
The following summary consolidated financial data as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. In the opinion of the management, the unaudited consolidated financial data for the interim periods included in this prospectus include all normal and recurring adjustments that we consider necessary for the fair presentation of such data for the respective interim periods.
The following summary consolidated financial data as of December 31, 2018 and 2017 and for each of the three years in the period ended December 31, 2018, are derived from our audited consolidated financial statements and the accompanying notes that are included elsewhere in this prospectus. The summary consolidated financial data as of December 31, 2016 are derived from our audited consolidated financial statements and the accompanying notes, which are not included in this prospectus. The historical results presented below are not necessarily indicative of financial results to be achieved in future periods.
The income statement information and related underwriting and other ratios presented below are for our continuing operations. The financial results of the U.K.-produced business are presented as discontinued operations in our consolidated financial statements and are excluded from the income statement information below. The summary balance sheet information also excludes specific assets and liabilities related to our discontinued operations. The assets and liabilities of the discontinued operations are only included in total assets, total liabilities and total shareholder’s equity. The summary consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.
Three Months
Ended March 31
Year Ended
December 31
2019
2018
2018
2017
2016
($ in thousands, except for per share data)
Revenues:
GWP(1) $ 255,838 $ 249,420 $ 895,112 $ 836,334 $ 771,995
Ceded written premiums
(45,936) 11,932 (45,038) (276,048) (85,312)
Net written premiums
$ 209,902 $ 261,352 $ 850,074 $ 560,286 $ 686,683
Net earned premiums
$ 195,608 $ 167,456 $ 730,785 $ 609,786 $ 675,778
Net investment income
17,158 13,709 55,971 36,196 28,052
Net investment gains (losses)
113 (287) (1,557) 4,204 (6,147)
Other income
93 168 673 853 1,057
Total revenues
$ 212,972 $ 181,046 $ 785,872 $ 651,039 $ 698,740
Expenses:
Losses and LAE
$ 118,333 $ 101,854 $ 434,830 $ 393,741 $ 489,464
Underwriting, acquisition and insurance expenses
73,767 63,593 271,547 213,844 241,873
Interest and other expenses
3,362 3,031 12,377 12,125 12,125
Total expenses
$ 195,462 $ 168,478 $ 718,754 $ 619,710 $ 743,462
Income (loss) before taxes
17,510 12,568 67,118 31,329 (44,722)
Income tax expense (benefit)
3,815 2,558 13,389 38,233 (23,988)
Net income (loss) from continuing
operations 
$ 13,695 $ 10,010 $ 53,729 $ (6,904) $ (20,734)
Underwriting income (loss)(2)
$ 3,508 $ 2,009 $ 24,409 $ 2,201 $ (55,559)
Adjusted operating income (loss)(3)
$ 13,582 $ 10,297 $ 55,286 $ 13,992 $ (14,587)
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Three Months
Ended March 31
Year Ended
December 31
2019
2018
2018
2017
2016
($ in thousands, except for per share data)
Per share of common stock data:
Continuing operations only
Basic earnings per share:
Common stock
$ 2.28 $ 1.67 $ 8.96 $ (1.19) $ (3.79)
Basic earnings per share, after giving effect to
the merger of PGHL with and into ProSight
Global:
Common stock
$ 0.35 $ 0.26 $ 1.39 $ (0.18) $ (0.59)
Diluted earnings per share:
Common stock
$ 2.24 $ 1.64 $ 8.80 $ (1.19) $ (3.79)
Diluted earnings per share, after giving effect to the merger of PGHL with and into ProSight Global:
Common stock
$ 0.35 $ 0.25 $ 1.36 $ (0.18) $ (0.59)
Basic adjusted operating earnings per share:
Common stock
$ 2.26 $ 1.72 $ 9.22 $ 2.41 $ (2.66)
Basic adjusted operating earnings per share, after giving effect to the merger of PGHL with and into ProSight Global:
Common stock
$ 0.35 $ 0.27 $ 1.43 $ 0.37 $ (0.41)
Diluted adjusted operating earnings per share:
Common stock
$ 2.22 $ 1.69 $ 9.05 $ 2.41 $ (2.66)
Diluted adjusted operating earnings per share,
after giving effect to the merger of PGHL
with and into ProSight Global:
Common stock
$ 0.34 $ 0.26 $ 1.40 $ 0.37 $ (0.41)
Three Months
Ended March 31
Year Ended
December 31
2019
2018
2018
2017
2016
Underwriting and other ratios:
Loss and LAE ratio(4)
60.5% 60.8% 59.5% 64.6% 72.4%
Loss and LAE ratio – excluding catastrophe
60.5% 60.8% 59.0% 63.1% 71.2%
Loss and LAE ratio – catastrophe
0.0% 0.0% 0.5% 1.5% 1.2%
Expense ratio(5)
37.7% 38.0% 37.2% 35.1% 35.8%
Combined ratio(6)
98.2% 98.8% 96.7% 99.7% 108.2%
Adjusted loss and LAE ratio(7)
60.5% 60.8% 59.6% 63.9% 72.4%
Adjusted loss and LAE ratio – excluding catastrophe
60.5% 60.8% 59.1% 62.6% 71.2%
Adjusted loss and LAE ratio – catastrophe
0.0% 0.0% 0.5% 1.3% 1.2%
Adjusted expense ratio(7)
37.7% 37.6% 37.0% 34.9% 35.8%
Adjusted combined ratio(7)
98.2% 98.4% 96.6% 98.8% 108.2%
Adjusted operating return on equity(8)
13.3% 11.1% 14.4% 3.7% (3.6)%
Return on equity(9)
13.4% 10.8% 14.0% (1.8)% (5.1)%
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At March 31
At December 31
2019
2018
2017
2016
($ in thousands)
Balance sheet data:
Total cash and investments
$ 1,950,416 $ 1,830,290 $ 1,632,629 $ 1,405,585
Premiums and other receivables, net 
196,490 200,347 184,334 168,378
Reinsurance receivables paid and unpaid, net
217,756 197,723 218,376 205,527
Goodwill and net intangible assets
29,211 29,219 29,249 29,745
Total assets
$ 2,703,030 $ 2,577,106 $ 2,409,452 $ 2,251,502
Unpaid losses and LAE
$ 1,449,535 $ 1,396,812 $ 1,258,237 $ 1,166,619
Reserve for unearned premiums
469,960 435,933 395,432 354,828
Notes payable, net of debt issuance costs
182,439 182,355 164,017 163,678
Total liabilities
$ 2,276,105 $ 2,187,276 $ 2,033,469 $ 1,870,849
Total stockholders’ equity
$ 426,925 $ 389,830 $ 375,983 $ 380,654
Other data:
Debt to total capitalization ratio (10)
29.9% 31.9% 30.4% 30.1%
Statutory capital and surplus(11)
$ 488,122 $ 473,575 $ 433,946 $ 355,366
(1)
GWP includes business from certain niches that are no longer part of our ongoing business. All GWP from exited niches are included in “Other” which consists of  (i) primary and excess workers’ compensation coverage for Self-Insured Groups (ii) niches exited prior to 2018, many with a concentration in commercial auto, (iii) fronting arrangements in which all premium written is ceded to a third party, (iv) participation in industry pools, and (v) emerging new business customer segments. The table below includes GWP for each customer segment for the three months ended March 31, 2019 and 2018 and for the years ended December 31, 2018, 2017 and 2016. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information.
Three Months
Ended March 31
Year Ended
December 31
2019
2018
2018
2017
2016
($ in thousands)
Construction
$ 23,248 $ 22,953 $ 100,741 $ 73,378 $ 54,983
Consumer Services
27,485 21,907 106,348 94,384 95,005
Marine and Energy
15,934 15,262 64,601 65,781 56,740
Media and Entertainment
37,542 40,254 145,985 136,666 121,454
Professional Services
29,562 29,565 110,300 112,576 79,793
Real Estate
28,735 27,958 130,468 132,028 102,134
Transportation
34,015 26,914 112,450 98,536 99,690
Customer Segments subtotal
$ 196,521 $ 184,813 $ 770,893 $ 713,349 $ 609,799
Other
59,317 64,607 124,219 122,985 162,196
Total
$ 255,838 $ 249,420 $ 895,112 $ 836,334 $ 771,995
(2)
Underwriting income is a non-GAAP financial measure. We calculate underwriting income by subtracting losses and LAE and underwriting, acquisition and insurance expenses from net earned premiums. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income in accordance with GAAP to underwriting income.
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(3)
Adjusted operating income is a non-GAAP financial measure. We calculate adjusted operating income as net income, excluding net realized investment gains and losses and the income tax expense resulting from implementation of the TCJA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income in accordance with GAAP to adjusted operating income.
(4)
The loss and LAE ratio is the ratio, expressed as a percentage, of losses and LAE, allocated and unallocated, to net earned premiums, net of the effects of reinsurance.
(5)
The expense ratio is the ratio, expressed as a percentage, of underwriting, acquisition and insurance expenses to net earned premiums.
(6)
The combined ratio is the sum of the loss and LAE ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.
(7)
Adjusted loss and LAE ratio, adjusted expense ratio and adjusted combined ratio are non-GAAP financial measures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Our Results of Operations — The WAQS.”
(8)
Adjusted operating return on equity is a non-GAAP financial measure. Adjusted operating return on equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income in accordance with GAAP to adjusted operating income.
(9)
Return on equity represents net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.
(10)
Debt to total capitalization ratio is the ratio, expressed as a percentage, of total indebtedness for borrowed money to the sum of total indebtedness for borrowed money and stockholders’ equity.
(11)
For our insurance subsidiaries, the statutory capital and surplus represents the excess of assets over liabilities as determined in accordance with statutory accounting principles as determined by the NAIC (as defined below).
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Risk Factors
Investing in our common stock involves significant risk. You should carefully consider the following risks and other information in this prospectus, including our financial and related notes, before you decide to purchase our common stock. Additional risks and uncertainties of which we are not presently aware or that we currently deem immaterial could also affect our business operations and financial condition. If any of these risks actually occur, our business, financial condition and results of operations could be materially affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.
Risks Related to Our Business
Third-party agents we rely upon to distribute certain business on our behalf may be acquired or terminate their agreements with us, or may not perform as anticipated, which could have an adverse effect on our business and results of operations.
Although we distribute our products through a variety of distribution channels, our distribution strategy is primarily focused on key agents. Our distribution model therefore relies partially upon the expertise, creditworthiness and performance of certain of our key agents. Several of these agents are responsible for a significant portion of the premium written by us. For the year ended December 31, 2018, our top three MGUs distributed 34.2% of our insurance by GWP from customer segments. While this model provides many benefits to us and our customers, such agents have in the past, and may in the future elect to renegotiate the terms of existing relationships, or reduce or terminate their distribution relationships with us as a result of industry consolidation of distributors or other industry changes that increase the competition for access to distributors, developments in legislation or regulation that affect our business, adverse developments in our business, adverse rating agency actions or concerns about market-related risks. In January 2019, Midlands Management Corporation (“Midlands”), an MGU for the Self-Insured Groups niches, was acquired by a third party insurance carrier. In 2018, we wrote $121.8 million of GWP through Midlands. Beyond the first quarter of 2019, we do not anticipate any future premium written from this relationship other than premium adjustments from premium audits. We seek to mitigate these risks in part through our contractual relationships with these agents, including in our MGU agreements, which in most cases have us retaining control over our intellectual property and maintaining the right to either exclusively pursue or to compete directly for our customers if an MGU terminates their relationship with us. In each case, we maintain the right to compete more generally in the niche. Nevertheless, an interruption in certain key relationships could cause operational difficulties, an inability to meet obligations (including, but not limited to, policyholder obligations), a loss of business and increased costs or suffer other negative consequences, all of which may have a material adverse effect on our business and results of operations.
In addition, our agents may fail to perform as anticipated or adhere to their obligations to us. Although our agents are subject to stringent guidelines, limited underwriting authority, ongoing oversight by our employees and monitoring through regular audits and other procedures, which have in the past enabled us to detect and remedy incidents of non-adherence, our efforts may not be adequate to prevent or detect such breaches. If our agents materially exceed their authorities or otherwise breach obligations owed to us and we are unable to timely identify and remedy such breaches, our business and results of operations could be adversely affected.
Our loss reserves are based on estimates and may be inadequate to cover our actual insured losses, which would negatively impact our profitability.
Significant periods of time often elapse between the occurrence of an insured loss, the reporting of the loss to us and our payment of that loss. To recognize liabilities for unpaid losses, we establish reserves as balance sheet liabilities representing estimates of amounts needed to pay reported and unreported losses and the related LAE. Loss reserves are estimates of the ultimate cost of claims and do not represent a precise calculation of any ultimate liability. These estimates are based on historical information and on estimates of future trends that may affect the frequency and severity of claims that may be reported in the future. Estimating loss reserves is a difficult, complex and inherently uncertain process involving many variables and subjective judgments. As part of the reserving process, we review historical data and consider the impact of various factors such as:
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loss emergence and cedant reporting patterns;

underlying policy terms and conditions;

business and exposure mix;

trends in claim frequency and severity;

changes in operations;

emerging economic and social trends;

inflation; and

changes in the regulatory and litigation environments.
This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events. It also assumes that adequate historical or other data exists upon which to make these judgments. For more information on the estimates used in the establishment of loss reserves, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Reserves for unpaid losses and LAE”. However, there is no precise method for evaluating the impact of any specific factor on the adequacy of reserves and actual results are likely to differ from original estimates, perhaps materially. Some of our reserves were established for exposure to liabilities acquired through our acquisition of NYMAGIC in 2010. These liabilities were not subject to our highly structured underwriting process, include asbestos, environmental and products liabilities and are subject to similar risks and uncertainties as property and casualty risks underwritten by us after the acquisition, including difficulties of estimating loss reserves, pricing risk and pricing reinsurance. The net loss reserves related to accident years 2010 and prior were $59.3 million as of December 31, 2018 or 4.9% of our total net loss reserves. If the actual amount of insured losses is greater than the amount we have reserved for these losses, our profitability could suffer.
Our risk management policies and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses or results of operations.
We have developed and continue to develop enterprise-wide risk management policies and procedures to mitigate risk and loss to which we are exposed. There are, however, inherent limitations to risk management strategies because there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. If our risk management policies and procedures are ineffective, we may suffer unexpected losses and could be materially adversely affected. As our business changes and the niches in which we operate evolve, our risk management framework may not evolve at the same pace as those changes. As a result, there is a risk that new products or new business strategies may present risks that are not appropriately identified, monitored or managed. In times of market stress, unanticipated market movements or unanticipated claims experience, the effectiveness of our risk management strategies may be limited, resulting in losses to us. In addition, there can be no assurance that we can effectively review and monitor all risks or that all of our employees will follow our risk management policies and procedures.
Moreover, the National Association of Insurance Commissioners (the “NAIC”) and state legislatures and regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to insurers. The NY DFS, the primary regulator of New York Marine and Gotham, has adopted regulations implementing a requirement under the New York Insurance Law for insurance holding companies to adopt a formal enterprise risk management (“ERM”) function and to file an annual enterprise risk report. NY DFS regulation also requires domestic insurers to conduct an own risk and solvency assessment (“ORSA”) and to submit an ORSA summary report prepared in accordance with the NAIC’s ORSA Guidance Manual. In addition, ProSight Global and Southwest Marine, whose primary regulator is the AZ DOI, are subject to similar ERM and ORSA requirements. We operate within an ERM framework designed to assess and monitor our risks.
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However, there can be no assurance that we can effectively review and monitor all risks, or that all of our employees will operate within the ERM framework or that our ERM framework will result in us accurately identifying all risks and accurately limiting our exposures based on our assessments.
Technology breaches or failures of our or our business partners’ systems, including but not limited to cybersecurity incidents, could disrupt our operations and result in the loss of critical and confidential information, which could adversely impact our reputation and results of operations.
Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information technology systems and those of our business partners or service providers to sophisticated and targeted measures known as advanced persistent threats. While we and our business partners and service providers employ measures to prevent, detect, address and mitigate these threats (including access controls, data encryption, vulnerability assessments, continuous monitoring of information technology networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. Security breaches could expose us to litigation and potential liability. In addition, cyber incidents that impact the availability, reliability, speed, accuracy or other proper functioning of our technology systems could affect our operations. We may not have the resources or technical sophistication to anticipate or prevent every type of cyber-attack. A significant cybersecurity incident, including system failure, security breach, disruption by malware or other damage could interrupt or delay our operations, result in a violation of applicable privacy and other laws, damage our reputation, cause a loss of customers or give rise to monetary fines and other penalties, any or all of which could be material. It is possible that insurance coverage we have in place would not entirely protect us in the event that we experienced a cybersecurity incident, interruption or widespread failure of our information technology systems.
Adverse changes in the economy could lower the demand for our insurance products and could have an adverse effect on the revenue and profitability of our operations.
Factors such as business revenue, government spending, the volatility and strength of the capital markets and inflation can all affect the business and economic environment. These same factors affect our ability to generate revenue and profits. Insurance premiums in our markets are heavily dependent on variables such as our customer revenues, values transported, miles traveled and number of new projects initiated. In an economic downturn that is characterized by higher unemployment and reduced corporate revenues, the demand for insurance products is adversely affected. Adverse changes in the economy may lead our customers to have less need for insurance coverage, to cancel existing insurance policies, to modify coverage or to not renew with us, all of which affect our ability to generate revenue.
Access to capital and market liquidity may adversely affect our ability to take advantage of business opportunities as they arise and to fund our operations in a cost-effective manner.
Our ability to grow our business, either organically or through acquisitions, depends in part on our ability to access capital when needed. We cannot predict capital market liquidity or the availability of capital. We also cannot predict the extent and duration of future economic and market disruptions, the impact of government interventions into the market to address these disruptions and their combined impact on our industry, business and investment portfolios. If we need capital but cannot raise it, our business and future growth could be adversely affected. In addition, we cannot make any assurances that we will be able to refinance our debt, including our senior notes due November 2020, or obtain additional financing on terms acceptable to us, or at all. Our inability to refinance our indebtedness on commercially reasonable terms or at all could also adversely affect our business, financial condition and future growth.
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We may not be able to effectively start up or integrate new product opportunities.
Our ability to grow our business depends, in part, on our creation, implementation and acquisition of new insurance products that are profitable and fit within our business model. New product launches as well as resources to integrate business acquisitions are subject to many obstacles, including ensuring we have sufficient business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens and planning for internal infrastructure needs. If we cannot accurately assess and overcome these obstacles or we improperly implement new insurance products, our ability to grow profitably will be impaired.
Our results of operations and revenues may fluctuate as a result of many factors, including cyclical changes in the insurance industry.
The results of operations of companies in the insurance industry historically have been subject to significant fluctuations and uncertainties in demand, pricing and overall profitability, causing cyclical performance in the insurance industry. These cycles are characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity permit more favorable pricing. Among our competitive strengths have been our specialty product focus and our niche market strategy. In periods of intense competition, these strengths also expose us to actions by other, especially larger, insurance companies who seek to write additional premiums without appropriate regard for underwriting profitability. During weak markets characterized by lower prices, it may be difficult for us to grow or maintain premium volume levels without sacrificing underwriting profits. If we are not successful in maintaining rates or achieving rate increases, it may be difficult for us to improve or maintain underwriting profits or to grow or maintain premium volume levels. In addition, our overall profitability can be affected significantly by:

rising levels of loss costs that we cannot anticipate at the time we price our coverages;

volatile and unpredictable developments, including man-made, weather-related and other natural catastrophes (“CATs”) or terrorist attacks;

changes in the level of available reinsurance;

changes in the amount of losses resulting from new types of claims and new or changing judicial interpretations relating to the scope of insurers’ liabilities; and

the ability of our underwriters to accurately select and price risk and of our claim personnel to appropriately deliver fair outcomes.
Furthermore, the demand for our insurance products across our customer segments can vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases, causing our revenues to fluctuate. These fluctuations in results of operations and revenues may not reflect our long-term results and may cause the price of our securities to be volatile.
We compete with a large number of companies in the insurance industry for underwriting revenues.
We compete with a large number of other companies in our customer segments. During periods of intense competition for premium, we are exposed to the actions of other companies who may seek to write policies without the appropriate regard for risk and profitability. During these times, it is very difficult to grow or maintain premium volume without sacrificing underwriting discipline and income.
We face competition from a wide range of both from specialty insurance companies, underwriting agencies and intermediaries, as well as diversified financial services companies that are significantly larger than we are and that have significantly greater financial, marketing, management and other resources. Some of these competitors also have greater market recognition and experience than we do. We may incur increased costs in competing for underwriting revenues. If we are unable to compete effectively in the markets in which we operate or expand our operations into new markets, our underwriting revenues may decline, as well as overall business results.
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We focus on providing specialized products and services in our various niches, and we believe that the diversity and uniqueness of our business model inherently provides a certain degree of shelter from competition. However, as we continue to grow our market share within each niche, the risk of competition within that niche grows as our larger competitors tend to focus on obtaining business at scale (as opposed to at the individual customer level). We seek to mitigate this risk, and the risk of competition generally, in part by building contractual protections into our distributor relationships. For example, in most cases we retain control over our intellectual property and have the right either to exclusively pursue our customers or to compete directly with our former MGU if they terminate their relationships with us. In each case, we maintain the right to compete more generally in the niche. However, there can be no assurance that our risk mitigation strategies will be effective.
A number of new, proposed or potential legislative or industry developments could further increase competition in our industry. These developments include:

programs in which state-sponsored entities provide property insurance in CAT-prone areas or other “alternative markets” types of coverage;

changing practices, which may lead to greater competition in the insurance business; and

the emergence of insurtech companies and the development of new technologies, which may lead to disruption of current business models and the insurance value chain.
New competition from these developments could cause the supply and/or demand for our insurance products to change, which could affect our ability to price our coverages at attractive rates and thereby adversely affect our underwriting results.
A downgrade in our Financial Strength Ratings (“FSRs”) from A.M. Best could negatively affect our results of operations.
FSRs are a critical factor in establishing the competitive position of insurance companies. Our insurance companies are rated for overall financial strength by A.M. Best. These FSRs reflect A.M. Best’s opinion of our financial strength, operating performance, strategic position and ability to meet our obligations to policyholders, and are not evaluations directed to investors. Our FSRs are subject to periodic review by such firms, and the criteria used in the rating methodologies is subject to change; as such, we cannot assure the continued maintenance of our current FSRs. All of our insurance subsidiaries’ FSRs were reviewed during 2018 and were reaffirmed at a rating of  “A-” (Excellent). In 2017, A.M. Best downgraded its “A” (Excellent) FSRs to “A-” (Excellent) for our insurance subsidiaries. Because FSRs have become an increasingly important factor in establishing the competitive position of insurance companies, if our FSRs are reduced from their current levels by A.M. Best, our competitive position in the industry, and therefore our business, could be adversely affected. A significant downgrade could result in a substantial loss of business, as policyholders might move to other companies with higher FSRs.
Our results of operations, liquidity, financial condition and FSRs are subject to the effects of natural and man-made catastrophic events.
Events such as hurricanes, windstorms, flooding, earthquakes, wildfires, solar storms, acts of terrorism, explosions and fires, cyber-crimes, product defects, mass torts and other catastrophes have adversely affected our business in the past and could do so in the future. Such catastrophic events, and any relevant regulations, could expose us to:

widespread claim costs associated with property and workers’ compensation claims;

losses resulting from a decline in the value of our invested assets;

losses resulting from actual policy experience that is adverse compared to the assumptions made in product pricing;

declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties with whom we transact business to whom we have credit exposure, including reinsurers, and declines in the value of investments; and
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significant interruptions to our systems and operations.
Natural and man-made catastrophic events are generally unpredictable. While we have structured our business and selected our niches in part to avoid catastrophic losses, our exposure to such losses depends on various factors, including the frequency and severity of the catastrophes, the rate of inflation and the value and geographic or other concentrations of insured companies and individuals. Vendor models and proprietary assumptions and processes that we use to manage catastrophe exposure may prove to be ineffective due to incorrect assumptions or estimates.
In addition, legislative and regulatory initiatives and court decisions following major catastrophes could require us to pay the insured beyond the provisions of the original insurance policy and may prohibit the application of a deductible, resulting in inflated catastrophe claims.
The effects of emerging claim and coverage issues on our business are uncertain.
As industry practices and economic, legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. Examples of emerging claims and coverage issues include, but are not limited to:

judicial expansion of policy coverage and the impact of new theories of liability;

plaintiffs targeting property and casualty insurers in purported class action litigation relating to claims-handling and other practices;

medical developments that link health issues to particular causes, resulting in liability claims; and

claims relating to unanticipated consequences of current or new technologies, including cyber-security related risks and claims relating to potentially changing climate conditions.
In some instances, these emerging issues may not become apparent for some time after we have issued the affected insurance policies. As a result, the full extent of liability under our insurance policies may not be known until many years after the policies are issued.
In addition, the potential passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to extend the statutes of limitations or otherwise to repeal or weaken tort reforms could have an adverse impact on our business.
The effects of these and other unforeseen emerging claim and coverage issues are difficult to predict and could harm our business and materially adversely affect our results of operations.
Concentration of our insurance and other risk exposures may adversely affect our results of operations.
We may be exposed to risks as a result of concentrations in our insurance policies. We manage these concentration risks by monitoring the accumulation of our exposures to factors such as exposure type, industry, geographic region, customer and other factors. We also seek to use reinsurance, hedging and other arrangements to limit or offset exposures that exceed the limits we wish to retain. In certain circumstances, however, these risk management arrangements may not be available on acceptable terms or may prove to be ineffective for certain exposures. Also, our exposure for certain single risk coverages and other coverages may be so large that losses could exceed our expectations and could have a potentially material adverse effect on our consolidated results of operations or result in additional statutory capital requirements for our subsidiaries.
Negative developments in the workers’ compensation insurance industry could adversely affect our financial condition and results of operations.
Although we engage in other businesses, approximately 27.5% of our GWP are currently attributable to workers’ compensation insurance policies providing both primary and excess coverage. As a result, negative developments in the economic, competitive or regulatory conditions affecting the
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workers’ compensation insurance industry could have an adverse effect on our financial condition and results of operations. In certain states in which we do business, insurance regulators set the premium rates we may charge, which has the potential to restrict our profits. In addition, if one of our larger markets were to enact legislation to increase the scope or amount of benefits for employees under workers’ compensation insurance policies without related premium increases or loss control measures, this could negatively affect our financial condition and results of operations.
Global climate change may in the future increase the frequency and severity of weather events and resulting losses, particularly to the extent our policies are concentrated in geographic areas where such events occur, may have an adverse effect on our business, results of operations and financial condition.
Scientific evidence indicates that manmade production of greenhouse gas has had, and will continue to have, an adverse effect on the global climate. There is a growing consensus today that climate change increases the frequency and severity of extreme weather events and, in recent years, the frequency of extreme weather events appears to have increased. We cannot predict whether or to what extent damage that may be caused by natural events, such as wild fires, severe tropical storms and hurricanes, will affect our ability to write new insurance policies and reinsurance contracts, but, to the extent our policies are concentrated in the specific geographic areas in which these events occur, the increased frequency and severity of such events and the total amount of our loss exposure in the impacted areas of such events may adversely affect our business, results of operations and financial condition. In addition, although we have historically had limited exposure to catastrophic risk, claims from catastrophe events could reduce our earnings and cause substantial volatility in our business, results of operations and financial condition for any period. However, assessing the risk of loss and damage associated with the adverse effects of climate change and the range of approaches to address loss and damage associated with the adverse effects of climate change, including impacts related to extreme weather events and slow onset events, remains a challenge and might adversely affect our business, results of operations and financial condition.
We may have exposure to losses from acts of terrorism as we are required by law to provide certain coverage for such losses.
U.S. insurers are required by state and federal law to offer coverage for acts of terrorism in certain commercial lines, including workers’ compensation. The Terrorism Risk Insurance Act, as extended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”) requires commercial property and casualty insurance companies to offer coverage for acts of terrorism, whether foreign or domestic, and established a federal assistance program through the end of 2020 to help cover claims related to future terrorism-related losses. The likelihood and impact of any terrorist act is unpredictable, and the ultimate impact on us would depend upon the nature, extent, location and timing of such an act. Although we reinsure a portion of the terrorism risk we retain under TRIPRA, our terrorism reinsurance does not provide full coverage for an act stemming from nuclear, biological or chemical terrorism. To the extent an act of terrorism, whether a domestic or foreign act, is certified by the Secretary of Treasury, we may be covered under TRIPRA of our losses for certain property/​casualty lines of insurance. However, any such coverage would be subject to a mandatory deductible based on 20% of earned premium for the prior year for the covered lines of commercial property and casualty insurance. Based on our 2018 earned premiums, our aggregate deductible under TRIPRA during 2019 is approximately $128.5 million. The federal government will then reimburse us for losses in excess of our deductible, which will be 81 percent of losses in 2019, and 80 percent in 2020, up to a total industry program limit of  $100 billion.
Our ultimate financial obligations to the buyers of our U.K. operations may be greater than expected, which could adversely affect our profitability.
As part of the 2017 sale transaction to divest our U.K.-based Lloyd’s of London business, which was placed in run-off in June of 2017, we retained three ongoing financial obligations. We: (1) committed to fund Lloyd’s Syndicate 1110’s “Funds At Lloyd’s” requirements until June 30, 2020 (the “FAL Obligation”), (2) entered a 100% Quota Share reinsurance agreement as reinsurer, covering
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U.S.-sourced business written by Lloyd’s Syndicate 1110, and (3) entered into Aggregate Stop Loss and 100% Quota Share reinsurance agreements as reinsurer on U.K.-sourced business, with Lloyd’s Syndicate 1110 as our reinsured, the effect of which was that we absorb syndicate losses on U.K.-originated business above a threshold equivalent to the stated reserves at the time of the sale (the “U.K. Obligations”) and collateralize the reserves relating to such business.
We undertook each of these obligations with an estimated quantified exposure and an expectation that the exposure would decrease over time and based on our FAL Obligation contractually terminating on June 30, 2020, at which time the process of releasing our assets posted as FAL is to take place. There is no assurance, however, that prior to that time the amount of the FAL Obligation will not increase by an amount greater than we expect or that the process of releasing those assets once our FAL Obligation terminates will not take longer than we expect. Similarly, there is no assurance that our ultimate exposure on the U.K. Obligations, will not be greater than expected due to more significant losses in the U.K. business. The impact of such an increase, or a dispute with Lloyd’s Syndicate 1110 over the calculation of that amount or on other matters, could cause our exposure under the U.K. Obligations to be greater than expected or the payment/release of collateral to us to occur later or in an amount that is lower than expected. The process of establishing reserves and related LAE is based on historical information and on estimates of future trends that may affect the frequency and severity of claims that may be reported in the future. This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events. It also assumes that adequate historical or other data exists upon which to make these judgments. However, there is no precise method for evaluating the impact of any specific factor on the adequacy of reserves or other estimates, and actual results are likely to differ from original estimates, perhaps materially. If the actual time periods and amounts of losses are greater than the amounts we have reserved for and expect, our profitability could be adversely affected.
The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition and results of operations.
We seek to limit our loss exposure in a variety of ways, including adhering to maximum limitations on policies written in defined geographical zones, limiting niche size for each customer, establishing per-risk and per-occurrence limitations for each event, employing coverage restrictions and generally following prudent underwriting guidelines for each niche written. We also seek to limit our loss exposure through geographic and market niche diversification. Underwriting is a matter of judgment, involving assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance. One or more future events could result in claims that substantially exceed our expectations, which could have a potentially material adverse effect on our financial condition and results of operations.
In addition, we seek to limit loss exposures by policy terms, exclusion from coverage and choice of legal forum. However, disputes relating to coverage and choice of legal forum also arise. As a result, various provisions of our policies, such as choice of legal forum, limitations or exclusions from coverage may not be enforceable in the manner we intend, or at all, and some or all of our loss limitation methods may prove ineffective.
Pricing for our products is subject to our ability to adequately assess risks and estimate losses, including the models that we use to do so. Given the inherent uncertainty of models, the usefulness of such models as a tool to evaluate risks is subject to a high degree of uncertainty that could result in actual losses that are materially different than our estimates, which may adversely affect our financial results.
We seek to price our insurance products such that insurance premiums, policy fees and charges, and future net investment income earned on revenues received will result in an acceptable profit in excess of expenses and the cost of paying claims. Our business is dependent on our ability to price our products effectively and charge appropriate premiums. Pricing adequacy depends on a number of factors and assumptions, including proper evaluation of insurance risks, our expense levels, net
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investment income realized, our response to rate actions taken by competitors, legal and regulatory developments and the ability to obtain regulatory approval for rate changes. Inadequate pricing could materially and adversely affect our financial condition and results of operations.
In addition, we rely on estimates of loss for certain events that are generated by computer-run models. We use these models to help us control risk accumulation, inform management and other stakeholders of capital requirements and to improve the risk-adjusted return profile or minimize the amount of capital required to cover the risks in each of our written policies. However, given the inherent uncertainty of modeling techniques and the application of these techniques, these models and databases may not accurately address a variety of matters which might affect certain of our policies.
Small changes in assumptions, which depend heavily on our expertise, judgment and foresight, can have a significant impact on modeled outputs. For example, although we have limited catastrophic loss exposure, we use catastrophe models that simulate loss estimates based on a set of assumptions. These assumptions address a number of factors that impact loss potential. We run many model simulations in order to understand the impact of these assumptions on a catastrophe’s loss potential, but there can be no assurance that our models will accurately predict catastrophic loss levels.
As a result of these factors, our reliance on estimates, models, data, assumptions and scenarios used to evaluate our entire risk portfolio may not produce accurate predictions. Consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio, which could materially and adversely affect our financial condition and results of operations.
Reinsurance may not be available or affordable and may not be adequate to protect us against losses, which could be material.
Our subsidiaries are major purchasers of reinsurance and we use reinsurance as part of our overall risk management strategy. While reinsurance does not discharge our subsidiaries from their obligation to pay claims for losses insured under our policies, it does make the reinsurer liable to them for the reinsured portion of the risk. For this reason, reinsurance is an important tool to manage transaction and insurance risk retention and to mitigate losses from catastrophes. Market conditions beyond our control may impact the availability and cost of reinsurance and could have a material adverse effect on our business, financial condition and results of operations. For example, reinsurance may be more difficult or costly to obtain after a year with a large number of major catastrophes. We may, at certain times, be forced to incur additional costs for reinsurance or may be unable to obtain sufficient reinsurance on acceptable terms. In the latter case, we would have to accept an increase in exposure to risk, reduce the amount of business written by our insurance subsidiaries or seek alternatives in line with our risk limits, all of which could materially and adversely affect our business, financial condition and results of operations.
Additionally, the use of reinsurance placed in the capital markets, may not provide the same levels of protection as traditional reinsurance transactions. Any disruption, volatility and uncertainty in these markets, such as following a major catastrophic event, may limit our ability to access such markets on terms favorable to us or at all. Also, to the extent that we intend to use structures based on an industry loss index or other non-indemnity trigger rather than on actual losses incurred by us, we could be subject to residual risk.
Retentions in various lines of business expose us to potential losses.
We retain risk for our own account on business underwritten by our insurance subsidiaries. The determination to reduce the amount of reinsurance we purchase, or not to purchase reinsurance for a particular risk, customer segment or niche is based on a variety of factors, including market conditions, pricing, availability of reinsurance, our capital levels and our loss history. Such determinations increase our financial exposure to losses associated with such risks, customer segments or niches and, in the event of significant losses associated with such risks, customer segments or niches, could have a material adverse effect on our financial condition, liquidity and results of operations.
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Our reinsurers may not pay on losses in a timely fashion, or at all, which could adversely affect our financial condition, liquidity and results of operations.
We purchase reinsurance to transfer part of the risk we have assumed (known as ceding) to a reinsurance company in exchange for part of the premium we receive in connection with the risk. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us (the reinsured) of our liability to our policyholders. Accordingly, we are exposed to credit risk with respect to our insurance subsidiaries’ reinsurers to the extent the reinsurance receivable is not secured by collateral or does not benefit from other credit enhancements. We also bear the risk that a reinsurer may be unwilling to pay amounts we have recorded as reinsurance recoverable for any reason, including that (i) the terms of the reinsurance contract do not reflect the intent of the parties of the contract or there is a disagreement between the parties as to their intent, (ii) the terms of the contract cannot be legally enforced, (iii) the terms of the contract are interpreted by a court or arbitration panel differently than intended, (iv) the reinsurance transaction performs differently than we anticipated due to a flawed design of the reinsurance structure, terms or conditions, or (v) a change in laws and regulations, or in the interpretation of the laws and regulations, materially affects a reinsurance transaction. The insolvency of one or more of our reinsurers, or inability or unwillingness to make timely payments under the terms of our contracts, could have a potentially material adverse effect on our financial condition, liquidity and results of operations.
Our investment results and, therefore, our financial condition may be affected by changes in the business, financial condition or results of operations of the entities in which we invest, as well as changes in interest rates, government monetary policies, general economic conditions, liquidity and overall market conditions.
We invest the premiums we receive from customers until they are needed to pay expenses or policyholder claims. Income from these investments remaining after paying expenses and claims, remain invested and are included in retained earnings. A substantial portion of our investment portfolio is managed by Goldman Sachs Asset Management, L.P. (“GSAM”), pursuant to our investment guidelines. Although these guidelines stress diversification and capital preservation, our investments are subject to a variety of risks and the value of our investment portfolio can fluctuate as a result of changes in the business, financial condition or results of operations of the entities in which we invest. In addition, fluctuations can result from changes in interest rates, credit risk, government monetary policies, liquidity of holdings and general economic conditions. We attempt to mitigate our interest rate and credit risks by having investment guidelines that are designed to result in a well-diversified portfolio of high-quality securities with varied maturities. These fluctuations may negatively impact our financial condition. However, we attempt to manage this risk through our investment guidelines, which provide specific requirements related to asset allocation, duration and security selection.
The historical performance of our investment portfolio should not be considered as indicative of the future results of our investment portfolio, our future results or any returns expected on our common stock.
Our investment portfolio’s returns have benefitted historically from investment opportunities and general market conditions that currently may not exist and may not repeat themselves, and there can be no assurance that we will be able to avail ourselves of profitable investment opportunities in the future. Furthermore, the historical returns of our investments are not directly linked to our future results or returns on our common stock, which are affected by various factors, one of which is the value of our investment portfolio.
A significant amount of our assets is invested in marketable securities and subject to market fluctuations.
Our investment portfolio consists almost entirely of debt securities and credit-focused alternative investments. As of March 31, 2019, our investment in marketable securities was approximately $2.0 billion, including cash and cash equivalents. As of that date, our portfolio of securities consisted of the following types of securities: corporate securities (64.2%); mortgage-backed securities (8.7%); collaterized loan obligations (8.4%); U.S. government securities (4.8%); asset-backed securities
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(4.1%); limited partnerships (2.9%); short term investments (3.5%); cash and cash equivalents (2.2%); commercial levered loans (0.9%); state and municipal securities (0.3%). As of March 31, 2019, our alternative portfolio included investments in funds managed by PIMCO, Blackrock, Goldman Sachs, Barings and Guggenheim Partners.
The fair value of these assets and the investment income from these assets fluctuate depending on general economic and market conditions. The fair value of securities generally decreases as interest rates rise. If significant inflation or an increase in interest rates were to occur, the fair value of our securities would be negatively affected. Conversely, if interest rates decline, investment income earned from future investments in securities will be lower. Some securities, such as mortgage-backed and other asset-backed securities, also carry prepayment risk as a result of interest rate fluctuations. Additionally, given the current extended period of low interest rates, we may not be able to successfully reinvest the proceeds from maturing securities at yields commensurate with our target performance goals.
The value of investments in securities is subject to impairment as a result of deterioration in the creditworthiness of the issuer, default by the issuer in the performance of its obligations in respect of the securities and/or increases in market interest rates. To a large degree, the credit risk we face is a function of the economy; accordingly, we face a greater risk in an economic downturn or recession. During periods of market disruption, it may be difficult to value certain of our securities, particularly if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, more securities may require additional subjectivity and management judgment.
Although the historical rates of default on state and municipal securities have been relatively low, our state and municipal securities could be subject to a higher risk of default or impairment due to declining municipal tax bases and revenue. Many states and municipalities operate under deficits or projected deficits, the severity and duration of which could have an adverse impact on both the valuation of our state and municipal securities and the issuer’s ability to perform its obligations thereunder. Additionally, our investments are subject to losses as a result of a general decrease in commercial and economic activity for an industry sector in which we invest, as well as risks inherent in particular securities.
Although we attempt to manage these risks through the use of investment guidelines and other oversight mechanisms and by diversifying our portfolio and emphasizing preservation of principal, our efforts may not be successful. Impairments, defaults and/or rate increases could reduce our net investment income and net realized investment gains or result in investment losses. Investment returns are currently, and will likely continue to remain, under pressure due to the continued low inflation, actions by the Federal Reserve, economic uncertainty, more generally, and the shape of the yield curve. As a result, our exposure to the risks described above could materially and adversely affect our results of operations, liquidity and financial condition.
Changes in the method for determining the London Interbank Offer Rate (“LIBOR”) and the potential replacement of LIBOR may affect our cost of capital and net investment income.
As a result of concerns about the accuracy of the calculation of LIBOR, a number of British Bankers’ Association (the “BBA”) member banks entered into settlements with certain regulators and law enforcement agencies with respect to the alleged manipulation of LIBOR. Actions by the BBA, regulators or law enforcement agencies as a result of these or future events may result in changes to the manner in which LIBOR is determined or its discontinuation.
On July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021, and it appears likely that LIBOR will be discontinued or modified by 2021.
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Potential changes or uncertainty related to such potential changes or discontinuation may adversely affect the market for securities that reference LIBOR. In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for securities that reference LIBOR or the value of our investment portfolio.
Our business is dependent on the efforts of our principal executive officers.
Our success is dependent on the efforts of our principal executive officers because of their industry expertise, knowledge of our markets and relationships with our distributors. Should any of these executive officers cease working for us, we may be unable to find acceptable replacements with comparable skills and experience in the specialty insurance industry and customer segments that we target, and our business may be adversely affected. We do not currently maintain life insurance policies with respect to our executive officers or other employees.
Effective as of May 1, 2019, Lawrence Hannon succeeded Joseph J. Beneducci as Chief Executive Officer of the Company. Mr. Beneducci, who is a founding member of ProSight, took over the role of Executive Chairman of the Company until May 2020. In connection with this transition, on May 3, 2019, ProSight Global and Mr. Beneducci entered into a Transition and Separation Agreement pursuant to which, among other things, Mr. Beneducci will provide transition services to us as an employee, which services will include preparing for this offering and facilitating an orderly transition of the Chief Executive Officer role. The agreement provides for the termination of Mr. Beneducci’s employment on the earlier of  (i) the announcement of our Q1 2020 earnings, (ii) May 15, 2020 or (iii) the termination of Mr. Beneducci’s employment by us without “cause” or a resignation by Mr. Beneducci for “good reason.” Mr. Beneducci will be paid a base salary at an annual rate of $950,000 and will be entitled to certain severance payments and benefits described in “Executive Compensation — Narrative Disclosure to Summary Compensation Table — Employment Agreements — Mr. Beneducci.”
We may be unable to attract and retain qualified key employees.
We depend on our ability to attract and retain qualified executive officers, experienced underwriters and other skilled employees who are knowledgeable about our business. Providing suitable succession planning for such positions is also important. If we cannot attract or retain top-performing executive officers, underwriters and other employees, if the quality of their performance decreases or if we fail to implement succession plans for our key staff, we may be unable to maintain our current competitive position in the niches in which we operate or to expand our operations into new customer segments and niches.
Third-party vendors we rely upon to provide certain business and administrative services on our behalf may not perform as anticipated, which could have an adverse effect on our business and results of operations.
We have taken action to reduce coordination costs and take advantage of economies of scale by transitioning multiple functions and services to a small number of third-party providers. We periodically negotiate provisions and renewals of these relationships, and there can be no assurance that such terms will remain acceptable to us or such third parties. If such third-party providers experience disruptions or do not perform as anticipated, or we experience problems with a transition to a third-party provider, we may experience operational difficulties, an inability to meet obligations (including, but not limited to, policyholder obligations), a loss of business and increased costs, or suffer other negative consequences, all of which may have a material adverse effect on our business and results of operations.
Employee and third-party error and misconduct may be difficult to detect and prevent and may result in significant losses.
There have been a number of cases involving fraud or other misconduct by employees in the financial services industry in recent years and we run the risk that employee or agent misconduct could occur. Instances of fraud, illegal acts, errors, failure to document transactions properly or to obtain
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proper authorization, misuse of customer or proprietary information, or failure to comply with regulatory requirements or our policies may result in losses and/or reputational damage. In the past, our audits and procedures have led us to identify an incident of fraud by one of our agents, which resulted in enhancements to our monitoring and audit procedures and no other employee or agent fraud has been identified to date. Nevertheless, it is not always possible to deter or prevent misconduct, and the controls that we have in place to prevent and detect this activity may not be effective in all cases.
Any significant interruption in the operation of our facilities, systems and business functions could adversely affect our results of operations.
We rely on multiple computer systems to interact with customers, issue policies, pay claims, run modeling functions, assess insurance risks and complete various important internal processes including accounting and bookkeeping. Our business is highly dependent on our ability to access these systems to perform necessary business functions. Additionally, some of these systems may include or rely upon third-party systems not located on our premises. Any of these systems may be exposed to unplanned interruption, unreliability or intrusion from a variety of causes, including among others, storms and other natural disasters, terrorist attacks, utility outages, security breaches or complications encountered as existing systems are replaced or upgraded.
Any such issues could materially impact our company including the impairment of information availability, compromise of system integrity or accuracy, misappropriation of confidential information, reduction of our volume of transactions and interruption of our general business. Although we believe our computer systems are securely protected and continue to take steps to ensure they are protected against such risks, we cannot guarantee that such problems will never occur. If they do, interruption to our business and damage to our reputation, and related costs, could be significant, which could have a material adverse effect on our results of operations and cause losses.
Increasing regulatory focus on privacy issues and expanding laws could affect our business model and expose us to increased liability.
The regulatory environment surrounding information security and privacy is increasingly demanding. We are subject to numerous U.S. federal and state laws and non-U.S. regulations governing the protection of personal and confidential information of our customers or employees. On March 1, 2017, new cybersecurity rules took effect for financial institutions, insurers and certain other companies, like us, supervised by the NY DFS (the “NY DFS Cybersecurity Regulation”). The NY DFS Cybersecurity Regulation imposes significant new regulatory burdens intended to protect the confidentiality, integrity and availability of information systems. For additional information, see “Regulation — Cybersecurity Regulation.”
We will incur increased costs as a result of operating as a public company, and operating as a public company will place additional demands on our management.
As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and the NYSE have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Compliance with these requirements will place significant additional demands on our management and will require us to enhance certain internal functions, such as investor relations, legal, financial reporting and corporate communications. Accordingly, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.
Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including, once we are no longer an emerging growth company, an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be
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engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and time-consuming. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
Any failure to protect our intellectual property rights could impair our intellectual property, proprietary technology platform and brand. In addition, we may be sued by third parties for alleged infringement of their proprietary rights.
Our success and ability to compete depend in part on our intellectual property, which includes our rights in our proprietary technology platform and our brand. We primarily rely on copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees, customers, service providers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property may be inadequate. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Additionally, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability and scope of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and adversely affect our business.
Our success depends also in part on our not infringing on the intellectual property rights of others. In the future, third parties may claim that we are infringing on their intellectual property rights, and we may be found to be infringing on such rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products and services, or require that we comply with other unfavorable terms. Even if we were to prevail in such a dispute, any litigation could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
Changes in accounting practices and future pronouncements may materially affect our reported financial results.
Developments in accounting practices may require us to incur considerable additional expenses to comply, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements retroactively. The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, stockholders’ equity and other relevant financial statement line items.
We are required to comply with statutory accounting principles (“SAP”). SAP and various components of SAP are subject to constant review by the NAIC and its task forces and committees, as well as state insurance departments, in an effort to address emerging issues and otherwise improve financial reporting. Various proposals are pending before committees and task forces of the NAIC, some of which, if enacted, could have negative effects on insurance industry participants. The NAIC continuously examines existing laws and regulations. We cannot predict whether or in what form such reforms will be enacted and, if so, whether the enacted reforms will positively or negatively affect us.
Our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations and prospects.
We must accurately and timely evaluate and pay claims that are made under our policies. Many factors affect our ability to pay claims accurately and timely, including the training and experience of our claims staff, our claims department’s culture and the effectiveness of our management, our ability
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to develop or select and implement appropriate procedures and systems to support our claims functions and other factors. Our failure to accurately and timely pay claims could lead to regulatory and administrative actions or material litigation, undermine our reputation in the marketplace and materially and adversely affect our business, financial condition, results of operations and prospects.
In addition, if we do not train new claims staff effectively or if we lose a significant number of experienced claims staff, our claims department’s ability to handle an increasing workload could be adversely affected. In addition to potentially requiring that growth be slowed in the affected markets, our business could suffer from decreased quality of claims work which, in turn, could adversely affect our operating margins.
If actual renewals of our existing contracts do not meet expectations, our written premiums in future years and our future results of operations could be materially adversely affected.
Many of our contracts are written for a one-year term. In our financial forecasting process, we make assumptions about the rates of renewal of our prior year’s contracts. The insurance and reinsurance industries have historically been cyclical businesses with intense competition, often based on price. If actual renewals do not meet expectations or if we choose not to write a renewal because of pricing conditions, our written premiums in future years and our future operations would be materially adversely affected.
Legal and Regulatory Risks
We are subject to extensive governmental regulation, which may adversely affect our ability to achieve our business objectives. Moreover, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition, results of operations and reputation.
Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors. These regulations, generally administered by a department of insurance in each state and territory in which we do business, relate to, among other things:

approval of policy forms and premium rates;

standards of solvency, including risk-based capital measurements;

licensing of insurers;

restrictions on agreements with our large revenue-producing agents;

cancellation and non-renewal of policies;

restrictions on the nature, quality and concentration of investments;

restrictions on the ability of our insurance subsidiaries to pay dividends to us;

restrictions on transactions between our insurance subsidiaries and their affiliates;

restrictions on the size of risks insurable under a single policy;

requiring deposits for the benefit of policyholders;

requiring certain methods of accounting;

periodic examinations of our operations and finances;

prescribing the form and content of records of financial condition required to be filed; and

requiring reserves for unearned premium, losses and other purposes.
State insurance departments also conduct periodic examinations of the conduct and affairs of insurance companies and require the filing of annual, quarterly and other reports relating to financial condition, holding company issues, ERM and ORSA and other matters. These regulatory requirements could adversely affect or inhibit our ability to achieve some or all of our business objectives, including profitable operations in our various customer segments.
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In addition, regulatory authorities have relatively broad discretion to deny or revoke licenses for various reasons, including the violation of regulations. In some instances, we follow practices based on our interpretations of regulations or practices that we believe may be generally followed by the industry. These practices may turn out to be different from the interpretations of regulatory authorities. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, insurance regulatory authorities could fine us, preclude or temporarily suspend us from carrying on some or all of our activities in certain jurisdictions or otherwise penalize us. This could adversely affect our ability to operate our business. Further, changes in the laws and regulations applicable to the insurance industry or interpretations by regulatory authorities could adversely affect our ability to operate our business as currently conducted and in accordance with our business objectives.
In addition to regulations specific to the insurance industry, including the insurance laws of our principal state regulators (the NY DFS and AZ DOI), as a public company we will also be subject to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and the NYSE, each of which regulate many areas such as financial and business disclosures, corporate governance and stockholder matters. Among other laws, we are subject to laws relating to federal trade restrictions, privacy/data security and terrorism risk insurance laws.
We have recently been provided with copies of three anonymous letters addressing essentially the same subject matter and strongly indicative of a single source. These letters contained allegations relating to our underwriting, pricing and reserving practices generally in connection with a single segment of our business. At this time, we cannot predict whether the SEC, state insurance regulators or other regulators will take any actions or what the impact of such actions could be. The audit committee of ProSight Global, with the assistance of our internal audit and internal legal personnel and outside counsel, has reviewed these matters carefully. Based on that review process, we have concluded that the allegations are not credible and accordingly do not present any issue material to our business practices, financial statements or disclosures.
We monitor these laws, regulations and rules on an ongoing basis to ensure compliance and make appropriate changes as necessary. Implementing such changes may require adjustments to our business methods, increases to our costs and other changes that could cause us to be less competitive in our industry. For further information on the regulation of our business, see “Regulation”.
New regulations may affect our business, financial condition, results of operations and ability to compete effectively.
Legislators and regulators may periodically consider various proposals that may affect our business practices and product designs, how we sell or service certain products we offer or the profitability of our business. We continually monitor such proposals and assess how they might apply to us or our competitors or how they could impact our business, financial condition, results of operations and ability to compete effectively.
We are an insurance holding company and our ability to receive dividends from our insurance subsidiaries is subject to regulatory constraints.
We are a holding company and, as such, we have no direct operations of our own. We do not expect to have any significant operations or assets other than our ownership of the shares of our operating subsidiaries. Unrestricted dividends payable from our insurance subsidiaries without the prior approval of applicable regulators are limited to the lesser of 10% of each of New York Marine’s or Gotham’s surplus as shown on the last statutory financial statement on file with the NY DFS or 100% of adjusted net investment income during the applicable twelve month period (where adjusted net investment income equals the net investment income for the twelve month period prior to the declaration or payment of the dividend plus the excess of net investment income over dividends paid in the two years prior thereto); and in Arizona, the greater of 10% of Southwest Marine’s surplus as of the immediately preceding December 31 or Southwest Marine’s net investment income for the period ending the immediately prior December 31. Dividends and other permitted payments from our operating subsidiaries are expected to be a source of funds to meet ongoing cash requirements, including debt service payments and other expenses. As of March 31, 2019, the maximum amount of unrestricted
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dividends that our insurance subsidiaries could pay to us without approval was $48.8 million. There can be no assurances that our insurance subsidiaries will be able to pay dividends in the future, and the limitations of such dividends could adversely affect ProSight Global’s liquidity or financial condition.
We could be adversely affected by recent and future changes in U.S. federal income tax laws.
Recent tax legislation (Public Law 115-97), commonly referred to as the TCJA, which was signed into law on December 22, 2017, fundamentally overhauls the U.S. tax system by, among other things, reducing the U.S. corporate income tax rate to 21%, repealing the corporate alternative minimum tax, limiting the deductibility of business interest expense, introducing a base erosion and anti-avoidance tax aimed at cross-border deductible payments to related foreign persons, moving closer to a territorial system of taxing earnings generated through foreign subsidiaries and imposing a one-time deemed repatriation tax on certain post-1986 undistributed earnings of foreign subsidiaries. In the context of the taxation of U.S. property and casualty insurance companies such as us, the TCJA would also modify the loss reserve discounting rules and the proration rules that apply to reduce reserve deductions to reflect the lower corporate income tax rate. Although we believe that the changes introduced by the TCJA should generally benefit us, we are unable to predict the ultimate impact of the TCJA and its implementing regulations. In addition, it is possible that other legislation could be introduced and enacted by the current Congress or future Congresses that could have an adverse impact on us. New regulations or pronouncements interpreting or clarifying provisions of the TCJA may be forthcoming. We cannot predict if, when or in what form such regulations or pronouncements may be provided or finalized, whether such guidance will have a retroactive effect or their potential impact on us.
We may suffer losses from litigation, which could adversely affect our business and financial condition.
As is typical in our industry, we continually face risks associated with litigation of various types, including general commercial and corporate litigation, and disputes relating to bad faith allegations which could result in us incurring losses in excess of policy limits. We are party to a variety of litigation matters throughout the year, mostly with respect to claims. Litigation is subject to inherent uncertainties, and if there were an outcome unfavorable to us, there exists the possibility of a material adverse impact on our results of operations and financial position in the period in which the outcome occurs. Even if an unfavorable outcome does not materialize, we still may face substantial expense and disruption associated with the litigation.
We are subject to banking regulations that may limit our business activities.
Goldman Sachs, affiliates of which owned approximately 49.9% of the voting and economic interest in our business on the date of this prospectus, is regulated as a bank holding company that has elected to be treated as a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The BHC Act imposes regulations and requirements on Goldman Sachs and on any company that is deemed to be “controlled” by Goldman Sachs for purposes of the BHC Act and the regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve”) promulgated thereunder. Due to the size of its voting and economic interest in us, we are deemed to be controlled by Goldman Sachs for purposes of the BHC Act and, therefore, are considered to be a “subsidiary” of Goldman Sachs under the BHC Act. We will remain subject to this regulatory regime until Goldman Sachs is no longer deemed to control us for purposes of the BHC Act, which we do not have the ability to control and which will not occur until Goldman Sachs has significantly reduced its voting and economic interest in us. Restrictions placed on Goldman Sachs as a result of supervisory or enforcement actions under the BHC Act or otherwise may restrict us or our activities in certain circumstances, even if these actions are unrelated to our conduct or business. The Federal Reserve could exercise its power to restrict us from engaging in any activity that, in the Federal Reserve’s opinion, is unauthorized for us or constitutes an unsafe or unsound business practice. Although to date none of these restrictions or limitations have adversely affected our business, to the extent that the Federal Reserve’s regulations impose limitations on our business, we may be at a competitive disadvantage to those of our competitors that are not subject to such regulations.
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As a subsidiary of a bank holding company, we are subject to examination by the Federal Reserve and could be required to provide information and reports for use by the Federal Reserve under the BHC Act. The Federal Reserve may also impose substantial fines and other penalties for violations of applicable banking laws, regulations and orders. In addition, as a subsidiary of Goldman Sachs, we are considered a “banking entity” and subject to the restrictions of Section 13 of the BHC Act, otherwise known as the “Volcker Rule”. The Volcker Rule prohibits banking entities from engaging in proprietary trading and from acquiring or retaining any ownership interest in, or sponsoring, a covered fund (which includes most private equity funds and hedge funds), subject to satisfying certain conditions, and, in certain circumstances, from engaging in credit related and other transactions with such funds. However, the Volcker Rule exempts from this prohibition regulated insurance companies directly engaged in the business of insurance where such investments are made for the general account of the company or by affiliates, subject to certain conditions. As we are a regulated insurance company whose investments are made for our general account, this exemption has not affected our investment approach. Changes in the provisions of the BHC Act that are made while we still qualify as a banking entity could alter our ability to invest, potentially impacting our profitability.
We have agreed to certain covenants in the Stockholders’ Agreement (as later defined) for the benefit of Goldman Sachs that are intended to facilitate its compliance with the BHC Act, but that may impose certain obligations on us. In particular, Goldman Sachs has rights to conduct audits on, and access certain of, our information, and we are obligated to establish (and have established) policies and procedures for compliance with law that are acceptable in form and substance to Goldman Sachs. These covenants will remain in effect as long as the Federal Reserve deems us to be a “subsidiary” of Goldman Sachs under the BHC Act.
Risks Related to Our Status as an Emerging Growth Company
We are an emerging growth company within the meaning of the Securities Act of 1933 (the “Securities Act”) and because we have decided to take advantage of certain exemptions from various reporting and other requirements applicable to emerging growth companies, our common stock could be less attractive to investors.
For as long as we remain an “emerging growth company”, as defined in JOBS Act, we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not emerging growth companies, including reduced disclosure obligations regarding executive compensation in our registration statements, periodic reports and proxy statements, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), being permitted to have an extended transition period for adopting any new or revised accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the SEC, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We will remain an emerging growth company until the earliest of  (i) the end of the fiscal year during which we have total annual gross revenues of  $1.07 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; (iii) the date we qualify as a “large accelerated filer”, which requires that (A) the market value of our equity securities that are held by non-affiliates exceeds $700 million as of June 30 of that year, (B) we have been a public reporting company under the Exchange Act for at least twelve calendar months and (C) we have filed at least one annual report on Form 10-K; and (iv) the end of the fiscal year following the fifth anniversary of the completion of this offering.
We have availed ourselves of reduced reporting requirements in this prospectus. In particular, in this prospectus, we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. We expect to continue to avail ourselves of the emerging growth company exemptions described above. In addition, we may but do not expect to avail ourselves of the extended transition period for complying with new or revised accounting standards. As a result, the information that we provide to stockholders will be less comprehensive than what you might receive from other public companies.
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Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with these accounting standards as of the public company effective dates. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock. We cannot predict if investors will find our common stock less attractive because we plan to rely on this exemption. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Risks Related to Our Common Stock and this Offering
Our common stock has no prior public market, and we cannot assure you that an active trading market will develop.
Prior to this offering, there has been no public market for our common stock. Although our common stock has been approved for listing on the NYSE, an active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The price for our common stock in this offering will be determined by negotiations among us, the selling stockholders and representatives of the underwriters, and it may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your shares of our common stock at or above the initial public offering price or at any other price, or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock, our ability to motivate our employees and sales representatives through equity incentive awards, and our ability to acquire other companies, products or technologies by using our common stock as consideration.
If securities analysts do not publish research or reports about our business or our industry or if they issue unfavorable commentary or issue negative recommendations with respect to our common stock, the price of our common stock could decline.
The trading market for our common stock will be influenced by the research and reports that equity research and other securities analysts publish about us, our business and our industry. We do not have control over these analysts and we may be unable or slow to attract research coverage. One or more analysts could issue negative recommendations with respect to our common stock or publish other unfavorable commentary or cease publishing reports about us, our business or our industry. If one or more of these analysts cease coverage of us, we could lose visibility in the market. As a result of one or more of these factors, the market price of our common stock price could decline rapidly and our common stock trading volume could be adversely affected.
The price of our common stock may be volatile and may be affected by market conditions beyond our control.
Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this section of the prospectus, are:

our operating and financial performance and prospects;
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our announcements or our competitors’ announcements regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments;

changes in earnings estimates or recommendations by securities analysts who cover our common stock;

fluctuations in our quarterly financial results or earnings guidance or the quarterly financial results or earnings guidance of companies perceived to be similar to us;

changes in our capital structure, such as future issuances of securities, sales of large blocks of common stock by our stockholders, including our principal stockholders, or the incurrence of additional debt;

departure of key personnel;

reputational issues;

changes in general economic and market conditions;

changes in industry conditions or perceptions or changes in the market outlook for the insurance industry; and

changes in applicable laws, rules or regulations, regulatory actions affecting us and other dynamics.
The stock market has experienced extreme price and volume fluctuations in recent years. The market prices of securities of insurance companies have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. These market fluctuations could result in extreme volatility in the price of shares of our common stock, which could cause a decline in the value of your investment. You should also be aware that price volatility may be greater if the public float and trading volume of shares of our common stock is low.
Our principal stockholders will continue to have significant influence over us following the completion of this offering, and their interests could conflict with those of our other stockholders.
Immediately following this offering, the principal stockholders will hold approximately 80.3% of our common stock. As a result, our principal stockholders are able to influence matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. Our principal stockholders may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our Company and might ultimately affect the market price of our common stock.
In connection with this offering we will enter into a stockholders’ agreement with the principal stockholders (the “Stockholders’ Agreement”) that will govern the relationship between us and the principal stockholders following this offering. The Stockholders’ Agreement will, among other things, provide that two directors shall be designated for election to the Board of Directors by the GS Investors and two directors shall be designated for election to the Board of Directors by the TPG Investors. These designation rights will diminish if either principal stockholder transfers more than a specified percentage of its ownership interest in ProSight Global. The size of our Board of Directors immediately following this offering is expected to be eleven directors. See “Certain Relationships and Related Party Transactions — Relationship with the Principal Stockholders Following this Offering — Stockholders’ Agreement.”
As long as our principal stockholders own a majority of our common stock, we may rely on certain exemptions from the corporate governance requirements of the NYSE available for “controlled companies”.
Upon the completion of this offering, we will be a “controlled company” within the meaning of the corporate governance listing requirements of the NYSE because our principal stockholders will
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continue to own more than 50% of our outstanding common stock. A controlled company may elect not to comply with certain corporate governance requirements of the NYSE. Accordingly, our Board of Directors will not be required to have a majority of independent directors and our Compensation Committee and Nominating and Governance Committee will not be required to meet the director independence requirements to which we would otherwise be subject until such time as we cease to be a “controlled company.” Notwithstanding this exemption, we currently expect that our Board of Directors, Compensation Committee and Nominating and Governance Committee will meet the director independence requirements under the NYSE rules. If we elect to rely on “controlled company” exemptions, you will not have certain of the protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
Our principal stockholders could sell their interests in us to a third party in a private transaction, which may not lead to your realization of any change-of-control premium on shares of our common stock and would subject us to the influence of a presently unknown third party.
Following the completion of this offering, our principal stockholders will continue to beneficially own a large percentage of our common stock. Our principal stockholders will have the ability, should they choose to do so, to sell some or all of their shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in another party gaining significant influence over our Company.
The ability of our principal stockholders to sell their shares of our common stock privately, with no requirement for a concurrent offer to be made to acquire all of the shares of our outstanding common stock that will be publicly traded hereafter, could prevent you from realizing any change-of-control premium on your shares of our common stock that may accrue to our principal stockholders upon their private sales of our common stock.
Future sales of a substantial number of shares of our common stock may depress the price of our shares.
If our stockholders sell a large number of shares of our common stock, or if we issue a large number of shares of our common stock in connection with future acquisitions, financings, or other circumstances, the market price of shares of our common stock could decline significantly. Moreover, the perception in the public market that our stockholders might sell shares of our common stock could depress the market price of those shares. In addition, sales of a substantial number of shares of our common stock by our principal stockholders could adversely affect the market price of our common stock.
All the shares sold in this offering will be freely tradable without restriction, except for shares acquired by any of our “affiliates”, as defined in Rule 144 under the Securities Act, including our principal stockholders. Immediately after this offering, the public market for our common stock will include only the 7,857,145 shares of common stock that are being sold in this offering, or 9,035,715 shares if the underwriters exercise their option to purchase additional shares in full. Once we register these shares, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates. In addition, the registration rights agreement with our principal stockholders pursuant to which we will be obligated to register our principal stockholders’ shares of our common stock for public resale upon request by our principal stockholders, beginning 180 days following the date of this prospectus. See “Shares Eligible for Future Sale — Registration Rights Agreement.”
We expect that we, our principal stockholders and our directors and executive officers will enter into lock-up arrangements under which we and they will agree that we and they will not sell, directly or indirectly, any common stock for a period of 180 days from the date of this prospectus (subject to certain exceptions) without the prior written consent of Goldman Sachs & Co. LLC and Barclays Capital Inc. See “Underwriting (Conflicts of Interest).”
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We do not anticipate declaring or paying regular dividends on our common stock in the near term, and our indebtedness could limit our ability to pay dividends on our common stock.
We do not currently anticipate declaring or paying regular cash dividends on our common stock in the near term. We currently intend to use our future earnings, if any, to pay debt obligations, to fund our growth and develop our business and for general corporate purposes (which may include capital contributions to our insurance subsidiaries in conjunction with future growth of premiums written). Therefore, you are not likely to receive any dividends on your common stock in the near term, and the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which they are initially offered. Any future declaration and payment of dividends or other distributions of capital will be at the discretion of the Board of Directors and the payment of any future dividends or other distributions of capital will depend on many factors, including our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries) and any other factors that the Board of Directors deems relevant in making such a determination. In addition, the terms of the agreements governing the debt we incurred, or debt that we may incur, may limit or prohibit the payment of dividends. For more information, see “Dividend Policy.” There can be no assurance that we will establish a dividend policy or pay dividends in the future or continue to pay any dividend if we do commence paying dividends pursuant to a dividend policy or otherwise.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law (the “DGCL”) or any action asserting a claim against us that is governed by the internal affairs doctrine. Unless the Corporation consents in writing to the selection of an alternative forum, the exclusive forum for any action under the Securities Act or the Exchange Act shall be either the Court of Chancery of the State of Delaware or the federal district court for the District of Delaware. This exclusive forum provision will not apply to claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware, for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction or, in the case of an action under the Securities Act or the Exchange Act, for which neither the Court of Chancery of the State of Delaware nor the federal district court for the District of Delaware has subject matter jurisdiction. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition and results of operations. For example, the Court of Chancery of the State of Delaware recently determined that a provision stating that federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. This decision may be reviewed and ultimately overturned by the Delaware Supreme Court.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, of Delaware corporate and of state insurance laws, may prevent or delay an acquisition of us, which could decrease the trading price of our common stock.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and of state law may delay, deter, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. For example, such provisions or laws may prevent
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our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have anti-takeover effects and may delay, deter or prevent a takeover attempt that our stockholders might consider in their best interests. The provisions provide for, among others:

the ability of our Board of Directors to issue one or more series of preferred stock;

the filling of any vacancies on our Board of Directors by the affirmative vote of a majority of the remaining directors, even if less than a quorum, or by a sole remaining director or by the stockholders; provided, however, that after the first time when the principal stockholders cease to beneficially own, in the aggregate, at least 50% of our outstanding common stock, any vacancy occurring in the Board of Directors may only be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by the stockholders);

certain limitations on convening special stockholder meetings;

advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; and

stockholder action by written consent only until the first time when the principal stockholders cease to beneficially own, in the aggregate, 50% or greater of our outstanding common stock.
Section 203 of the DGCL may affect the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation.
The insurance laws and regulations of the various states in which our insurance subsidiaries are organized may delay or impede a business combination involving the Company. State insurance laws generally prohibit an entity from acquiring control of an insurance company without the prior approval of the domestic insurance regulator. Under most states’ statutes, an entity is presumed to have control of an insurance company if it owns, directly or indirectly, 10% or more of the voting stock of that insurance company or its parent company. These regulatory restrictions may delay, deter or prevent a potential merger or sale of our company, even if our Board of Directors decides that it is in the best interests of stockholders for us to merge or be sold. These restrictions also may delay sales by us or acquisitions by third parties of our insurance subsidiaries.
These anti-takeover provisions and laws may delay, deter or prevent a takeover attempt that our stockholders might consider in their best interests. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. See “Description of Capital Stock — Certain Anti-Takeover Provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Applicable Law.”
We have broad discretion in the use of the net proceeds from this offering, and our use of those proceeds may not yield a favorable return on your investment.
We intend to use the net proceeds from this offering for general corporate purposes. Our management has broad discretion over how these proceeds are to be used and could spend the proceeds in ways with which you may not agree. In addition, we might not use the proceeds of this offering effectively or in a manner that increases our market value or enhances our profitability. We have not established a timetable for the effective deployment of the proceeds, and we cannot predict how long it will take to deploy the proceeds.
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Certain underwriters are affiliates of one of our principal stockholders and have interests in this offering beyond customary underwriting discounts and commissions.
Certain affiliates of Goldman Sachs & Co. LLC, an underwriter in this offering, own in excess of 10% of our issued and outstanding common stock and are participating as selling stockholders in this offering. Since the Goldman Sachs & Co. LLC affiliates beneficially own more than 10% of our outstanding common stock, a “conflict of interest” is deemed to exist under Rule 5121(f)(5)(B) of the Conduct Rules of FINRA. Accordingly, we intend that this offering will be made in compliance with the applicable provisions of Rule 5121. In particular, pursuant to Rule 5121, the appointment of a “qualified independent underwriter” is required to participate in the preparation of, and exercise the usual standards of  “due diligence” with respect to, the registration statement and this prospectus. In accordance with this rule, Barclays Capital Inc. has assumed the responsibilities of acting as a qualified independent underwriter. Barclays Capital Inc. will not receive any additional fees for serving as a qualified independent underwriter in connection with this offering. In accordance with Rule 5121, Goldman Sachs & Co. LLC will not sell our common stock to a discretionary account without receiving written approval from the customer. See “Underwriting (Conflicts of Interest).”
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Special note regarding forward-looking statements
This prospectus contains forward-looking statements. Forward-looking statements include statements relating to future developments in our business or expectations for our future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “should,” “seek,” and other words and terms of similar meaning. Forward-looking statements in the prospectus include, but are not limited to, statements about:

our strategies to continue our growth trajectory, expand our distribution network and maintain underwriting profitability;

future growth in existing niches or by entering into new niches;

our loss expectations and expectation to decrease our loss ratio; and

our expectations with respect to the ultimate financial obligations to the buyers of our U.K. operations.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include:

the performance of and our relationship with third-party agents and vendors we rely upon to distribute certain business on our behalf;

the adequacy of our loss reserves;

the effectiveness of our risk management policies and procedures;

potential technology breaches or failure of our or our business partners’ systems;

adverse changes in the economy which could lower the demand for our insurance products;

our ability to effectively start up or integrate new product opportunities;

cyclical changes in the insurance industry;

the effects of natural and man-made catastrophic events;

our ability to adequately assess risks and estimate losses;

the availability and affordability of reinsurance;

changes in interest rates, government monetary policies, general economic conditions, liquidity and overall market conditions;

changes in the business, financial condition or results of operations of the entities in which we invest;

increased costs as a result of operating as a public company, and time our management will be required to devote to new compliance initiatives;

our ability to protect intellectual property rights;

the impact of government regulation, including the impact of restrictions on our business activities under the BHC Act;

our status as an emerging growth company;
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the absence of a previous public market for shares of our common stock; and

potential conflicts of interests with our principal stockholders.
We discuss many of these risks in greater detail under the section titled “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
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Organizational structure
We were founded in 2009 by members of the current management team and secured capital commitments from affiliates of each of Goldman Sachs and TPG. We established our insurance operating platform and acquired our insurance subsidiaries through the acquisition of NYMAGIC in 2010.
We write insurance out of three subsidiaries: New York Marine, Gotham and Southwest Marine. New York Marine is admitted in 50 states, Washington D.C., Puerto Rico and the Virgin Islands. Southwest Marine is licensed in 49 states and Washington D.C. and it is eligible to write on a non-admitted basis in New York. Gotham is admitted in New York and it is eligible to write on a non-admitted basis in 49 states and Puerto Rico.
The insurance subsidiaries participate in a risk sharing pool managed by PSMC. This structure allows us to leverage the efficiencies of having a single vehicle managing operations and providing back-office services across our business. All premiums, losses and expenses written by our insurance subsidiaries are pooled and then are allocated to these three insurance subsidiaries in accordance with their respective pool participation percentages. The pool participation percentages are 80% for New York Marine, 15% for Gotham and 5% for Southwest Marine.
In November of 2011, we formed a Bermuda holding company structure and acquired several entities in the U.K. to build our own Lloyd’s syndicate. Our principal objective was to achieve greater capital and tax efficiency for our growing U.S. niche business. We also considered opportunities to use this as a platform to extend our niche strategy to the U.K. and Europe. By 2015, however, we determined that we would not be able to profitably achieve our objectives due to two principal factors. Firstly, a significant driver of the success of our U.S.-sourced business is the extensive control and oversight of our niche specialized internal and external underwriters. In contrast, in the UK, the regulatory framework required us to operate the syndicate as an independent entity, largely excluded from oversight by the U.S. management team. As a result, our Group Chief Underwriting Officer could not serve on the board of directors of the U.K. entities nor have final underwriting authority for non-U.S. sourced business. In addition, given the growing predominance of the U.S. underwritten business in the syndicate, the syndicate was required to develop an organic and independent growth strategy for U.K.-sourced business. The independently underwritten U.K. business did not execute upon our niche strategy, and generated unacceptable loss ratios and acquisition costs. Secondly, while we had success in writing and reinsuring profitable U.S. sourced business into our syndicate, the U.S. business had become a disproportionately high percentage of the total syndicate book, and therefore our U.S. underwriting entity was treated as an independent Lloyd’s coverholder. As such, we were required to deploy redundant control and underwriting resources in the U.K. to oversee our U.S. book. This resulted in an unacceptable increase in the syndicate expense ratio. Given the uneconomic loss and expense costs associated with operating in Lloyd’s, in 2015 we began evaluating an exit from the Lloyd’s market and the repatriation of our U.S. business. The exit timeframes were extended due to capital constraints in our U.S. underwriting entity and protracted exit negotiations. In 2017, we entered into a two-phase sale transaction, which closed in October 2017 and March 2018. As part of that sale, we retained certain obligations to fund Lloyd’s-mandated capital requirements through June 2020, which obligations are managed through PSBL. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.”
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As of the date of this prospectus, PGHL is our parent holding company. The diagram below depicts our current organizational structure:
[MISSING IMAGE: tv509807_chrt-flow1.jpg]
Following the date of this prospectus and prior to the completion of this offering, PGHL will merge with and into ProSight Global, with ProSight Global surviving the merger. The current holders of PGHL’s equity interests (other than holders of the P Shares) will receive, as merger consideration, 38,851,369 shares of ProSight Global’s common stock in accordance with the provisions of PGHL’s bye-laws, resulting from the issuance of 6.46 shares of our common stock for each outstanding equity interest of PGHL at the time of the merger (excluding, for the avoidance of doubt, P Shares). Immediately following the merger, but prior to the completion of this offering, our principal stockholders will hold approximately 98.1% of our common stock and the remaining 1.9% will be held by management and other investors.
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Immediately following the completion of this offering, our principal stockholders will hold approximately 80.3% of our common stock, 1.4% will be held by the management and other investors and the remaining 18.3% will be held by public stockholders (or 77.6%, 1.4% and 21.0%, respectively, if the underwriters’ option to purchase additional shares from us is exercised in full). The diagram below depicts our organizational structure immediately following this offering:
[MISSING IMAGE: tv525543_chrt-flow2.jpg]
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Use of Proceeds
This offering will consist of both a primary and a secondary component. We estimate that the net proceeds we will receive from the sales of the shares of common stock offered by us in this offering will be approximately $51.6 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholders, although we will bear the costs, other than underwriting discounts and commissions, associated with those sales.
We intend to use the net proceeds from this offering for general corporate purposes, which may include capital contributions to our insurance subsidiaries in conjunction with future growth of premiums written. The principal purposes of this offering are to create a public market for our common stock, obtain additional capital, facilitate future access to public equity markets, increase awareness of our company in the market, facilitate the use our common stock as a means of attracting and retaining key employees and provide liquidity to our current stockholders.
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Dividend Policy
We do not currently anticipate declaring or paying regular cash dividends on our common stock in the near term. Any future declaration and payment of dividends or other distributions of capital will be at the discretion of the Board of Directors and will depend on our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries) and any other factors that the Board of Directors deems relevant in making such a determination. In addition, the terms of the agreements governing the debt we have incurred or may incur may limit or prohibit the payment of dividends. Therefore, there can be no assurance that we will pay any dividends to holders of our common stock, or as to the amount of any such dividends.
Delaware law requires that dividends be paid only out of  “surplus,” which is defined as the fair market value of our net assets, minus our stated capital; or out of the current or the immediately preceding year’s earnings. We are a holding company, and we have no direct operations. All of our business operations are conducted through our subsidiaries. The states in which our insurance subsidiaries are domiciled impose certain restrictions on our insurance subsidiaries’ ability to pay dividends to us. These restrictions are based in part on the prior year’s statutory income and surplus. Such restrictions, or any future restrictions adopted by the states in which our insurance subsidiaries are domiciled, could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable to us by our subsidiaries without affirmative approval of state regulatory authorities. See “Risk Factors — Legal and Regulatory Risks — We are an insurance holding company and our ability to receive dividends from our insurance subsidiaries is subject to regulatory constraints.”
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Capitalization
The following table sets forth our capitalization as of March 31, 2019 on an actual basis and on an as adjusted basis, after giving effect to:

the reorganization described under “Organizational Structure” pursuant to which PGHL will merge with and into ProSight Global, with ProSight Global surviving the merger and the current holders of PGHL’s equity interests (other than holders of the P Shares) will receive, as merger consideration, 38,851,369 shares of ProSight Global’s common stock in accordance with the provisions of PGHL’s bye-laws, resulting from the issuance of 6.46 shares of our common stock for each outstanding equity interest of PGHL at the time of the merger (excluding, for the avoidance of doubt, P Shares); the aggregate number of shares to be issued in the merger will be 38,851,369; and

the sale by us of 4,285,715 shares of common stock in this offering at the initial public offering price of  $14.00 per share and our receipt of the estimated net proceeds from that sale after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this table with the sections of this prospectus entitled “Organizational Structure,” “Selected Consolidated Financial Data”, “Management Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.
As of March 31, 2019
Actual
As Adjusted
(in thousands, except share amounts)
Cash and cash equivalents
$ 42,300 $ 93,900
Short-term debt
$ 18,000 $ 18,000
Long-term debt
165,000 165,000
Equity:
Share capital(1)
60 430
Additional paid-in capital
603,492 654,722
Retained deficit
(181,864) (181,864)
Accumulated other comprehensive income (loss)
5,437 5,437
Total stockholders’ equity
$ 426,925 $ 478,525
Total capitalization
$ 609,925 $ 661,525
(1)
PGHL’s actual share capital as of March 31, 2019 was $60,141, represented by 4,190,580 D-1 Shares, 91,483 D-2 Shares, 85,487 F-1A Shares, 85,487 F-1B, 1,538,774 F-1C Shares, 1,117 F-2A Shares, 1,117 F-2B and 20,097 F-2C Shares. In addition, 1,122,848 P Shares were outstanding as of March 31, 2019. Accordingly, the total number of outstanding Shares of PGHL as of March 31, 2019 (excluding P Shares, all of which will be forfeited in connection with the consummation of this offering) was 6,014,144 shares, and in connection with the merger of PGHL with and into ProSight Global, the then-outstanding Shares of PGHL will be exchanged for 38,851,369 shares of ProSight Global. ProSight Global’s actual share capital as of March 31, 2019 was $27,755, represented by 2,775,463 shares, $0.01 par value per share. As adjusted share capital would be $429,991, represented by 42,999,097 shares of common stock of ProSight Global, $0.01 par value per share.
55

The number of shares of our common stock set forth in the table above excludes:

4,500,000 shares of common stock reserved for issuance under the 2019 Equity Incentive Plan described in “Executive Compensation — Equity Plans — 2019 Equity Incentive Plan”, including:

668,135 restricted stock units (“RSUs”) initially granted under the 2010 Equity Incentive Plan described in “Executive Compensation — Equity Plans — 2010 Equity Incentive Plan” and converted into RSUs based on our shares of common stock upon the merger of PGHL with and into ProSight Global;

183,095 2019 annual long-term incentive awards, 50% of which are time-vesting RSUs and 50% of which are performance-vesting RSUs, granted to management in connection with this offering;

1,302,198 supplemental RSUs, 100% of which are time-vesting RSUs, granted to management in connection with this offering;

250,000 founders grants, 100% of which are time-vesting RSUs, granted in connection with this offering to Messrs. Hannon and Bailey; and

26,399 non-employee director RSUs (other than RSUs granted to non-employee directors designated by the principal stockholders, if any, which shall be determined by the Board of Directors), which are fully vested on grant, granted to our non-employee directors in connection with this offering; and

1,000,000 shares of common stock reserved for sale under the 2019 Employee Stock Purchase Plan described in “Executive Compensation — Equity Plans — 2019 Employee Stock Purchase Plan.”
56

Dilution
If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma, as adjusted net tangible book value per share of our common stock after this offering.
As of March 31, 2019, we had pro forma net tangible book value of approximately $397.7 million, or $10.24 per share of our common stock, based upon 38,851,369 shares of our common stock outstanding immediately following the merger of PGHL with and into ProSight Global and prior to the completion of this offering. Pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock that will be outstanding following this offering.
Dilution in pro forma net tangible book value per share to new investors in this offering represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the pro forma net tangible book value per share of our common stock immediately after the completion of this offering. After giving effect to the sale of the shares of our common stock offered by us in this offering, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2019 would have been $449.3 million, or $10.45 per share of our common stock. This represents an immediate increase in pro forma net tangible book value of  $0.21 per share to existing stockholders and an immediate dilution of  $3.55 per share to new investors in our common stock. The following table illustrates this dilution on a per share basis.
Initial public offering price per share
$ 14.00
Pro forma net tangible book value per share as of March 31, 2019, before giving effect to this offering
$ 10.24
Increase in pro forma net tangible book value per share attributed to new investors purchasing shares in this offering
0.21
Pro forma as adjusted net tangible book value per share after giving effect to this offering
$ 10.45
Dilution per share to new investors in this offering
$ 3.55
If the underwriters exercise their option to purchase additional shares of our common stock in full, this would have no effect on the pro forma as adjusted net tangible book value per share after this offering and the dilution in pro forma net tangible book value per share to new investors in this offering.
The following table summarizes, on a pro forma as adjusted basis as of March 31, 2019 and after giving effect to the offering, the differences between existing stockholders and new investors with respect to the number of shares of our common stock purchased from us, the total consideration paid to us and the average price per share paid:
Shares Purchased
Total Consideration
Number
Percent
Amount
(in thousands)
Percent
Average
Price Per
Share
Existing stockholders
35,141,952 81.7% $ 542,241 83.1% $ 15.43
New public investors
7,857,145 18.3 110,000 16.9 14.00
Total
42,999,097 100.0% $ 652,241 100% $ 15.17
If the underwriters exercise their over-allotment option in full, our existing stockholders would own 79.0% and our new investors would own 21.0% of the total number of shares of our common stock outstanding upon the completion of this offering.
57

Selected Consolidated Financial Data
The following selected consolidated financial data as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. In the opinion of the management, the unaudited consolidated financial data for the interim periods included in this prospectus include all normal and recurring adjustments that we consider necessary for the fair presentation of such data for the respective interim periods.
The following selected consolidated financial data as of December 31, 2018 and 2017 and for each of the three years in the period ended December 31, 2018, are derived from our audited consolidated financial statements and the accompanying notes that are included elsewhere in this prospectus. The selected consolidated financial data as of December 31, 2016, 2015 and 2014 are derived from our audited consolidated financial statements and the accompanying notes, which are not included in this prospectus.
The historical results presented below are not necessarily indicative of financial results to be achieved in future periods.
The income statement information and related underwriting and other ratios presented below are for our continuing operations. The financial results of the U.K.-produced business(13) are presented as discontinued operations in our consolidated financial statements and are excluded from the income statement information below. The selected balance sheet information also excludes specific assets and liabilities related to our discontinued operations. The assets and liabilities of the discontinued operations are only included in total assets, total liabilities and total shareholder’s equity. The selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.
Three Months
Ended March 31
Year Ended December 31
2019
2018
2018
2017
2016
2015
2014
($ in thousands, except for per share data)
Revenues:
GWP(1) $ 255,838 $ 249,420 $ 895,112 $ 836,334 $ 771,995 $ 772,136 $ 679,310
Ceded written premiums
(45,936) 11,932 (45,038) (276,048) (85,312) (93,956) (86,342)
Net written premiums
$ 209,902 $ 261,352 $ 850,074 $ 560,286 $ 686,683 $ 678,180 $ 592,968
Net earned premiums
195,608 167,456 $ 730,785 $ 609,786 $ 675,778 $ 648,876 $ 511,395
Net investment income
17,158 13,709 55,971 36,196 28,052 25,606 3,009
Net investment gains (losses)
113 (287) (1,557) 4,204 (6,147) 8,607 1,868
Other income
93 168 673 853 1,057 4,949 6,064
Total revenues
$ 212,972 $ 181,046 $ 785,872 $ 651,039 $ 698,740 $ 688,038 $ 522,336
Expenses:
Losses and LAE
$ 118,333 $ 101,854 $ 434,830 $ 393,741 $ 489,464 $ 445,244 $ 297,680
Underwriting, acquisition and
insurance expenses
73,767 63,593 271,547 213,844 241,873 233,491 197,192
Interest and other
expenses
3,362 3,031 12,377 12,125 12,125 18,202 16,559
Total expenses
$ 195,462 $ 168,478 $ 718,754 $ 619,710 $ 743,462 $ 696,937 $ 511,431
Income (loss) before taxes 
17,510 12,568 67,118 31,329 (44,722) (8,900) 10,905
Income tax expense (benefit) 
3,815 2,558 13,389 38,233 (23,988) (7,321) 500
Net income (loss) from continuing operations
$ 13,695 $ 10,010 $ 53,729 $ (6,904) $ (20,734) $ (1,579) $ 10,405
Underwriting income (loss)(2) 
$ 3,508 $ 2,009 $ 24,409 $ 2,201 $ (55,559) $ (29,859) $ 16,523
Adjusted operating income (loss)(3)
$ 13,582 $ 10,297 $ 55,286 $ 13,992 $ (14,587) $ (10,186) $ 9,037
58

Three Months
Ended March 31
Year Ended December 31
2019
2018
2018
2017
2016
2015
2014
($ in thousands, except for per share data)
Per share of common stock data:
Continuing operations only
Basic earnings per share:
Common stock
$ 2.28 $ 1.67 $ 8.96 $ (1.19) $ (3.79) $ (0.29) $ 1.91
Basic earnings per share, after giving effect to the merger of PGHL with and into ProSight Global:
Common stock
$ 0.35 $ 0.26 $ 1.39 $ (0.18) $ (0.59) $ (0.04) $ 0.32
Diluted earnings per share:
Common stock
$ 2.24 $ 1.64 $ 8.80 $ (1.19) $ (3.79) $ (0.29) $ 1.90
Diluted earnings per share, after giving effect to the merger of PGHL with and into ProSight Global:
Common stock
$ 0.35 $ 0.25 $ 1.36 $ (0.18) $ (0.59) $ (0.04) $ 0.32
Basic adjusted operating earnings per share:
Common stock
$ 2.26 $ 1.72 $ 9.22 $ 2.41 $ (2.66) $ (1.86) $ 1.65
Basic adjusted operating
earnings per share, after
giving effect to the merger
of PGHL with and into
ProSight Global:
Common stock
$ 0.35 $ 0.27 $ 1.43 $ 0.37 $ (0.41) $ (0.29) $ 0.28
Diluted adjusted operating earnings per share:
Common stock
$ 2.22 $ 1.69 $ 9.05 $ 2.41 $ (2.66) $ (1.86) $ 1.64
Diluted adjusted operating
earnings per share, after
giving effect to the merger
of PGHL with and into
ProSight Global:
Common stock
$ 0.34 $ 0.26 $ 1.40 $ 0.37 $ (0.41) $ (0.29) $ 0.28
59

Three Months
Ended March 31
Year Ended December 31
2019
2018
2018
2017
2016
2015
2014
Underwriting and other ratios:
Loss and LAE ratio(4)
60.5% 60.8% 59.5% 64.6% 72.4% 68.6% 58.2%
Loss and LAE ratio –  excluding catastrophe
60.5% 60.8% 59.0% 63.1% 71.2% 68.0% 58.0%
Loss and LAE ratio –  catastrophe
0.0% 0.0% 0.5% 1.5% 1.2% 0.6% 0.2%
Expense ratio(5)
37.7% 38.0% 37.2% 35.1% 35.8% 36.0% 38.6%
Combined ratio(6)
98.2% 98.8% 96.7% 99.7% 108.2% 104.6% 96.8%
Adjusted loss and LAE ratio(7)
60.5% 60.8% 59.6% 63.9% 72.4% 68.6% 58.2%
Adjusted loss and LAE ratio – excluding catastrophe
60.5% 60.8% 59.1% 62.6% 71.2% 68.0% 58.0%
Adjusted loss and LAE ratio – catastrophe
0.0% 0.0% 0.5% 1.3% 1.2% 0.6% 0.2%
Adjusted expense ratio(7)
37.7% 37.6% 37.0% 34.9% 35.8% 36.0% 38.6%
Adjusted combined ratio(7)
98.2% 98.4% 96.6% 98.8% 108.2% 104.6% 96.8%
Adjusted operating return on
equity(8)
13.3% 11.1% 14.4% 3.7% (3.6)% (2.2)% 2.0%
Return on equity(9)
13.4% 10.8% 14.0% (1.8)% (5.1)% (0.3)% 2.4%
At March 31
At December 31
2019
2018
2017
2016
2015
2014
($ in thousands)
Balance sheet data:
Total cash and investments
$ 1,950,416 $ 1,830,290 $ 1,632,629 $ 1,405,585 $ 1,262,072 $ 1,172,192
Premiums and other receivables, net
196,490 200,347 184,334 168,378 161,705 151,151
Reinsurance receivables paid and unpaid, net
217,756 197,723 218,376 205,527 161,295 176,406
Goodwill and net Intangible assets
29,211 29,219 29,249 29,745 30,287 30,890
Total assets
$ 2,703,030 $ 2,577,106 $ 2,409,452 $ 2,251,502 $ 2,138,205 $ 1,963,409
Unpaid losses and LAE
$ 1,449,535 $ 1,396,812 $ 1,258,237 $ 1,166,619 $ 983,155 $ 834,543
Reserve for unearned premiums
469,960 435,933 395,432 354,828 344,678 322,227
Notes payable, net of debt issuance costs
182,439 182,355 164,017 163,678 163,340 140,000
Total liabilities
$ 2,276,105 $ 2,187,276 $ 2,033,469 $ 1,870,849 $ 1,700,841 $ 1,474,341
Total stockholders’ equity 
$ 426,925 $ 389,830 $ 375,983 $ 380,654 $ 437,365 $ 489,068
Other data:
Debt to total capitalization ratio(10)
29.9% 31.9% 30.4% 30.1% 27.2% 22.3%
Statutory capital and surplus(11)
$ 488,122 $ 473,575 $ 433,946 $ 355,366 $ 379,231 $ 352,642
(1)
GWP includes business from certain niches that are no longer part of our ongoing business. All GWP from exited niches(12) are included in “Other” which consists of  (i) primary and excess workers’ compensation coverage for Self-Insured Groups(12) (ii) niches exited prior to 2018, many with a concentration in commercial auto, (iii) fronting arrangements in which all premium written is ceded to a third party, (iv) participation in industry pools, and (v) emerging new business customer segments. The table below includes GWP for each customer segment for the three months ended March 31, 2019 and 2018 and the years ended December 31, 2018, 2017, 2016, 2015, and 2014. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information.
60

Three Months
Ended March 31
Year Ended December 31
2019
2018
2018
2017
2016
2015
2014
($ in thousands)
Construction
$ 23,248 $ 22,953 $ 100,741 $ 73,378 $ 54,983 $ 37,887 $ 28,714
Consumer Services
27,485 21,907 106,348 94,384 95,005 87,112 78,643
Marine and Energy
15,934 15,262 64,601 65,781 56,740 75,644 98,344
Media and Entertainment
37,542 40,254 145,985 136,666 121,454 95,555 72,924
Professional Services
29,562 29,565 110,300 112,576 79,793 71,187 70,600
Real Estate
28,735 27,958 130,468 132,028 102,134 81,533 61,563
Transportation
34,015 26,914 112,450 98,536 99,690 121,227 87,401
Customer segments subtotal
$ 196,521 $ 184,813 $ 770,893 $ 713,349 $ 609,799 $ 570,145 $ 498,189
Other
59,317 64,607 124,219 122,985 162,196 201,991 181,121
Total
$ 255,838 $ 249,420 $ 895,112 $ 836,334 $ 771,995 $ 772,136 $ 679,310
(2)
Underwriting income is a non-GAAP financial measure. We calculate underwriting income by subtracting losses and LAE and underwriting, acquisition and insurance expenses from net earned premiums. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income in accordance with GAAP to underwriting income.
(3)
Adjusted operating income is a non-GAAP financial measure. We calculate adjusted operating income as net income, excluding net realized investment gains and losses and the income tax expense resulting from implementation of the TCJA. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures” for a reconciliation of net income in accordance with GAAP to adjusted operating income.
(4)
The loss and LAE ratio is the ratio, expressed as a percentage, of losses and LAE, allocated and unallocated, to net earned premiums, net of the effects of reinsurance. For the year ended December 31, 2015 ProSight Global's loss reserves developed adversely by $44.8 million, and for the year ended December 31, 2014 ProSight Global's loss reserves developed favorably by $3.4 million.
(5)
The expense ratio is the ratio, expressed as a percentage, of underwriting, acquisition and insurance expenses to net earned premiums.