0001127703false00011277032023-08-082023-08-08

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 8, 2023
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ProAssurance Corporation
(Exact name of registrant as specified in its charter)
Delaware001-1653363-1261433
(State of Incorporation)
(Commission File No.)
(IRS Employer I.D. No.)
100 Brookwood Place,Birmingham, AL35209
(Address of Principal Executive Office )(Zip code)
Registrant’s telephone number, including area code:
(205)
877-4400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-(c) under the Exchange Act
(17CFR 240.13e-(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per sharePRANew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
          Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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ITEM 2.02 RESULTS OF OPERATION AND FINANCIAL CONDITION
On August 8, 2023 we issued a news release reporting the results of our operations for the quarter and year ended June 30, 2023. The text of the release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 7.01 REGULATION FD DISCLOSURES
We have updated our online disclosure of our entire investment portfolio to provide details of our holdings through June 30, 2023. The disclosure is available under Quarterly Investment Supplements under the Financial Information section of the Investor Relations section of our website (http://investor.proassurance.com/).
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
The information we are furnishing under Items 7.01 and 9.01 of this Current Report on Form 8K, including Exhibit 99.1, are not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) as amended, or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 8, 2023
PROASSURANCE CORPORATION
by: /s/ Jeffrey P. Lisenby
-----------------------------------------------------
Jeffrey P. Lisenby
General Counsel

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NEWS RELEASE
For More Information:
Dana Hendricks
EVP, Chief Financial Officer
800-282-6242 • 205-877-4462 • DanaHendricks@ProAssurance.com
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ProAssurance Reports Results for Second Quarter 2023
BIRMINGHAM, AL – (BUSINESSWIRE) – August 8, 2023 – ProAssurance Corporation (NYSE: PRA) reports net income of $10.6 million, or $0.20 per diluted share, and operating income(1) of $8.6 million, or $0.16 per diluted share, for the three months ended June 30, 2023.
Highlights - Second Quarter 2023(2)
•Gross premiums written of $238 million (+1%)
•New business written increased to $19 million (+58%)
•Favorable prior accident year reserve development of $6 million
•Consolidated combined ratio of 108.2%
•Consolidated operating ratio of 95.4%
•Net investment income of $32 million (+44%)
◦Net investment income increased by $10 million compared to 2022
•Adjusted book value per share(1) of $26.31 as of June 30, 2023. Adjusted book value per share was $25.99 as of December 31, 2022.

(1) Represents a Non-GAAP financial measure. See a reconciliation to its GAAP counterpart under the heading “Non-GAAP Financial Measures” that follows.
(2) Comparisons are to the second quarter of 2022.

Management Commentary & Results of Operations
Our second quarter results for 2023 reflect operating income of $8.6 million, largely driven by strong investment returns. Underwriting results reflect the ongoing competition and pressures in losses and premiums in our core business. Net loss ratios improved from the first quarter of the year in both our Specialty P&C and Workers’ Compensation Insurance segments. Compared to last year, favorable reserve development is lower, pushing the combined ratio higher.
“The lines of business in which we operate continue to face challenges, and we are responding in ways that will benefit all of our constituencies over the long-term,” said Ned Rand, President and Chief Executive Officer of ProAssurance. “Our underwriting teams continue their disciplined focus on account selection and pricing, while our claims handling professionals work diligently to manage losses and mitigate the impact of social inflation prevalent in the claims environment.”
New business written was noteworthy this quarter in several of our lines of business. The healthcare professional liability, life sciences, and traditional workers compensation lines all produced new business exceeding expectations in the quarter.
Rand commented, “The new business we wrote across multiple lines is a testament to the hard work our team members have performed in keeping the market aware of the value proposition that ProAssurance offers. We believe that our financial position and reputation for standing with our insureds is attractive in the competitive marketplace.”
Net investment income showed substantial growth this quarter, increasing by 44% to $32 million. This continues a trend of higher investment income as a result of higher interest rates. We expect this trend to continue, as reinvestment rates are now considerably higher than the average book yield of maturing investments. Strong performance from investments in LPs/LLCs also contributed to an increase in book value in the quarter.
Our book value per share at quarter end was $21.24, up 4% from the December 31, 2022 book value of $20.46. Adjusted book value per share, which excludes Accumulated Other Comprehensive Income (AOCI), is $26.31 as of June 30, 2023 as compared to $25.99 as of December 31, 2022. Share repurchases during the second quarter contributed a $0.32 per share increase to adjusted book value.

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CONSOLIDATED INCOME STATEMENT HIGHLIGHTS
Selected consolidated financial data for each period is summarized in the table below.
Three Months Ended June 30Six Months Ended June 30
($ in thousands, except per share data)20232022Change20232022Change
Revenues
Gross premiums written(1)
$237,928 $235,475 1.0 %$553,722 $571,082 (3.0 %)
Net premiums written$214,046 $210,151 1.9 %$498,955 $521,066 (4.2 %)
Net premiums earned$247,862 $247,271 0.2 %$487,649 $512,982 (4.9 %)
Net investment income31,650 21,944 44.2 %61,960 42,387 46.2 %
Equity in earnings (loss) of unconsolidated subsidiaries6,632 5,180 28.0 %5,511 12,799 (56.9 %)
Net investment gains (losses)(2)
2,946 (23,884)112.3 %5,858 (37,390)115.7 %
Other income (loss)(1)
2,741 5,314 (48.4 %)3,528 8,119 (56.5 %)
Total revenues(1)
291,831 255,825 14.1 %564,506 538,897 4.8 %
Expenses
Net losses and loss adjustment expenses191,058 177,670 7.5 %396,354 387,093 2.4 %
Underwriting, policy acquisition and operating expenses(1)
76,976 77,333 (0.5 %)144,764 149,109 (2.9 %)
SPC U.S. federal income tax expense994 349 184.8 %1,526 991 54.0 %
SPC dividend expense (income)3,747 (854)538.8 %5,689 1,513 276.0 %
Interest expense5,502 4,919 11.9 %10,965 9,360 17.1 %
Total expenses(1)
278,277 259,417 7.3 %559,298 548,066 2.0 %
Income (loss) before income taxes13,554 (3,592)477.3 %5,208 (9,169)156.8 %
Income tax expense (benefit)2,927 (1,933)251.4 %755 (3,950)119.1 %
Net income (loss)$10,627 $(1,659)740.6 %$4,453 $(5,219)185.3 %
Non-GAAP operating income (loss)$8,562 $16,328 (47.6 %)$490 $24,008 (98.0 %)
Weighted average number of common shares outstanding
Basic53,815 54,068 53,900 54,040 
Diluted53,918 54,186 54,017 54,165 
Earnings (loss) per share
Net income (loss) per diluted share$0.20 $(0.03)$0.23 $0.08 $(0.10)$0.18 
Non-GAAP operating income (loss) per diluted share$0.16 $0.30 $(0.14)$0.01 $0.44 $(0.43)
(1) Consolidated totals include inter-segment eliminations. The eliminations affect individual line items only and have no effect on net income (loss). See Note 12 of the Notes to Condensed Consolidated Financial Statements in our June 30, 2023 report on Form 10-Q for amounts by line item.
(2) This line item typically includes both realized and unrealized investment gains and losses, investment impairments losses, and, for the current period, the change in the fair value of the contingent consideration in relation to the NORCAL acquisition. Detailed information regarding the components of net investment gains (losses) are included in Note 3 of the Notes to Condensed Consolidated Financial Statements in our June 30, 2023 report on Form 10-Q.
The abbreviation “nm” indicates that the information or the percentage change is not meaningful.
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BALANCE SHEET HIGHLIGHTS
($ in thousands, except per share data)June 30, 2023December 31, 2022
Total investments
$4,315,417 $4,387,683 
Total assets
$5,657,412 $5,699,999 
Total liabilities
$4,537,698 $4,595,981 
Common shares (par value $0.01)
$636 $634 
Retained earnings
$1,425,038 $1,423,286 
Treasury shares
$(439,185)$(419,214)
Shareholders’ equity
$1,119,714 $1,104,018 
Book value per share
$21.24 $20.46 
Non-GAAP adjusted book value per share(1)
$26.31 $25.99 
(1) Adjusted book value per share is a Non-GAAP financial measure. See a reconciliation of book value per share to Non-GAAP adjusted book value per share under the heading “Non-GAAP Financial Measures” that follows.
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CONSOLIDATED KEY RATIOS
Three Months Ended June 30Six Months Ended June 30
2023202220232022
Current accident year net loss ratio
79.6 %79.5 %81.1 %80.2 %
Effect of prior accident years’ reserve development
(2.5 %)(7.6 %)0.2 %(4.7 %)
Net loss ratio77.1 %71.9 %81.3 %75.5 %
Underwriting expense ratio31.1 %31.3 %29.7 %29.1 %
Combined ratio108.2 %103.2 %111.0 %104.6 %
Operating ratio95.4 %94.3 %98.3 %96.3 %
Return on equity(1)
3.2 %(0.4 %)0.5 %(0.7 %)
Non-GAAP operating return on equity(1)(2)
3.0 %5.3 %0.1 %3.7 %
Combined ratio, excluding transaction-related costs(3)
108.2 %102.9 %111.0 %104.3 %
(1) Quarterly amounts are annualized. Refer to our June 30, 2023 report on Form 10-Q under the heading “Non-GAAP Operating ROE” in the Executive Summary of Operations section for details on our calculation.
(2) See a reconciliation of ROE to Non-GAAP operating ROE under the heading “Non-GAAP Financial Measures” that follows.
(3) Our consolidated underwriting expense ratio for the three and six months ended June 30, 2022 includes $0.7 million and $1.9 million, respectively, of transaction-related costs included in consolidated operating expenses associated with our acquisition of NORCAL. These costs do not reflect normal operating results.

SPECIALTY P&C SEGMENT RESULTS
Three Months Ended June 30Six Months Ended June 30
 ($ in thousands)
20232022% Change20232022% Change
Gross premiums written$170,174 $167,760 1.4 %$409,049 $425,433 (3.9 %)
Net premiums written$145,562 $150,015 (3.0 %)$359,627 $384,853 (6.6 %)
Net premiums earned$178,902 $183,547 (2.5 %)$358,245 $381,514 (6.1 %)
Other income
1,021 1,903 (46.3 %)2,014 2,924 (31.1 %)
Total revenues179,923 185,450 (3.0 %)360,259 384,438 (6.3 %)
Net losses and loss adjustment expenses(145,044)(137,002)5.9 %(309,096)(302,960)2.0 %
Underwriting, policy acquisition and operating expenses(47,439)(48,077)(1.3 %)(88,399)(90,958)(2.8 %)
Total expenses(192,483)(185,079)4.0 %(397,495)(393,918)0.9 %
Segment results$(12,560)$371 (3,485.4 %)$(37,236)$(9,480)(292.8 %)
SPECIALTY P&C SEGMENT KEY RATIOS
Three Months Ended June 30Six Months Ended June 30
2023202220232022
Current accident year net loss ratio84.7 %84.1 %86.0 %85.0 %
Effect of prior accident years’ reserve development(3.6 %)(9.5 %)0.3 %(5.6 %)
Net loss ratio81.1 %74.6 %86.3 %79.4 %
Underwriting expense ratio26.5 %26.2 %24.7 %23.8 %
Combined ratio107.6 %100.8 %111.0 %103.2 %
Compared to the second quarter of last year, gross written premium increased 1.4% driven by $7.9 million of tail coverage related to one program in which we do not participate in the underwriting results, all of which is ceded to our Segregated Portfolio Cell Reinsurance segment (see further discussion in the Segregated Portfolio Cell Reinsurance section that follows). Net earned premium decreased 2.5% in the same period. Standard Physician written premium was lower than last year, while Custom Physician premium increased due to new business exceeding expectations. Premium retention in the quarter was 83% compared to 84% in the prior period. Standard Physician retention improved to 88%, while Specialty retention was lower at 66%; the Small Business Unit and Medical Technology Liability business retained 89% and 82% of premium, respectively.
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We achieved renewal pricing increases of 6%, on par with the 6% increase achieved in the second quarter of 2022. New business written improved to $12.3 million for the quarter, compared to $7.8 million last year; we have written $23.1 million new business year-to-date in 2023, despite the competitive market conditions.
Excluding adjustments from purchase accounting and ceded premium, the segment current accident year net loss ratio increased by 0.7 percentage points in the quarter driven by the continued severity trends and changes in the mix of business.
We recognized net favorable prior accident year reserve development of $6.5 million in the second quarter, compared to $17.4 million in the same period of 2022. The favorable development for the quarter was primarily related to our Medical Technology Liability line of business.
The expense ratio slightly increased to 26.5% compared to 26.2% last year. Compensation-related expenses were largely responsible for the increase, although this was mostly offset by an increase in ceding commission, which provides a benefit to the expense ratio.
WORKERS’ COMPENSATION INSURANCE SEGMENT RESULTS
Three Months Ended June 30Six Months Ended June 30
($ in thousands)20232022% Change20232022% Change
Gross premiums written
$62,757 $63,634 (1.4 %)$136,187 $135,752 0.3 %
Net premiums written
$42,323 $42,558 (0.6 %)$89,894 $87,824 2.4 %
Net premiums earned$41,018 $41,709 (1.7 %)$81,821 $82,393 (0.7 %)
Other income651 517 25.9 %1,232 1,199 2.8 %
Total revenues41,669 42,226 (1.3 %)83,053 83,592 (0.6 %)
Net losses and loss adjustment expenses
(29,762)(27,947)6.5 %(60,606)(55,158)9.9 %
Underwriting, policy acquisition and operating expenses(14,400)(13,669)5.3 %(27,379)(26,669)2.7 %
Total expenses
(44,162)(41,616)6.1 %(87,985)(81,827)7.5 %
Segment results$(2,493)$610 (508.7 %)$(4,932)$1,765 (379.4 %)
WORKERS’ COMPENSATION INSURANCE SEGMENT KEY RATIOS
Three Months Ended June 30Six Months Ended June 30
2023202220232022
Current accident year net loss ratio
72.6 %71.8 %72.6 %71.8 %
Effect of prior accident years’ reserve development
0.0 %(4.8 %)1.5 %(4.9 %)
Net loss ratio
72.6 %67.0 %74.1 %66.9 %
Underwriting expense ratio35.1 %32.8 %33.5 %32.4 %
Combined ratio
107.7 %99.8 %107.6 %99.3 %
The Workers’ Compensation Insurance segment underwriting results declined in the second quarter of 2023, compared to the same period in 2022, reflecting an increase in the net loss ratio, higher expenses, and a reduction in net premiums earned.
Gross premiums decreased by $0.9 million during the three months ended June 30, 2023, compared to the same period of 2022 primarily reflecting lower renewal premium, partially offset by an increase in new business and higher audit premium. In our traditional business, renewal results reflected rate decreases of 7% and renewal retention of 80% as competitive market conditions persist. Audit premium increased to $2.3 million in 2023, compared to $1.8 million for the same period in 2022, and we increased our carried EBUB estimate by $1.9 million in the second quarter. New business written in our traditional business was $5.6 million in the second quarter of 2023, an increase of $2.0 million compared to the same period in 2022.
The current accident year net loss ratio increased 0.8 percentage points, primarily reflecting an increase in losses recognized under our reinsurance contract annual aggregate deductible and higher ULAE costs. We recognized no prior accident year reserve development in the second quarter of 2023, compared to net favorable prior accident year reserve development of $2.0 million for the same period in 2022.
Underwriting expenses increased by $0.7 million, primarily driven by higher compensation-related costs, IT costs, and travel-related expenses. The underwriting expense ratio increased to 35.1% reflecting the higher expenses and lower net premiums earned.
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SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT RESULTS
Three Months Ended June 30Six Months Ended June 30
($ in thousands)20232022% Change20232022% Change
Gross premiums written
$25,113 $16,634 51.0 %$47,994 $45,003 6.6 %
Net premiums written
$23,057 $14,515 58.8 %$43,005 $39,732 8.2 %
Net premiums earned
$24,094 $16,222 48.5 %$39,394 $35,536 10.9 %
Net investment income
603 211 185.8 %1,024 323 217.0 %
Net investment gains (losses)1,194 (2,782)142.9 %2,355 (3,493)167.4 %
Other income
1 1— %1 1 — %
Net losses and loss adjustment expenses
(13,816)(9,272)49.0 %(22,238)(20,763)7.1 %
Underwriting, policy acquisition and operating expenses(6,538)(5,237)24.8 %(11,575)(9,605)20.5 %
SPC U.S. federal income tax expense(1)
(994)(349)184.8 %(1,526)(991)54.0 %
SPC net results
4,544 (1,206)476.8 %7,435 1,008 637.6 %
SPC dividend (expense) income (2)
(3,747)854 538.8 %(5,689)(1,513)276.0 %
Segment results (3)
$797 $(352)326.4 %$1,746 $(505)445.7 %
(1) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs.
(2) Represents the net (profit) loss attributable to external cell participants.
(3) Represents our share of the net profit (loss) and OCI of the SPCs in which we participate.
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT KEY RATIOS
Three Months Ended June 30Six Months Ended June 30
2023202220232022
Current accident year net loss ratio
62.9 %70.7 %63.7 %67.3 %
Effect of prior accident years’ reserve development
(5.6 %)(13.5 %)(7.2 %)(8.9 %)
Net loss ratio
57.3 %57.2 %56.5 %58.4 %
Underwriting expense ratio27.1 %32.3 %29.4 %27.0 %
Combined ratio84.4 %89.5 %85.9 %85.4 %
The improvement in the Segregated Portfolio Cell Reinsurance segment results for the second quarter of 2023 primarily reflects improved investment results and a lower net loss ratio in the segregated portfolio cells in which we participate.
Gross premiums written increased in the quarter, primarily reflecting healthcare professional liability tail premium of $7.9 million written and fully earned; we do not participate in the underwriting results of this program. Workers’ compensation premium declined slightly, primarily reflecting lower renewal and audit premium.
Workers’ compensation renewal premium reflected rate decreases of 6% and renewal retention of 84% for the three months ended June 30, 2023. Audit premium decreased to $0.9 million in the current period, compared to $1.2 million in 2022. New business written was $1.5 million in the second quarter of 2023, compared to $0.9 million for the same period in 2022.
The second quarter 2023 calendar year net loss ratio was consistent with 2022, reflecting a lower workers’ compensation loss ratio, offset by an increase in the healthcare professional liability loss ratio. The workers’ compensation current accident year net loss ratio decreased in 2023, reflecting a reduction in claim severity and frequency. The increase in the healthcare professional liability current accident year net loss ratio was driven by a higher loss ratio in the program that wrote the tail coverage. We recognized net favorable prior accident year reserve development in the workers’ compensation business of $1.3 million and $2.2 million during the second quarters of 2023 and 2022, respectively. The 2023 net favorable development reflected overall favorable trends in claim closing patterns primarily in accident years 2018 through 2021.
The underwriting expense ratio decreased to 27.1% in 2023 from 32.3% in 2022, primarily reflecting the impact of a lower ceding commission on the healthcare professional liability tail coverage written and fully earned in the second quarter of 2023. Underwriting expenses mostly represent commissions and other expenses charged by the Workers’ Compensation Insurance and Specialty P&C segments.
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LLOYD’S SYNDICATES SEGMENT RESULTS
Three Months Ended June 30Six Months Ended June 30
($ in thousands)20232022% Change20232022% Change
Gross premiums written$4,997 $4,081 22.4 %$8,486 $9,897 (14.3 %)
Net premiums written$3,104 $3,063 1.3 %$6,429 $8,657 (25.7 %)
Net premiums earned$3,848 $5,793 (33.6 %)$8,189 $13,539 (39.5 %)
Net investment income137 143 (4.2 %)325 355 (8.5 %)
Net investment gains (losses)33 (485)106.8 %22 (884)102.5 %
Other income (loss)5 129 (96.1 %)2 263 (99.2 %)
Net losses and loss adjustment expenses(2,436)(3,449)(29.4 %)(4,414)(8,212)(46.2 %)
Underwriting, policy acquisition and operating expenses(1,434)(1,508)(4.9 %)(3,155)(4,218)(25.2 %)
Segment results$153 $623 (75.4 %)$969 $843 14.9 %
LLOYD’S SYNDICATES SEGMENT KEY RATIOS
Three Months Ended June 30Six Months Ended June 30
2023202220232022
Current accident year net loss ratio
23.8 %14.1 %38.4 %29.9 %
Effect of prior accident years’ reserve development
39.5 %45.4 %15.5 %30.8 %
Net loss ratio
63.3 %59.5 %53.9 %60.7 %
Underwriting expense ratio
37.3 %26.0 %38.5 %31.2 %
Combined ratio
100.6 %85.5 %92.4 %91.9 %
Results of our Lloyd’s Syndicates segment are generally reported on a one-quarter lag and include the results from our current participation in Lloyd's of London Syndicate 1729. Our participation in the results of Syndicate 1729 for the 2023 underwriting year remains unchanged from the 2022 underwriting year at 5%. We ceased participation in Syndicate 6131 beginning with the 2022 underwriting year. Due to the quarter lag, our ceased participation in Syndicate 6131 was not reflected in our results until the second quarter of 2022. We continue to view our participation at Lloyd’s as an investment outside of our core operations.
The Lloyd’s segment reported a combined ratio of 100.6% for the quarter. The current accident year net loss ratio increased to 23.8% in 2023 as compared to 14.1% in 2022, driven by certain catastrophe related losses.
We recognized $1.5 million of unfavorable prior year development during the three months ended June 30, 2023 as compared to $2.6 million for the same period of 2022. The 2023 unfavorable prior year development was driven by higher than expected losses and development on certain large claims, primarily catastrophe related losses.
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CORPORATE SEGMENT
Three Months Ended June 30Six Months Ended June 30
($ in thousands)20232022% Change20232022% Change
Net investment income$30,910 $21,590 43.2 %$60,611 $41,709 45.3 %
Equity in earnings (loss) of unconsolidated subsidiaries:
All other investments, primarily investment fund LPs/LLCs8,143 7,028 15.9 %7,376 17,035 (56.7 %)
Tax credit partnerships(1,511)(1,848)(18.2 %)(1,865)(4,236)(56.0 %)
Total equity in earnings (loss) of unconsolidated subsidiaries:6,632 5,180 28.0 %5,511 12,799 (56.9 %)
Net investment gains (losses)(281)(20,617)(98.6 %)481 (33,013)101.5 %
Other income (loss)2,173 3,626 (40.1 %)2,500 5,691 (56.1 %)
Operating expenses(8,275)(9,019)(8.2 %)(16,477)(17,756)(7.2 %)
Interest expense(5,502)(4,919)11.9 %(10,965)(9,360)17.1 %
Income tax (expense) benefit(2,927)1,789 263.6 %(755)3,559 121.2 %
Segment results$22,730 $(2,370)1059.1 %$40,906 $3,629 1027.2 %
Consolidated effective tax rate21.6%53.8%14.5%43.1%
The rise in interest rates continues to add significantly to our net investment income, which increased to $30.9 million in the quarter, driven by higher average book yields on our fixed maturity investments as our reinvestment rate exceeds that of the maturing assets.
Equity in earnings from our investment in LPs/LLCs, which are typically reported to us on a one-quarter lag, increased to $8.1 million in the quarter. Also contributing to the improvement to equity in earnings was lower amortization of tax credit partnership operating losses.
The corporate segment results include $0.3 million of net investment losses for the quarter, as unrealized holding gains resulting from changes in the fair value of convertible securities and other investments nearly offset net realized losses in our equity and other investments.
Other income was $2.2 million compared to $3.6 million in 2022. The variance in other income from quarter to quarter is largely driven by foreign currency exchange rate movements related to euro-denominated loss reserves in our Specialty P&C Segment. Foreign exchange movements resulted in a gain of $2.5 million to other income in 2022 as compared to a loss of $0.4 million in the current period.
Operating expenses decreased by $0.7 million primarily due to a decrease in compensation-related costs and, to a lesser extent, a decrease in professional fees.
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Non-GAAP Financial Measures
Non-GAAP Operating Income (Loss)
Non-GAAP operating income (loss) is a financial measure that is widely used to evaluate performance within the insurance sector. In calculating Non-GAAP operating income (loss), we have excluded the effects of the items listed in the following table that do not reflect normal results. We believe Non-GAAP operating income (loss) presents a useful view of the performance of our insurance operations, however it should be considered in conjunction with net income (loss) computed in accordance with GAAP. The following table reconciles net income (loss) to Non-GAAP operating income (loss):
RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP OPERATING INCOME (LOSS)
Three Months Ended June 30Six Months Ended June 30
 (In thousands, except per share data)
2023202220232022
Net income (loss)$10,627 $(1,659)$4,453 $(5,219)
Items excluded in the calculation of Non-GAAP operating income (loss):
Net investment (gains) losses (1)
(2,946)23,884 (5,858)37,390 
Net investment gains (losses) attributable to SPCs which no profit/loss is retained (2)
939 (2,198)1,852 (2,800)
Transaction-related costs (3)
— 685 — 1,862 
Guaranty fund assessments (recoupments)1 113 (74)125 
Pre-tax effect of exclusions(2,006)22,484 (4,080)36,577 
Tax effect, at 21% (4)
(59)(4,497)117 (7,350)
After-tax effect of exclusions(2,065)17,987 (3,963)29,227 
Non-GAAP operating income (loss)$8,562 $16,328 $490 $24,008 
Per diluted common share:
Net income (loss)$0.20 $(0.03)$0.08 $(0.10)
Effect of exclusions(0.04)0.33 (0.07)0.54 
Non-GAAP operating income (loss) per diluted common share$0.16 $0.30 $0.01 $0.44 
(1) Net investment gains (losses) for the three and six months ended June 30, 2023 include a gain of $2.0 million and $3.0 million, respectively, related to the change in the fair value of contingent consideration issued in connection with the NORCAL acquisition. We have excluded this adjustment as it does not reflect normal operating results. See further discussion around the contingent consideration in Note 2 of the Notes to Condensed Consolidated Financial Statements and discussion on our accounting policy in the Critical Accounting Estimates section under the heading "Contingent Consideration" of our June 30, 2023 report on Form 10-Q.
(2) Net investment gains (losses) on investments related to SPCs are recognized in our Segregated Portfolio Cell Reinsurance segment. SPC results, including any net investment gain or loss, that are attributable to external cell participants are reflected in the SPC dividend expense (income). To be consistent with our exclusion of net investment gains (losses) recognized in earnings, we are excluding the portion of net investment gains (losses) that is included in the SPC dividend expense (income) which is attributable to the external cell participants.
(3) Transaction-related costs associated with our acquisition of NORCAL. We are excluding these costs as they do not reflect normal operating results and are unique and non-recurring in nature.
(4) The 21% rate is the annual expected statutory tax rate associated with the taxable or tax deductible items listed above. We utilized the estimated annual effective tax rate method for the three and six months ended June 30, 2023, while we utilized the discrete effective tax rate method for the three and six months ended June 30, 2022. For the 2023 periods, our effective tax rate was applied to these items in calculating net income (loss), excluding net investment gains (losses) and related adjustments. The 2023 gain related to the change in the fair value of contingent consideration is non-taxable and therefore had no associated income tax impact. For the 2022 periods, our statutory tax rate was applied to these items in calculating net income (loss). Net investment gains (losses) in our Corporate segment are treated as discrete items and are tax effected at the annual expected statutory tax rate (21%) in the period they are included in our consolidated tax provision and net income (loss). The taxes associated with the net investment gains (losses) related to SPCs in our Segregated Portfolio Cell Reinsurance segment are paid by the individual SPCs and are not included in our consolidated tax provision or net income (loss); therefore, both the net investment gains (losses) from our Segregated Portfolio Cell Reinsurance segment and the adjustment to exclude the portion of net investment gains (losses) included in the SPC dividend expense (income) in the table above are not tax effected. See further discussion under the heading “Taxes” in the Executive Summary of Operations section of our June 30, 2023 report on Form 10-Q.
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Non-GAAP Operating ROE
The following table is a reconciliation of ROE to Non-GAAP operating ROE for the three and six months ended June 30, 2023 and 2022:
Three Months Ended
June 30		Six Months Ended
June 30
2023202220232022
ROE(1)
3.2 %(0.4 %)0.5 %(0.7 %)
Pre-tax effect of items excluded in the calculation of Non-GAAP operating ROE(0.2 %)7.2 %(0.4 %)5.5 %
Tax effect, at 21%(2)
— %(1.5 %)— %(1.1 %)
Non-GAAP operating ROE3.0 %5.3 %0.1 %3.7 %
(1) Quarterly amounts are annualized. Refer to our June 30, 2023 report on Form 10-Q under the heading “Non-GAAP Operating ROE” in the Executive Summary of Operations section for details on our calculation.
(2) The 21% rate is the statutory tax rate associated with the taxable or tax deductible items. See further discussion in footnote 4 in this section under the heading "Non-GAAP Operating Income."
Non-GAAP Adjusted Book Value per Share
The following table is a reconciliation of our book value per share to Non-GAAP adjusted book value per share at June 30, 2023 and December 31, 2022:
Book Value Per Share
Book Value Per Share at December 31, 2022$20.46 
Less: AOCI Per Share(1)
(5.53)
Non-GAAP Adjusted Book Value Per Share at December 31, 202225.99
Increase (decrease) to Non-GAAP Adjusted Book Value Per Share during the six months ended June 30, 2023 attributable to:
Dividends declared(0.05)
Cumulative repurchase of shares(2)
0.32 
Net income (loss)0.08 
Other(3)
(0.03)
Non-GAAP Adjusted Book Value Per Share at June 30, 2023
26.31 
Add: AOCI Per Share(1)
(5.07)
Book Value Per Share at June 30, 2023
$21.24 
(1) Primarily the impact of accumulated unrealized investment gains (losses) on our available-for-sale fixed maturity investments. See Note 9 of the Notes to Condensed Consolidated Financial Statements in our June 30, 2023 report on Form 10-Q for additional information.
(2) Represents the impact of our repurchase of 1.4 million common shares, conducted through a 10b5-1 stock repurchase plan during the second quarter of 2023. See Note 9 of the Notes to Condensed Consolidated Financial Statements in our June 30, 2023 report on Form 10-Q for additional information.
(3) Includes the impact of share-based compensation.
Conference Call Information
ProAssurance management will discuss second quarter 2023 results during a conference call at 10:00 a.m. ET on Wednesday, August 9, 2023. US-based investors may access the call by dialing either (833) 470-1428 (toll free) or (404) 975-4839 (local). International investors may find a toll-free number here: https://www.netroadshow.com/events/globalnumbers?confId=53156. The access code for all attendees is 644047.
Callers may also choose to pre-register to receive unique call access details and avoid operator wait times; pre-register here if desired: https://www.netroadshow.com/events/login?show=75636f9a&confId=53156.

The conference call will also be webcast at https://events.q4inc.com/attendee/305732155.
A replay will be available by telephone for at least 7 days after the call date. US-based investors may access the replay by dialing (866) 813-9403 (toll free) or (929) 458-6194, and international investors may dial +44 (204) 525-0658. The access code for all attendees is 531045. A replay will also be available for at least one year at investor.proassurance.com. Investors may follow @ProAssurance on Twitter to be notified of the latest news about ProAssurance.
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About ProAssurance
ProAssurance Corporation is an industry-leading specialty insurer with extensive expertise in healthcare professional liability, products liability for medical technology and life sciences, legal professional liability, and workers’ compensation insurance.
ProAssurance Group is rated “A” (Excellent) by AM Best; NORCAL Group is rated “A-” (Excellent) by AM Best. ProAssurance and its operating subsidiaries (excluding NORCAL Group) are rated “A-” (Strong) by Fitch Ratings. For the latest on ProAssurance and its industry-leading suite of products and services, cutting-edge risk management and practice enhancement programs, follow @ProAssurance on Twitter or LinkedIn. ProAssurance’s YouTube channel regularly presents thought-provoking, insightful videos that communicate effective practice management, patient safety and risk management strategies.
        Page: 12

Caution Regarding Forward-Looking Statements
Any statements in this news release that are not historical facts are specifically identified as forward-looking statements. These statements are based upon our estimates and anticipation of future events and are subject to significant risks, assumptions and uncertainties that could cause actual results to differ materially from the expected results described in the forward-looking statements. Forward-looking statements are identified by words such as, but not limited to, “anticipate,” “believe,” “estimate,” “expect,” “hope,” “hopeful,” “intend,” “likely,” “may,” “optimistic,” “possible,” “potential,” “preliminary,” “project,” “should,” “will,” and other analogous expressions.
Although it is not possible to identify all of these risks and factors, they include, among others, the following: inadequate loss reserves to cover the Company's actual losses; inherent uncertainty of models resulting in actual losses that are materially different than the Company's estimates; adverse economic factors; a decline in the Company's financial strength rating; loss of one or more key executives; loss of a group of agents or brokers that generate significant portions of the Company's business; failure of any of the loss limitations or exclusions the Company employs, or change in other claims or coverage issues; adverse performance of the Company's investment portfolio; adverse market conditions that affect its excess and surplus lines insurance operations; and other risks described in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this release and the Company does not undertake and specifically declines any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

#####
v3.23.2
Document and Entity Information Document
Aug. 08, 2023
Cover [Abstract]  
Document Type 8-K
Entity Registrant Name ProAssurance Corporation
Entity Incorporation, State or Country Code DE
Entity File Number 001-16533
Entity Tax Identification Number 63-1261433
Entity Central Index Key 0001127703
Amendment Flag false
Entity Address, Address Line One 100 Brookwood Place,
Entity Address, City or Town Birmingham,
Entity Address, State or Province AL
Entity Address, Postal Zip Code 35209
City Area Code (205)
Local Phone Number 877-4400
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol PRA
Security Exchange Name NYSE
Entity Emerging Growth Company false
Document Period End Date Aug. 08, 2023
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