Core Insights - ProAssurance Corporation (PRA) reported weaker third-quarter 2025 results, with shares dipping marginally due to poor underwriting performance, declining gross premiums written, and elevated expenses [1][2][5] - The company experienced a significant drop in adjusted operating income and net income, while investment income showed strong growth [2][4][9] Financial Performance - Adjusted operating income was 15 cents per share, missing the Zacks Consensus Estimate by 46.4% and down 53.1% year over year [2][9] - Operating revenues totaled $274 million, a decrease of 1.4% year over year, and missed the consensus mark by 0.7% [2] - Gross premiums written fell 5.7% year over year to $290.4 million, below the estimate of $301.9 million [3][9] - Net premiums earned decreased 4% year over year to $233.4 million, surpassing the Zacks Consensus Estimate but missing the internal estimate [3] Investment Income and Expenses - Net investment income increased 8.5% year over year to $40.4 million, exceeding both the consensus and internal estimates [4] - Total expenses rose 4.2% year over year to $275.2 million, driven by higher net losses and operating costs, surpassing internal estimates [4] Segment Performance - Specialty P&C Segment revenues declined 4.4% year over year to $181.8 million, missing estimates [6] - Workers' Compensation Insurance Segment revenues fell 2.3% year over year to $41.4 million, also missing estimates [8] - Segregated Portfolio Cell Reinsurance Segment saw gross premiums written improve 4.2% year over year to $14.2 million, with a profit increase of 66.5% [11][12] Financial Position - As of September 30, 2025, cash and cash equivalents were $54.5 million, down 0.8% from the end of 2024 [14] - Total investments reached $4.4 billion, up 1.6% from the previous year [14] - Total shareholders' equity increased 8.5% to $1.3 billion, with book value per share growing 8% to $25.37 [15] Share Repurchase Update - ProAssurance did not repurchase any common shares in the third quarter of 2025, with a remaining capacity of $55.9 million for future repurchases or debt retirement [16]

Core Insights - ProAssurance reported quarterly earnings of $0.15 per share, missing the Zacks Consensus Estimate of $0.28 per share, and down from $0.34 per share a year ago, representing an earnings surprise of -46.43% [1] - The company posted revenues of $273.98 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 0.72%, and down from $278.23 million year-over-year [2] - ProAssurance shares have increased approximately 50.4% year-to-date, outperforming the S&P 500's gain of 16.5% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.25 on revenues of $277.51 million, and for the current fiscal year, it is $1.20 on revenues of $1.1 billion [7] - The estimate revisions trend for ProAssurance was favorable prior to the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Insurance - Property and Casualty industry is currently ranked in the top 27% of over 250 Zacks industries, suggesting a favorable outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Position - As of September 30, 2025, ProAssurance held cash and liquid investments of approximately $125 million outside its insurance subsidiaries, with an additional $125 million in permitted borrowings available under its Revolving Credit Agreement[170]. - As of September 30, 2025, the total carrying value of investments was $4,437,855,000, an increase from $4,367,427,000 as of December 31, 2024, representing a growth of approximately 1.6%[189]. - The outstanding debt as of September 30, 2025, totaled $422,783,000, slightly decreasing from $426,476,000 as of December 31, 2024[197]. - The company has $175 million available for use through its Revolving Credit Agreement as of October 30, 2025, providing additional liquidity options[192]. - Premiums receivable amounted to approximately $256 million, net of an allowance for expected credit losses of about $8 million, as of September 30, 2025[326]. Operating Performance - For the nine months ended September 30, 2025, net cash provided by operating activities was $(12,476) thousand, a decrease of $1,999 thousand compared to $(10,477) thousand for the same period in 2024[171]. - The decrease in operating cash flows was primarily due to an increase in cash paid for operating expenses of $8.9 million and a decrease in net premium receipts of $19.8 million[173]. - Total revenues decreased by $5.7 million (2.0%) to $279.6 million for the three months ended September 30, 2025, compared to $285.3 million in 2024[201]. - Net investment result increased by $3.1 million (7.5%) to $45.2 million for the three months ended September 30, 2025, compared to $42.0 million in 2024[204]. - Net income decreased by $15.0 million (91.4%) to $1.4 million for the three months ended September 30, 2025, compared to $16.4 million in 2024[201]. Underwriting Results - The combined ratio increased by 9.1 percentage points to 114.7% for the three months ended September 30, 2025, compared to 105.6% in 2024[201]. - The consolidated current accident year net loss ratio for the three months ended September 30, 2025, was 81.3%, a slight decrease of 0.2 percentage points from 81.5% in 2024[214]. - The net loss ratio for the nine months ended September 30, 2025, is 76.4%, down 0.6 percentage points from 76.6% in the same period of 2024[229]. - The net loss ratio for the Specialty P&C segment in Q3 2025 is 82.6%, a decrease of 1.8 percentage points from 72.2% in Q3 2024[229]. - The current accident year net loss ratio for Q3 2025 is 81.3%, a decrease of 0.2 percentage points from Q3 2024's 81.5%[228]. Investment Performance - The average rating of available-for-sale fixed maturity securities was A+, with 99% rated, indicating a strong credit quality in the investment portfolio[190]. - The company anticipates that between $90 million and $170 million of its portfolio will mature each quarter over the next twelve months, enhancing liquidity for cash flow requirements[192]. - The total fair value of fixed maturities, available-for-sale, was $3,929 million, an increase from $3,803 million at the end of 2024, reflecting a growth of approximately 3.3%[319]. - The corporate debt segment showed a fair value of $1,868 million as of September 30, 2025, compared to $1,832 million at December 31, 2024, indicating a growth of about 2.0%[319]. - The company recognized $1.3 million of other net investment gains in Q3 2025, driven by unrealized holding gains from equity investments[304]. Tax and Regulatory Matters - The OBBBA signed into law on July 4, 2025, included extensions and modifications to various tax provisions, but did not materially impact the company's effective tax rate[168]. - The effective tax rate for the nine months ended September 30, 2025, was 31.1%, significantly higher than the 17.5% for the same period in 2024, due to discrete items impacting the rate[313]. - The projected annual effective tax rate for 2025 is 25.2%, up from 17.5% in 2024, before considering discrete items[221]. - The tax impact of transaction-related costs for the three and nine months ended September 30, 2025, included a benefit of $555 thousand and $1,491 thousand, respectively, related to the proposed merger transaction[312]. - The company has made a 953(d) election under the U.S. Internal Revenue Code for its Cayman Islands reinsurance subsidiaries, subjecting them to U.S. federal income tax[310]. Segment Performance - The Specialty P&C segment's current accident year net loss ratio increased to 83.2% for the three months ended September 30, 2025, up 0.5 percentage points from 82.7% in 2024[214]. - Non-core operations reported an underwriting loss of $3.4 million for the three months ended September 30, 2025, compared to an underwriting income of $0.5 million in 2024[227]. - The underwriting expense ratio for the Specialty P&C segment was 28.2% for the three months ended September 30, 2025, an increase of 0.7 percentage points from 2024, while the nine-month ratio decreased by 0.4 percentage points to 27.0%[261]. - The retention rate for Medical Professional Liability (MPL) was 85% for the three months ended September 30, 2025, compared to 84% in 2024[243]. - The company retained thirteen of the sixteen workers' compensation alternative market programs that were up for renewal during the nine months ended September 30, 2025[268].

Financial Performance - ProAssurance reported net income of $1.4 million, or $0.03 per diluted share, for Q3 2025, a decrease of 91.2% compared to $16.4 million, or $0.32 per diluted share, in Q3 2024[1][7] - Net income for Q3 2025 was $1.446 million, a decrease from $16.441 million in Q3 2024, while net income for the nine months ended September 30, 2025 was $17.545 million compared to $36.575 million in the same period of 2024[19] - Non-GAAP operating income for Q3 2025 was $7.896 million, down from $16.454 million in Q3 2024, and for the nine months ended September 30, 2025, it was $41.474 million compared to $30.426 million in 2024[19] - Non-GAAP operating income for the nine months ended September 30, 2025, was $41.5 million, a 36.3% increase from $30.4 million in the same period of 2024[7][10] Premiums and Underwriting - Consolidated net premiums written were $261.3 million for the quarter, down 6.5% from $279.5 million in Q3 2024, with Medical Professional Liability business contributing over 95% of this segment[5][7] - Specialty P&C renewal premium increases of 8% this quarter are part of a cumulative premium change of over 80% since 2018 in the medical professional liability market[5] - Specialty P&C segment gross premiums written decreased by 5.9% to $229,507,000 for the three months ended September 30, 2025, compared to $244,007,000 in 2024[11] - Workers' Compensation insurance segment net premiums written fell by 6.3% to $43,396,000 for the three months ended September 30, 2025, down from $46,318,000 in 2024[13] - The net loss ratio for the Specialty P&C segment increased to 80.8% in Q3 2025 from 72.5% in Q3 2024[12] - The current accident year net loss ratio for Q3 2025 is 83.2%, an increase of 0.5 percentage points from 82.7% in Q3 2024[26] Investment Income - Consolidated net investment income increased by 8.5% to $40.4 million in Q3 2025, reflecting higher average book yields[5][7] - Corporate segment net investment income increased by 8.5% to $39,342,000 for the three months ended September 30, 2025, from $36,263,000 in 2024[17] - The company recognized net investment losses of $841,000 in Q3 2025, compared to losses of $2.252 million in Q3 2024[19] Ratios and Performance Metrics - The Non-GAAP combined ratio for Q3 2025 was 112.2%, compared to 106.4% in Q3 2024, indicating a deterioration in underwriting performance[5][10] - The combined ratio for Q3 2025 was 112.2%, a decrease from 114.7% in Q3 2024, and for the nine months ended September 30, 2025, it was 108.8%, down from 111.4% in 2024[23] - The underwriting expense ratio for the nine months ended September 30, 2025, is 27.0%, a slight decrease from 27.4% in the same period of 2024[26] - Non-GAAP operating ROE for Q3 2025 is 2.4%, down from 5.6% in Q3 2024[28] Assets and Book Value - Book value per share rose to $25.37 at September 30, 2025, up from $23.49 at year-end 2024[9] - The Non-GAAP adjusted book value per share at September 30, 2025, is $27.14, an increase from $26.86 at December 31, 2024[29] - Total assets decreased slightly to $5.55 billion as of September 30, 2025, from $5.57 billion at year-end 2024[9] Corporate Actions and Future Outlook - The anticipated closing of the transaction with The Doctors Company is expected by June 30, 2026, pending regulatory approvals in several states[4][3] - The company continues to forgo renewal and new business opportunities that do not meet expectations of rate adequacy in the current medical professional liability loss environment[5] - The Corporate segment results for the three months ended September 30, 2025, included pre-tax transaction-related costs of $3,000,000 related to a proposed merger transaction[17] - Transaction-related costs in 2025 amounted to $2.983 million for Q3 and $14.578 million for the nine-month period, primarily related to a proposed merger transaction[19] Tax and Currency Effects - The consolidated effective tax rate for the Corporate segment was 66.9% for the three months ended September 30, 2025, compared to 22.1% in 2024[17] - The effective tax rate applied to adjustments was 21%, consistent for both 2025 and 2024 periods[24] - Foreign currency exchange rate gains for Q3 2025 were $1.003 million, down from $3.849 million in Q3 2024[19] Non-Core Operations - Non-core operations reported an underwriting loss of $3.4 million for Q3 2025, compared to an underwriting income of $0.5 million in Q3 2024[22] Ratings - The company is rated "A" (Excellent) by AM Best, indicating strong financial stability and performance in the specialty insurance sector[30]

Industry Overview - The Zacks Property and Casualty Insurance industry has performed well in 2025, driven by better pricing, prudent underwriting standards, increased exposure, streamlined operations, a wider global presence, and a solid capital position [1] - The industry has returned 7.9% year-to-date, compared to the Finance sector and the Zacks S&P 500 composite's growth of 14.9% [2] - Global commercial insurance rates declined by 4% in Q2 2025, marking the fourth consecutive decrease after seven years of increases [4][7] Driving Forces - Increased technology advancements and an improving rate environment have contributed positively to the industry [1] - Heavy investments in blockchain, telematics, and insurtech are enhancing efficiency and long-term profitability [7][10] - The global insured losses from natural catastrophes reached $80 billion in the first half of 2025, nearly double the 10-year average, impacting profitability and policy renewal rates [5] Company Performance - Heritage Insurance Holdings, Inc. (HRTG) has seen significant growth, with a 125.5% increase in shares year-to-date, driven by its expanding commercial residential business and improving pricing [15][12] - ProAssurance Corporation (PRA) has benefited from strong premium growth and strategic acquisitions, with shares rallying 50% year-to-date and a 16.8% year-over-year growth in earnings estimates for 2025 [17][16] - HCI Group, Inc. (HCI) has also shown strong performance, with shares up 56.5% year-to-date and a 120.2% year-over-year growth in earnings estimates for 2025 [20][19] Future Outlook - Gross premiums in the insurance industry are estimated to exceed $722 billion by 2030, indicating a positive growth trajectory [4] - The insurance industry is expected to generate around $4.7 billion in annual global premiums from AI-related insurance by 2032, with a CAGR of nearly 80% [10]

Core Insights - ProAssurance Corporation (PRA) reported a second-quarter 2025 adjusted operating income of $0.52 per share, exceeding the Zacks Consensus Estimate of $0.19, and an increase from $0.21 in the same period last year [1][11] - Operating revenues decreased by 2.4% year over year to $271.9 million, but still surpassed the consensus estimate by 2% [1][2] - The company experienced a decline in gross premiums written by 3.1% year over year to $216.9 million, with net premiums earned also decreasing by 3.1% to $232.4 million [3][6] Financial Performance - Net investment income rose by 6.5% year over year to $38.9 million, driven by higher book yields, and exceeded the consensus estimate of $37.5 million [4][11] - Total expenses decreased by 8.5% year over year to $249.3 million, lower than the estimate of $260.3 million, primarily due to a reduction in net losses and loss adjustment expenses [4][5] - Net income for the second quarter was $21.9 million, reflecting a 41.4% increase year over year, with a combined ratio improving to 103.6% from 110.9% in the prior-year quarter [5][11] Segment Analysis - Specialty P&C Segment revenues declined by 2.4% year over year to $181.4 million, but were above the Zacks Consensus Estimate of $178.7 million [6] - Workers' Compensation Insurance Segment revenues fell by 0.6% year over year to $42 million, missing the consensus estimate [8] - The Segregated Portfolio Cell Reinsurance Segment saw gross premiums written decline by 18% year over year to $13 million, missing estimates [12] Operational Metrics - The combined ratio for the Specialty P&C Segment improved to 95.2% from 106.8% in the prior-year quarter, while the Workers' Compensation Insurance Segment's combined ratio deteriorated to 115.4% from 113.2% [7][9] - The Corporate Segment's net investment income increased by 6.9% year over year to $38 million, surpassing estimates [14] Financial Position - As of June 30, 2025, ProAssurance had cash and cash equivalents of $41.6 million, down from $54.9 million at the end of 2024, while total investments rose to $4.4 billion [15] - Total shareholders' equity increased by 6.1% to $1.3 billion, with book value per share rising to $24.80 from $23.49 at the end of 2024 [16] Share Repurchase Update - ProAssurance did not repurchase any common shares in the second quarter of 2025, with a remaining capacity of $55.9 million for future repurchases or debt retirement [17]

Core Insights - ProAssurance reported a revenue of $271.94 million for the quarter ended June 2025, reflecting a decrease of 2.4% year-over-year, but exceeding the Zacks Consensus Estimate by 1.96% [1] - The company's EPS was $0.52, significantly higher than the $0.23 reported in the same quarter last year, resulting in an EPS surprise of 173.68% compared to the consensus estimate of $0.19 [1] Financial Performance Metrics - Net Loss Ratio was reported at 68.8%, better than the average estimate of 77% from three analysts [4] - Underwriting Expense Ratio stood at 34.8%, slightly above the average estimate of 33.9% [4] - Combined Ratio was 103.6%, outperforming the average estimate of 110.9% [4] - Net premiums earned totaled $232.41 million, surpassing the average estimate of $225.22 million, but showing a year-over-year decline of 3.1% [4] - Net investment income was $38.93 million, exceeding the average estimate of $37.5 million, with a year-over-year increase of 6.5% [4] - Equity in earnings of unconsolidated subsidiaries was $4.58 million, compared to the average estimate of $3.07 million, reflecting a 47% decrease year-over-year [4] - Other income was reported at $0.6 million, significantly lower than the average estimate of $2.68 million, marking a 71.5% decline year-over-year [4] Segment Performance - Net Premiums Earned in Specialty Property & Casualty was $179.31 million, slightly below the average estimate of $180.34 million, with a year-over-year decrease of 2.8% [4] - Net Premiums Earned in Segregated Portfolio Cell Reinsurance was $11.56 million, compared to the average estimate of $12.1 million, reflecting a 14.7% year-over-year decline [4] - Net Premiums Earned in Workers Compensation was $41.54 million, close to the average estimate of $41.61 million, showing a minor decrease of 0.5% year-over-year [4] - Net investment income in Segregated Portfolio Cell Reinsurance was $0.9 million, slightly below the average estimate of $0.91 million, with an 8.4% year-over-year decline [4] Stock Performance - ProAssurance shares returned +0.6% over the past month, underperforming the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance in the near term [3]

Company Performance - ProAssurance (PRA) reported quarterly earnings of $0.52 per share, exceeding the Zacks Consensus Estimate of $0.19 per share, and up from $0.23 per share a year ago, representing an earnings surprise of +173.68% [1] - The company posted revenues of $271.94 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.96%, although this is a decrease from year-ago revenues of $278.54 million [2] - Over the last four quarters, ProAssurance has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Performance - ProAssurance shares have increased approximately 49.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 7.6% [3] - The current consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $267.23 million, and for the current fiscal year, it is $0.91 on revenues of $1.08 billion [7] Industry Outlook - The Insurance - Property and Casualty industry, to which ProAssurance belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of ProAssurance's stock may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) ProAssurance Corporation filed its Q2 2025 Form 10-Q, detailing its large accelerated filer status and key registrant information - ProAssurance Corporation filed its **Form 10-Q** for the quarterly period ended **June 30, 2025**. The company is a **large accelerated filer** and is not a shell company[1](index=1&type=chunk)[4](index=4&type=chunk)[5](index=5&type=chunk) Registrant Information | Field | Value | | :--- | :--- | | Commission File Number | 0-16533 | | Exact Name of Registrant | ProAssurance Corporation | | State of Incorporation | Delaware | | I.R.S. Employer Identification No. | 63-1261433 | | Principal Executive Offices Address | 100 Brookwood Place, Birmingham, AL 35209 | | Telephone Number | (205) 877-4400 | | Trading Symbol | PRA | | Exchange Registered On | New York Stock Exchange | | Common Stock Outstanding (July 31, 2025) | 51,413,643 shares | [Glossary of Terms and Acronyms](index=2&type=section&id=Glossary%20of%20Terms%20and%20Acronyms) This section provides a glossary defining key terms and acronyms used throughout the report for enhanced clarity - The report includes a glossary defining various terms and acronyms used throughout the document, such as **AAD (Annual aggregate deductible)**, **AOCI (Accumulated other comprehensive income (loss))**, **MPL (Medical Professional Liability)**, and **SEC (Securities and Exchange Commission)**, to ensure clarity and understanding for readers[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk) [Caution Regarding Forward-Looking Statements](index=4&type=section&id=Caution%20Regarding%20Forward-Looking%20Statements) This section cautions that forward-looking statements are subject to significant risks and uncertainties, with no obligation for revisions - The document contains **forward-looking statements** based on estimates and anticipations of future events, which are **subject to significant risks, assumptions, and uncertainties** that could cause actual results to differ materially. These statements are identified by specific words and cover various aspects of the business, including liquidity, capital requirements, investment performance, and regulatory actions[12](index=12&type=chunk)[13](index=13&type=chunk)[16](index=16&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which are valid only as of the date made. The company explicitly declines any obligation to publicly release revisions to these statements unless required by law[16](index=16&type=chunk) [Risk Factors (General)](index=4&type=section&id=Risk%20Factors%20(General)) The company faces various general risk factors, including economic, regulatory, and operational challenges, detailed in its 2024 Form 10-K - Numerous factors could cause actual results to differ materially from forward-looking statements, including changes in economic conditions (inflation, unemployment), regulatory and legislative actions, tort reforms, interest and tax rate changes, financial market performance, and changes in accounting policies[14](index=14&type=chunk) - Other **significant risks** include the impact of healthcare system changes, consolidation of insureds, cyclical insurance industry trends, uncertainties in loss reserve estimates, availability and cost of reinsurance, litigation outcomes, and the availability and security of technology infrastructure, including cyber-attack susceptibility[14](index=14&type=chunk)[17](index=17&type=chunk) - The principal risk factors are detailed in the company's **December 31, 2024 Form 10-K report**, with no material changes noted other than those specifically disclosed in this 10-Q[15](index=15&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's analysis [ITEM 1. FINANCIAL STATEMENTS](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents ProAssurance's unaudited condensed consolidated financial statements and detailed notes for Q2 2025 [Condensed Consolidated Balance Sheets (Unaudited)](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)%20-%20JUNE%2030%2C%202025%20AND%20DECEMBER%2031%2C%202024) This section presents the unaudited condensed consolidated balance sheets, detailing changes in assets, liabilities, and equity Condensed Consolidated Balance Sheets (Unaudited) (In thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Total Investments | $4,379,327 | $4,367,427 | | Cash and cash equivalents | $41,605 | $54,881 | | Premiums receivable, net | $252,473 | $228,900 | | Receivable from reinsurers on unpaid losses and loss adjustment expenses | $361,278 | $409,069 | | Deferred tax asset, net | $142,694 | $163,928 | | Total Assets | $5,485,603 | $5,574,273 | | **Liabilities** | | | | Reserve for losses and loss adjustment expenses | $3,134,904 | $3,257,696 | | Unearned premiums | $425,551 | $418,756 | | Debt less unamortized debt issuance costs | $422,633 | $424,873 | | Total Liabilities | $4,210,353 | $4,372,524 | | **Shareholders' Equity** | | | | Total Shareholders' Equity | $1,275,250 | $1,201,749 | | Total Liabilities and Shareholders' Equity | $5,485,603 | $5,574,273 | - **Total assets decreased by $88.67 million** from **December 31, 2024**, to **June 30, 2025**, **primarily due to a decrease** in cash and cash equivalents, receivables from reinsurers, and deferred tax assets[21](index=21&type=chunk) - **Total liabilities decreased by $162.17 million**, **mainly driven by a reduction** in the reserve for losses and loss adjustment expenses and other liabilities[21](index=21&type=chunk) - **Shareholders' equity increased by $73.5 million**, **primarily due to an increase** in retained earnings and accumulated other comprehensive income (loss)[21](index=21&type=chunk) [Condensed Consolidated Statements of Changes in Capital (Unaudited)](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20CAPITAL%20(UNAUDITED)%20-%20THREE%20AND%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202025%20AND%202024) This section details changes in shareholders' equity, including common stock, paid-in capital, and retained earnings Condensed Consolidated Statements of Changes in Capital (Unaudited) (In thousands) | Item | Balance at Dec 31, 2024 | 3 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2025 | Balance at Jun 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Common Stock | $638 | $1 | $2 | $640 | | Additional Paid-in Capital | $408,471 | $1,406 | $1,565 | $410,036 | | Accumulated Other Comprehensive Income (Loss) | $(172,391) | $18,302 | $55,835 | $(116,556) | | Retained Earnings | $1,434,725 | $21,921 | $16,099 | $1,450,824 | | Treasury Stock | $(469,694) | $0 | $0 | $(469,694) | | **Total Shareholders' Equity** | **$1,201,749** | **$40,260** | **$73,501** | **$1,275,250** | - **Total shareholders' equity increased by $73.5 million** for the six months ended **June 30, 2025**, **primarily driven by a significant increase** in **accumulated other comprehensive income (loss)** and **retained earnings**[23](index=23&type=chunk) - **Accumulated other comprehensive income (loss) improved** from **$(172.39) million** at **December 31, 2024**, to **$(116.56) million** at **June 30, 2025**, reflecting **positive other comprehensive income (loss) of $55.84 million** during the six-month period[23](index=23&type=chunk) - Net income contributed **$21.92 million** for the three months and **$16.10 million** for the six months ended **June 30, 2025**, to retained earnings[23](index=23&type=chunk) [Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20AND%20COMPREHENSIVE%20INCOME%20(UNAUDITED)%20-%20THREE%20AND%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202025%20AND%202024) This section presents the unaudited condensed consolidated statements of income and comprehensive income Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) (In thousands, except per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | | | | | | Net premiums earned | $232,407 | $239,867 | $468,682 | $484,017 | | Net investment income | $38,933 | $36,558 | $75,883 | $70,455 | | Total revenues | $276,753 | $290,355 | $548,831 | $575,053 | | **Expenses** | | | | | | Net losses and loss adjustment expenses | $159,937 | $186,000 | $349,898 | $380,694 | | Total expenses | $249,318 | $272,426 | $527,728 | $551,807 | | Income (loss) before income taxes | $27,435 | $17,929 | $21,103 | $23,246 | | Total income tax expense (benefit) | $5,514 | $2,421 | $5,004 | $3,112 | | Net income (loss) | $21,921 | $15,508 | $16,099 | $20,134 | | Other comprehensive income (loss), after tax | $18,302 | $924 | $55,835 | $(1,548) | | Comprehensive income (loss) | $40,223 | $16,432 | $71,934 | $18,586 | | Basic EPS | $0.43 | $0.30 | $0.31 | $0.39 | | Diluted EPS | $0.42 | $0.30 | $0.31 | $0.39 | - Net income for the three months ended **June 30, 2025**, **increased by $6.41 million (41.35%)** to **$21.92 million**, compared to **$15.51 million** in the prior year period. For the six months, net income **decreased by $4.04 million (20.04%)** to **$16.10 million**[24](index=24&type=chunk) - **Total revenues decreased by $13.60 million (4.68%)** for the three months and **$26.22 million (4.56%)** for the six months ended **June 30, 2025**, **primarily due to lower net premiums earned**[24](index=24&type=chunk) - Net losses and loss adjustment expenses **decreased by $26.06 million (14.01%)** for the three months and **$30.80 million (8.09%)** for the six months ended **June 30, 2025**, contributing to **improved profitability**[24](index=24&type=chunk) - **Other comprehensive income (loss) significantly increased** to **$18.30 million** for the three months and **$55.84 million** for the six months ended **June 30, 2025**, compared to **$0.92 million** and **$(1.55) million**, respectively, in the prior year, **largely due to investment performance**[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)%20-%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202025%20AND%202024) This section presents the unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) | Activity | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $(39,674) | $(24,499) | $(15,175) | | Net cash provided (used) by investing activities | $34,233 | $(1,970) | $36,203 | | Net cash provided (used) by financing activities | $(7,835) | $(2,552) | $(5,283) | | Increase (decrease) in cash and cash equivalents | $(13,276) | $(29,021) | $15,745 | | Cash and cash equivalents at end of period | $41,605 | $36,877 | $4,728 | - Net cash used in operating activities **increased by $15.18 million** to **$(39.67) million** for the six months ended **June 30, 2025**, **primarily due to higher operating expenses** and **lower net premium receipts**[27](index=27&type=chunk)[174](index=174&type=chunk) - Net cash provided by investing activities **significantly improved by $36.20 million**, moving from **$(1.97) million** used in 2024 to **$34.23 million** provided in 2025, **largely driven by proceeds** from the sale of capital assets and higher proceeds from sales/maturities of fixed maturities[27](index=27&type=chunk)[173](index=173&type=chunk) - Net cash used in financing activities **increased by $5.28 million** to **$(7.84) million**, **mainly due to higher repayments** under the **Revolving Credit Agreement** and capital contributions received from external segregated portfolio cell participants[27](index=27&type=chunk)[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section provides an overview of Notes to Condensed Consolidated Financial Statements [Basis of Presentation](index=12&type=section&id=Basis%20of%20Presentation) The financial statements are prepared under GAAP, with segment reorganization and merger-related disclosures - ProAssurance operates in four reportable segments: **Specialty P&C**, **Workers' Compensation Insurance**, **Segregated Portfolio Cell Reinsurance**, and **Corporate**. A segment reorganization in **Q1 2025** recast prior period segment information to align with current CODM oversight[32](index=32&type=chunk)[33](index=33&type=chunk) - The company entered into a **Merger Agreement** with **The Doctors Company** on **March 19, 2025**, for **$25.00 cash per share**. Stockholders approved the merger on **June 24, 2025**, and FTC granted early termination of the waiting period on **July 2, 2025**. The merger is expected to close in the **first half of 2026**, subject to remaining regulatory approvals[42](index=42&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk) - Pre-tax transaction-related costs of approximately **$4.5 million** and **$11.6 million** were incurred for the three and six months ended **June 30, 2025**, respectively, related to the proposed merger[45](index=45&type=chunk) - In **Q1 2025**, ProAssurance sold its Franklin, TN property, recognizing a **$2.2 million gain** in other income (expense) and generating **$19.3 million** in proceeds from investing activities[47](index=47&type=chunk) [Fair Value Measurement](index=14&type=section&id=Fair%20Value%20Measurement) Fair value is measured using a three-level hierarchy, primarily for investments, with specific methodologies detailed - Fair value measurements are categorized into a three-level hierarchy: **Level 1** (quoted prices in active markets), **Level 2** (observable market data), and **Level 3** (non-observable inputs and entity's own assumptions)[50](index=50&type=chunk)[52](index=52&type=chunk) Total Assets at Fair Value (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets categorized within the fair value hierarchy | $4,044,200 | $4,028,615 | | Assets carried at NAV (Investment in unconsolidated subsidiaries) | $218,452 | $226,269 | | **Total assets at fair value** | **$4,262,652** | **$4,254,884** | Level 3 Fair Value Measurements – Assets (In thousands) | Asset Type | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--- | :--- | :--- | | Corporate debt, limited observable inputs | $80,344 | $81,062 | | Residential mortgage backed, other commercial mortgage backed and other asset-backed securities | $9,449 | $3,774 | | Equity investments | $4,526 | $5,506 | | Other investments | $1,021 | $500 | | **Total Level 3 Assets** | **$95,340** | **$90,842** | - Unfunded contractual commitments related to investments carried at **NAV** totaled approximately **$213.6 million** as of **June 30, 2025**, **primarily for non-public equity funds** and credit funds[70](index=70&type=chunk) [Investments](index=21&type=section&id=Investments) The investment portfolio consists primarily of available-for-sale fixed maturities, with detailed income and gain/loss analysis Available-for-sale fixed maturities (In thousands) | Category | Amortized Cost (Jun 30, 2025) | Estimated Fair Value (Jun 30, 2025) | Gross Unrealized Losses (Jun 30, 2025) | | :--- | :--- | :--- | :--- | | U.S. Treasury obligations | $253,693 | $246,070 | $8,343 | | State and municipal bonds | $484,985 | $470,552 | $18,211 | | Corporate debt | $1,817,137 | $1,749,456 | $75,742 | | Residential mortgage-backed securities | $565,604 | $517,973 | $50,609 | | Other asset-backed securities | $455,923 | $451,961 | $6,764 | | **Total** | **$3,810,930** | **$3,659,830** | **$170,082** | - As of **June 30, 2025**, 1,961 debt securities (**48.4%** of available-for-sale fixed maturities) were in an unrealized loss position, totaling **$170.08 million** in unrealized losses. The company does not intend to sell these securities and expects to recover their amortized cost[92](index=92&type=chunk)[95](index=95&type=chunk) Net Investment Income (In thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Fixed maturities | $36,594 | $33,607 | $71,627 | $65,058 | | Equities | $1,237 | $1,164 | $2,115 | $2,056 | | Short-term investments, including Other | $2,482 | $3,140 | $5,056 | $6,551 | | BOLI | $621 | $534 | $1,239 | $986 | | Investment fees and expenses | $(2,001) | $(1,887) | $(4,154) | $(4,196) | | **Net investment income** | **$38,933** | **$36,558** | **$75,883** | **$70,455** | - Net investment income **increased by $2.38 million (6.5%)** for the three months and **$5.43 million (7.7%)** for the six months ended **June 30, 2025**, **primarily due to higher average book yields** and **increased average investment balances**[101](index=101&type=chunk)[205](index=205&type=chunk) - Equity in earnings of unconsolidated subsidiaries **decreased by $4.07 million (47.0%)** for the three months and **$3.02 million (26.0%)** for the six months ended **June 30, 2025**, reflecting lower market valuations in prior quarters[102](index=102&type=chunk)[205](index=205&type=chunk) Net Investment Gains (Losses) (In thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net impairment losses recognized in earnings | $882 | $(465) | $625 | $(1,399) | | Other net investment gains (losses) | $(655) | $3,628 | $(2,091) | $4,294 | | **Total net investment gains (losses)** | **$227** | **$3,163** | **$(1,466)** | **$2,895** | - The company recognized a reversal of **$0.9 million** and **$0.6 million** in credit-related impairment losses for the three and six months ended **June 30, 2025**, respectively, **primarily from the sale of corporate bonds**[108](index=108&type=chunk) [Income Taxes](index=28&type=section&id=Income%20Taxes) Income tax provisions are based on the estimated annual effective tax rate, with discrete items impacting the rate - ProAssurance uses the estimated annual effective tax rate method for interim periods, with unusual or infrequent items treated as discrete[112](index=112&type=chunk) - For the three and six months ended **June 30, 2025**, the income tax provision was impacted by executive compensation exceeding statutory limits, non-deductible merger transaction costs, and changes in uncertain tax positions[113](index=113&type=chunk) - As of **June 30, 2025**, the company had a receivable for U.S. federal and U.K. income taxes of **$2.4 million**[114](index=114&type=chunk) [Reserve for Losses and Loss Adjustment Expenses](index=28&type=section&id=Reserve%20for%20Losses%20and%20Loss%20Adjustment%20Expenses) Loss reserves are based on complex estimates, with significant net favorable prior year reserve development noted - Estimating the reserve for losses and loss adjustment expenses is a complex process involving actuarial estimates and judgments, which are regularly reviewed and updated[115](index=115&type=chunk) Activity in the Reserve for Losses and Loss Adjustment Expenses (In thousands) | Item | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | | Balance, beginning of year | $3,257,696 | $3,401,281 | | Net losses: Current year | $376,405 | $387,630 | | (Favorable) unfavorable development of reserves established in prior years, net | $(26,507) | $(6,936) | | Total Net Losses | $349,898 | $380,694 | | Total paid | $(440,708) | $(414,126) | | Foreign currency exchange rate (gains) losses | $15,809 | $(2,602) | | **Balance, end of period** | **$3,134,904** | **$3,367,540** | - Consolidated net favorable prior year reserve development of **$26.51 million** was recognized for the six months ended **June 30, 2025**, compared to **$6.94 million** in the prior year[117](index=117&type=chunk) - This **favorable development was primarily driven by $22.8 million** in the **Specialty P&C** segment (**MPL** and **Medical Technology Liability**), **$1.0 million** in **Workers' Compensation Insurance**, and **$2.7 million** in **Segregated Portfolio Cell Reinsurance**, partially offset by **$1.2 million unfavorable development** from **Lloyd's Syndicates** operations[118](index=118&type=chunk)[119](index=119&type=chunk) [Commitments and Contingencies](index=30&type=section&id=Commitments%20and%20Contingencies) The company is involved in legal actions and has funding commitments, with no material corporate legal reserves - ProAssurance is involved in legal actions related to insurance policies and claims handling, which are considered part of its loss reserving process[121](index=121&type=chunk) - As of **June 30, 2025**, there were no material reserves established for corporate legal actions[121](index=121&type=chunk) - The company has funding commitments totaling approximately **$213.6 million**, **primarily related to non-public investment entities**[122](index=122&type=chunk) [Debt](index=30&type=section&id=Debt) Outstanding debt includes Contribution Certificates, a Revolving Credit Agreement, and a Term Loan, with covenant compliance Outstanding Debt (In thousands) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Contribution Certificates due 2031, interest at 3.0% | $181,820 | $181,163 | | Revolving Credit Agreement | $125,000 | $125,000 | | Term Loan | $117,188 | $120,313 | | **Total principal** | **$424,008** | **$426,476** | | Less unamortized debt issuance costs | $1,375 | $1,603 | | **Debt less unamortized debt issuance costs** | **$422,633** | **$424,873** | - As of **June 30, 2025**, ProAssurance was in compliance with all covenants of its **Revolving Credit Agreement**[124](index=124&type=chunk) - The effective interest rate for the **Revolving Credit Agreement** was **6.27%** and for the **Term Loan** was **6.40%** as of **June 30, 2025**[123](index=123&type=chunk) [Derivatives](index=31&type=section&id=Derivatives) Derivative instruments are used to manage interest rate and foreign exchange risks, with fair value changes recognized - ProAssurance uses two forward-starting interest rate swap agreements to hedge against variability in cash flows from its **Revolving Credit Agreement** and **Term Loan**, effectively fixing the base rates at **3.187%** and **3.207%**, respectively[128](index=128&type=chunk) - Foreign currency forward contracts are utilized as economic hedges to mitigate foreign exchange exposure related to foreign currency denominated loss reserves, with changes in fair value recognized in earnings[130](index=130&type=chunk)[136](index=136&type=chunk) Derivative Instruments Summary (In thousands) | Derivative Type | Aggregate Notional Amount (Jun 30, 2025) | Estimated Fair Value (Jun 30, 2025) | Aggregate Notional Amount (Dec 31, 2024) | Estimated Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | :--- | :--- | | Interest Rate Swaps | $242,188 | $1,214 | $245,313 | $5,801 | | Foreign Currency Forwards | $106,904 | $1,536 | $5,470 | $293 | - For the six months ended **June 30, 2025**, a gain of **$1.09 million** on **Interest Rate Swaps** was reclassified from **AOCI** to earnings, reducing interest expense[134](index=134&type=chunk) [Shareholders' Equity](index=32&type=section&id=Shareholders%27%20Equity) Shareholders' equity details authorized shares, repurchase capacity, and changes in accumulated other comprehensive income - As of **June 30, 2025**, ProAssurance had **100 million** authorized common shares and **50 million** authorized preferred shares[137](index=137&type=chunk) - Board authorizations for common share repurchases or debt retirement totaled **$55.9 million** as of **June 30, 2025**. No common shares were repurchased during the three or six months ended **June 30, 2025** or 2024[138](index=138&type=chunk) Changes in Accumulated Other Comprehensive Income (Loss) (AOCI) (In thousands) | Component | Balance, Dec 31, 2024 | Net OCI, 6 Months Ended Jun 30, 2025 | Balance, Jun 30, 2025 | | :--- | :--- | :--- | :--- | | Unrealized Investment Gains (Losses) | $(176,053) | $59,378 | $(116,675) | | Cash Flow Hedging Gains (Losses) | $4,576 | $(3,624) | $952 | | Non-credit Impairments | $(92) | $81 | $(11) | | Change in Defined Benefit Plan Liabilities | $(822) | $0 | $(822) | | **Total AOCI** | **$(172,391)** | **$55,835** | **$(116,556)** | - **AOCI improved by $55.84 million** for the six months ended **June 30, 2025**, **primarily due to an increase** in unrealized investment gains (losses) on available-for-sale securities[141](index=141&type=chunk) [Variable Interest Entities](index=33&type=section&id=Variable%20Interest%20Entities) The company holds passive interests in VIEs and consolidates PPM RRG due to primary beneficiary status - ProAssurance holds passive interests in **VIEs**, mainly investment fund LPs/LLCs, with a carrying value of **$228.3 million** as of **June 30, 2025**. These are not consolidated as ProAssurance is not the primary beneficiary[142](index=142&type=chunk)[144](index=144&type=chunk) - ProAssurance is the primary beneficiary of **PPM RRG**, consolidating its operations due to a management services agreement and effective control over its Board of Directors[145](index=145&type=chunk) - Approximately **$139 million** of ProAssurance's consolidated assets and liabilities are related to **PPM RRG**[145](index=145&type=chunk) [Earnings (Loss) Per Share](index=34&type=section&id=Earnings%20(Loss)%20Per%20Share) Earnings per share calculations include diluted weighted average shares, with no antidilutive equivalents noted Weighted Average Number of Common Shares Outstanding (In thousands, except per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic | 51,345 | 51,060 | 51,267 | 51,036 | | Dilutive effect of securities: Restricted Share Units | 211 | 128 | 200 | 120 | | Dilutive effect of securities: Performance Share Units | 121 | 37 | 95 | 31 | | **Diluted** | **51,677** | **51,225** | **51,562** | **51,187** | | Basic EPS | $0.43 | $0.30 | $0.31 | $0.39 | | Diluted EPS | $0.42 | $0.30 | $0.31 | $0.39 | - **Diluted EPS** for the three months ended **June 30, 2025**, was **$0.42**, up from **$0.30** in the prior year. For the six months, **diluted EPS** was **$0.31**, down from **$0.39** in the prior year[146](index=146&type=chunk) - There were no antidilutive common share equivalents for the three and six months ended **June 30, 2025**[146](index=146&type=chunk) [Segment Information](index=34&type=section&id=Segment%20Information) ProAssurance operates in four segments, with performance evaluated based on underwriting profit/loss and operating profit/loss - ProAssurance reorganized its segment reporting structure in **Q1 2025**, now operating in four segments: **Specialty P&C**, **Workers' Compensation Insurance**, **Segregated Portfolio Cell Reinsurance**, and **Corporate**[149](index=149&type=chunk)[151](index=151&type=chunk) - The **CODM** evaluates **Specialty P&C** and **Workers' Compensation** segments based on before-tax underwriting profit/loss and net loss/underwriting expense ratios. **Segregated Portfolio Cell Reinsurance** is evaluated on operating profit/loss (including investment results, net of taxes), and **Corporate** on its contribution to consolidated after-tax results[152](index=152&type=chunk) Consolidated Net Premiums Earned by Segment (In thousands) | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Specialty P&C | $179,308 | $184,546 | $362,564 | $373,433 | | Workers' Compensation Insurance | $41,543 | $41,770 | $83,066 | $82,864 | | Segregated Portfolio Cell Reinsurance | $11,556 | $13,551 | $23,052 | $27,720 | | **Consolidated total** | **$232,407** | **$239,867** | **$468,682** | **$484,017** | - Consolidated net premiums earned **decreased by $7.46 million (3.1%)** for the three months and **$15.34 million (3.2%)** for the six months ended **June 30, 2025**, **primarily due to reduced participation** in **Lloyd's Syndicates** and non-renewals in the **Segregated Portfolio Cell Reinsurance** segment[156](index=156&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes ProAssurance's financial condition and results for Q2 2025, including segment performance [ProAssurance Overview](index=40&type=section&id=ProAssurance%20Overview) ProAssurance is a holding company providing various P&C insurance, with a reorganized four-segment structure - **ProAssurance Corporation** is a holding company for property and casualty insurance companies, providing medical professional liability, medical technology and life sciences liability, and workers' compensation insurance[165](index=165&type=chunk) - The company reorganized its internal management reporting structure in **Q1 2025**, now operating in four segments: **Specialty P&C**, **Workers' Compensation Insurance**, **Segregated Portfolio Cell Reinsurance**, and **Corporate**. This change had no impact on previously reported consolidated financial results[166](index=166&type=chunk) [Critical Accounting Estimates](index=40&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve significant judgment, including loss reserves, reinsurance, investments, and income taxes - **Critical accounting estimates** involve **significant management judgment** and include the reserve for losses and loss adjustment expenses, reinsurance, valuation of investments and impairment of securities, and income taxes[168](index=168&type=chunk)[171](index=171&type=chunk) - The company utilizes the estimated annual effective tax rate method for interim periods, treating unusual or infrequent items as discrete. The OBBBA, signed **July 4, 2025**, will impact tax provisions starting **Q3 2025**[169](index=169&type=chunk)[170](index=170&type=chunk) [Liquidity and Capital Resources and Financial Condition](index=41&type=section&id=Liquidity%20and%20Capital%20Resources%20and%20Financial%20Condition) This section provides an overview of Liquidity and Capital Resources and Financial Condition [Overview (Liquidity)](index=41&type=section&id=Overview%20(Liquidity)) The company's liquidity is supported by investments, dividends from subsidiaries, and available credit facilities - ProAssurance's principal sources of external revenue are investment revenues and dividends from operating subsidiaries[172](index=172&type=chunk) - As of **June 30, 2025**, the company held approximately **$83 million** in cash and liquid investments outside its insurance subsidiaries, available without regulatory approval[172](index=172&type=chunk) - Operating subsidiaries paid approximately **$12 million** in dividends to the holding company in 2025. An additional **$145 million** in dividends is permitted over the remainder of 2025 without prior state insurance regulator approval[172](index=172&type=chunk) [Cash Flows](index=41&type=section&id=Cash%20Flows) Cash flows from operating activities decreased, while investing activities significantly improved for the period Cash Flows (In thousands) | Activity | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $(39,674) | $(24,499) | $(15,175) | | Net cash provided (used) by investing activities | $34,233 | $(1,970) | $36,203 | | Net cash provided (used) by financing activities | $(7,835) | $(2,552) | $(5,283) | | **Increase (decrease) in cash and cash equivalents** | **$(13,276)** | **$(29,021)** | **$15,745** | - Operating cash flows **decreased by $15.18 million**, **primarily due to a $20.2 million increase** in cash paid for operating expenses (incentive compensation, merger-related costs) and an **$11.9 million decrease** in net premium receipts[174](index=174&type=chunk)[175](index=175&type=chunk) - The **decrease in operating cash flows** was partially offset by a **$7.9 million decrease** in paid net losses (due to increased reinsurance recoveries and fewer large indemnity payments) and a **$7.3 million increase** in cash from investment income[175](index=175&type=chunk) [Operating Activities and Related Cash Flows](index=42&type=section&id=Operating%20Activities%20and%20Related%20Cash%20Flows) Operating activities involve reinsurance, tax laws, and a payroll tax refund, with federal NOL carryforwards - Reinsurance is used in **Specialty P&C** and **Workers' Compensation** segments for capacity, loss reimbursement, and risk mitigation[177](index=177&type=chunk) - The traditional workers' compensation treaty renewed on **May 1, 2025**, at a lower contract rate, with other material terms consistent with the previous treaty[178](index=178&type=chunk) - ProAssurance received a **$4.4 million** payroll tax refund (including **$0.6 million** interest) in **April 2025**, related to a **CARES Act** claim for wages paid in 2020[187](index=187&type=chunk)[189](index=189&type=chunk) - As of **June 30, 2025**, the company had approximately **$18.9 million** in U.S. federal **NOL carryforwards**, subject to Section 382 limitations and expiring in 2035[189](index=189&type=chunk) [Investing Activities and Related Cash Flows](index=45&type=section&id=Investing%20Activities%20and%20Related%20Cash%20Flows) The investment portfolio is primarily high-quality fixed income, with anticipated maturities and unfunded commitments Investment Portfolio Composition (In thousands) | Investment Category | June 30, 2025 Carrying Value | % of Total Investment (Jun 30, 2025) | | :--- | :--- | :--- | | Fixed maturities, available-for-sale | $3,659,830 | 83% | | Fixed maturities, trading | $13,048 | 1% | | Equity investments | $108,758 | 2% | | Short-term investments | $257,268 | 6% | | BOLI | $81,418 | 1% | | Investment in unconsolidated subsidiaries | $251,198 | 6% | | Other investments | $7,807 | 1% | | **Total investments** | **$4,379,327** | **100%** | - At **June 30, 2025**, **92%** of fixed maturities were **investment grade**, with an average rating of **A+**. The weighted average **effective duration** of fixed maturity securities was **3.38 years**[192](index=192&type=chunk)[196](index=196&type=chunk) - The company anticipates **$70 million to $180 million** of its portfolio to mature or be paid down quarterly over the next twelve months to meet cash flow requirements[194](index=194&type=chunk) - **Funds at Lloyd's (FAL)** had a fair value of **$14.1 million** at **June 30, 2025**, increased in **Q1 2025** to support accumulated losses[195](index=195&type=chunk) - Total funding commitments for investment fund LPs/LLCs were approximately **$213.6 million** as of **June 30, 2025**, with an estimated **$136 million** expected to be drawn[197](index=197&type=chunk) [Financing Activities and Related Cash Flows](index=47&type=section&id=Financing%20Activities%20and%20Related%20Cash%20Flows) Financing activities involve debt instruments and interest rate swaps, with FHLB membership for liquidity Outstanding Debt (In thousands) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Contribution Certificates | $181,820 | $181,163 | | Revolving Credit Agreement | $125,000 | $125,000 | | Term Loan | $117,188 | $120,313 | | **Total principal** | **$424,008** | **$426,476** | - Interest rate swaps are used to manage exposure to interest rate risk on borrowings under the **Revolving Credit Agreement** and **Term Loan**[199](index=199&type=chunk) - Two insurance subsidiaries are **FHLB** members, providing access to secured cash advances for liquidity, though not materially utilized for borrowing to date[200](index=200&type=chunk) [Results of Operations – Three and Six Months Ended June 30, 2025 Compared to Three and Six Months Ended June 30, 2024](index=48&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares ProAssurance's Q2 2025 results to Q2 2024, detailing revenues, expenses, and key ratios Selected Consolidated Financial Data (In thousands, except per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net premiums earned | $232,407 | $239,867 | $(7,460) | $468,682 | $484,017 | $(15,335) | | Total revenues | $276,753 | $290,355 | $(13,602) | $548,831 | $575,053 | $(26,222) | | Net losses and loss adjustment expenses | $159,937 | $186,000 | $(26,063) | $349,898 | $380,694 | $(30,796) | | Total expenses | $249,318 | $272,426 | $(23,108) | $527,728 | $551,807 | $(24,079) | | Net income (loss) | $21,921 | $15,508 | $6,413 | $16,099 | $20,134 | $(4,035) | | Basic EPS | $0.43 | $0.30 | $0.13 | $0.31 | $0.39 | $(0.08) | | Diluted EPS | $0.42 | $0.30 | $0.12 | $0.31 | $0.39 | $(0.08) | | Net loss ratio | 68.8% | 77.5% | (8.7 pts) | 74.7% | 78.7% | (4.0 pts) | | Underwriting expense ratio | 34.8% | 33.4% | 1.4 pts | 35.0% | 32.6% | 2.4 pts | | Combined ratio | 103.6% | 110.9% | (7.3 pts) | 109.7% | 111.3% | (1.6 pts) | | Operating ratio | 86.8% | 95.7% | (8.9 pts) | 93.5% | 96.7% | (3.2 pts) | | Return on equity | 7.0% | 5.5% | 1.5 pts | 2.6% | 3.6% | (1.0 pts) | [Executive Summary of Operations](index=49&type=section&id=Executive%20Summary%20of%20Operations) This summary highlights key operational trends, including changes in revenues, expenses, taxes, and operating ratios [Revenues](index=49&type=section&id=Revenues) Consolidated net premiums earned decreased, while net investment income increased, and other income saw significant changes Consolidated Net Premiums Earned (In thousands) | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Specialty P&C | $179,308 | $184,546 | (2.8%) | $362,564 | $373,433 | (2.9%) | | Workers' Compensation Insurance | $41,543 | $41,770 | (0.5%) | $83,066 | $82,864 | 0.2% | | Segregated Portfolio Cell Reinsurance | $11,556 | $13,551 | (14.7%) | $23,052 | $27,720 | (16.8%) | | **Consolidated total** | **$232,407** | **$239,867** | **(3.1%)** | **$468,682** | **$484,017** | **(3.2%)** | - Net investment income **increased by 6.5%** for the three months and **7.7%** for the six months ended **June 30, 2025**, **driven by higher average book yields** and investment balances[205](index=205&type=chunk) - Equity in earnings of unconsolidated subsidiaries **decreased by 47.0%** for the three months and **26.0%** for the six months, reflecting lower market valuations in prior quarters[205](index=205&type=chunk) Consolidated Net Investment Gains (Losses) (In thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net impairment losses recognized in earnings | $882 | $(465) | (289.7%) | $625 | $(1,399) | (144.7%) | | Contingent Consideration remeasurement gain | $0 | $6,500 | (100.0%) | $0 | $6,500 | (100.0%) | | Other net investment gains (losses) | $(655) | $(2,872) | (77.2%) | $(2,091) | $(2,206) | (5.2%) | | **Net investment gains (losses)** | **$227** | **$3,163** | **(92.8%)** | **$(1,466)** | **$2,895** | **(150.6%)** | - Consolidated other income (expense) **decreased by $1.51 million (71.5%)** for the three months and **$8.94 million (147.2%)** for the six months, **primarily due to foreign currency exchange rate losses**, partially offset by a **$2.2 million gain** from the sale of Franklin, TN property and **$1.0 million** from the sale of legal professional liability renewal rights[209](index=209&type=chunk)[50](index=50&type=chunk) [Expenses](index=51&type=section&id=Expenses) The net loss ratio improved due to favorable reserve development, while the underwriting expense ratio increased Consolidated Net Loss Ratios and Prior Accident Year Reserve Development | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (pts) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (pts) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Current accident year net loss ratio | 79.8% | 80.3% | (0.5) | 80.3% | 80.1% | 0.2 | | Calendar year net loss ratio | 68.8% | 77.5% | (8.7) | 74.7% | 78.7% | (4.0) | | Favorable (unfavorable) reserve development, prior accident years (in millions) | $25.6 | $6.5 | $19.1 | $26.5 | $6.9 | $19.6 | - Consolidated net favorable reserve development, excluding purchase accounting amortization, was **largely attributable** to the **MPL** line of business in the **Specialty P&C** segment for accident years 2018-2022[216](index=216&type=chunk) Consolidated Underwriting Expense Ratios | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (pts) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (pts) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consolidated underwriting expense ratio | 34.8% | 33.4% | 1.4 | 35.0% | 32.6% | 2.4 | | Corporate contribution | 3.8% | 3.6% | 0.2 | 3.6% | 3.5% | 0.1 | - The **increase in consolidated underwriting expense ratios** was **primarily due to transaction-related costs** associated with the proposed merger, which **increased the ratios by 1.7 and 2.5 percentage points** for the three and six months, respectively[217](index=217&type=chunk) [Taxes](index=53&type=section&id=Taxes) The consolidated income tax provision increased, resulting in a higher effective tax rate due to discrete items Consolidated Income Taxes (In thousands) | Item | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Income (loss) before income taxes | $21,103 | $23,246 | (9.2%) | | Income tax expense (benefit) | $5,004 | $3,112 | 60.8% | | Net income (loss) | $16,099 | $20,134 | (20.0%) | | **Effective tax rate** | **23.7%** | **13.4%** | **10.3 pts** | - The **effective tax rate increased by 10.3 percentage points** to **23.7%** for the six months ended **June 30, 2025**, compared to **13.4%** in the prior year[219](index=219&type=chunk) - Discrete items **increased the effective tax rate by 0.9%** for the 2025 six-month period, compared to a **0.7% decrease** in 2024[219](index=219&type=chunk) [Operating Ratio](index=53&type=section&id=Operating%20Ratio) The consolidated operating ratio improved due to favorable reserve development and increased investment income Consolidated Operating Ratios | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (pts) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (pts) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Combined ratio | 103.6% | 110.9% | (7.3) | 109.7% | 111.3% | (1.6) | | Less: investment income ratio | 16.8% | 15.2% | 1.6 | 16.2% | 14.6% | 1.6 | | **Operating ratio** | **86.8%** | **95.7%** | **(8.9)** | **93.5%** | **96.7%** | **(3.2)** | - The **decrease in the operating ratio** was **primarily attributable** to a **(8.2) percentage point impact** from prior accident year reserve development and a **(1.6) percentage point impact** from investment income for the three-month period[220](index=220&type=chunk) - Excluding specific items, the **operating ratios improved by approximately 1.1 and 0.7 percentage points** for the three and six months, respectively, **driven by improved current accident year net loss ratio** in **Workers' Compensation** and a **decrease in estimated ceded premiums** in **Specialty P&C**[221](index=221&type=chunk) [Non-GAAP Financial Measures](index=54&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures provide a clearer view of core operations by excluding non-recurring items, showing improved performance - **Non-GAAP operating income (loss)** excludes items not reflecting normal results, such as net investment gains/losses, transaction-related costs, and foreign currency exchange rate movements, to provide a useful view of core insurance operations[222](index=222&type=chunk)[223](index=223&type=chunk) Reconciliation of Net Income (Loss) to Non-GAAP Operating Income (Loss) (In thousands, except per share data) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $21,921 | $15,508 | $16,099 | $20,134 | | After-tax effect of exclusions | $4,847 | $(4,569) | $17,478 | $(6,162) | | **Non-GAAP operating income (loss)** | **$26,768** | **$10,939** | **$33,577** | **$13,972** | | Non-GAAP operating income (loss) per diluted common share | $0.52 | $0.21 | $0.65 | $0.27 | - **Non-GAAP operating ROE increased by 4.6 percentage points** for the three months and **2.9 percentage points** for the six months ended **June 30, 2025**, **driven by higher favorable prior accident year reserve development**[232](index=232&type=chunk) Non-GAAP Adjusted Book Value Per Share | Item | December 31, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Book Value Per Share | $23.49 | $24.80 | | Less: AOCI Per Share | $(3.37) | $(2.27) | | **Non-GAAP Adjusted Book Value Per Share** | **$26.86** | **$27.07** | - **Non-GAAP adjusted book value per share increased by $0.21** from **December 31, 2024**, to **June 30, 2025**, reflecting net income of **$0.31 per share**, partially offset by share-based compensation and changes in common shares outstanding[236](index=236&type=chunk) [Segment Results - Specialty Property & Casualty](index=58&type=section&id=Segment%20Results%20-%20Specialty%20Property%20%26%20Casualty) The Specialty P&C segment saw decreased net premiums earned but improved results due to favorable loss development [Premiums Written](index=58&type=section&id=Premiums%20Written) Specialty P&C gross and net premiums written decreased due to lower MPL and Medical Technology Liability premiums Specialty P&C Segment Premiums Written (In thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross premiums written | $157,610 | $163,176 | (3.4%) | $391,620 | $401,894 | (2.6%) | | Net premiums written | $142,937 | $149,020 | (4.1%) | $356,593 | $367,719 | (3.0%) | - **Gross premiums written decreased by 3.4%** for the three months and **2.6%** for the six months ended **June 30, 2025**, **primarily due to lower Medical Professional Liability (MPL)** and **Medical Technology Liability** premiums[241](index=241&type=chunk)[242](index=242&type=chunk) - **MPL** premium **decreased** for the three-month period due to retention losses and underwriting discipline, partially offset by **increased renewal pricing (11%)** and new business. For the six-month period, **MPL** premium **increased** due to renewal pricing and new business, offset by retention losses[242](index=242&type=chunk) - **Medical Technology Liability** premium **decreased** due to retention losses and reduced renewal pricing. **Lloyd's Syndicates** premium **decreased significantly** due to ceased participation in Syndicate 1729 for the 2024 underwriting year[242](index=242&type=chunk) - The company sold renewal rights for its legal professional liability business for **$1.0 million** on **April 15, 2025**, entering a **100% quota share reinsurance agreement**[242](index=242&type=chunk)[243](index=243&type=chunk) [Ceded Premiums Ratio](index=61&type=section&id=Ceded%20Premiums%20Ratio) The Specialty P&C ceded premiums ratio increased due to higher ceded premiums under reinsurance arrangements Specialty P&C Ceded Premiums Ratio | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (pts) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (pts) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Ceded premiums ratio | 9.3% | 8.7% | 0.6 | 8.9% | 8.5% | 0.4 | | Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years | (0.7%) | 0.0% | (0.7) | (0.3%) | 0.0% | (0.3) | | **Ratio, current accident year** | **10.0%** | **8.7%** | **1.3** | **9.2%** | **8.5%** | **0.7** | - The current accident year ceded premiums ratio **increased due to higher premiums ceded** under excess of loss reinsurance arrangements, incorporating podiatric and chiropractic policies into the **MPL** treaty, and the **100% quota share reinsurance agreement** for legal professional liability policies[247](index=247&type=chunk) - A **$1.2 million decrease** in the estimate of ceded premiums owed related to prior accident years was recognized during the 2025 three- and six-month periods[246](index=246&type=chunk) [Net Premiums Earned](index=62&type=section&id=Net%20Premiums%20Earned) Specialty P&C net premiums earned decreased due to ceased Syndicate 1729 participation and lower written premium Specialty P&C Net Premiums Earned (In thousands) | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (%) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross premiums earned | $195,172 | $201,693 | (3.2%) | $396,098 | $408,320 | (3.0%) | | Less: Ceded premiums earned | $15,864 | $17,147 | (7.5%) | $33,534 | $34,887 | (3.9%) | | **Net premiums earned** | **$179,308** | **$184,546** | **(2.8%)** | **$362,564** | **$373,433** | **(2.9%)** | - Gross premiums earned **decreased due to ceased participation** in Syndicate 1729 and lower written premium volume from proactive profitability actions[249](index=249&type=chunk) - Ceded premiums earned remained relatively unchanged after removing the **$1.2 million** prior accident year ceded premium adjustment[250](index=250&type=chunk) [Losses and Loss Adjustment Expenses](index=62&type=section&id=Losses%20and%20Loss%20Adjustment%20Expenses) Specialty P&C net loss ratios improved due to significant net favorable prior accident year reserve development Specialty P&C Net Loss Ratios | Item | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (pts) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (pts) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Calendar year net loss ratio | 69.0% | 78.7% | (9.7) | 76.1% | 79.9% | (3.8) | | Current accident year net loss ratio | 82.0% | 82.0% | 0.0 | 82.4% | 81.9% | 0.5 | | Current accident year net loss ratio, excluding prior year ceded premium adjustments | 82.5% | 82.0% | 0.5 | 82.7% | 81.9% | 0.8 | - The calendar year net loss ratio **improved by 9.7 percentage points** for the three months and **3.8 percentage points** for the six months ended **June 30, 2025**[253](index=253&type=chunk) Specialty P&

Core Viewpoint - ProAssurance (PRA) shares have increased by approximately 0.8% since the last earnings report, underperforming the S&P 500, raising questions about the sustainability of this trend leading up to the next earnings release [1] Earnings Estimates - Analysts have not made any earnings estimate revisions for ProAssurance in the last two months [2] VGM Scores - ProAssurance has a poor Growth Score of F, a Momentum Score of C, and a Value Score of D, placing it in the bottom 40% for the value investment strategy, resulting in an overall aggregate VGM Score of F [3] Outlook - ProAssurance holds a Zacks Rank of 4 (Sell), indicating expectations of below-average returns in the upcoming months [4] Industry Performance - ProAssurance is part of the Zacks Insurance - Property and Casualty industry, where Axis Capital (AXS) has seen a gain of 4.3% over the past month [5] - Axis Capital reported revenues of $1.55 billion for the last quarter, reflecting a year-over-year increase of 8.3%, with EPS rising from $2.57 to $3.17 [5] - For the current quarter, Axis Capital is projected to post earnings of $2.92 per share, showing a slight decline of 0.3% from the previous year, with a Zacks Consensus Estimate change of -0.9% over the last 30 days, resulting in a Zacks Rank of 3 (Hold) and a VGM Score of B [6]