ProAssurance(PRA) - 2025 Q3 - Quarterly Report

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].