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Fair Value Measurement (Tables)
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6 Months Ended |
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Jun. 30, 2013
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| Fair Value Disclosures [Abstract] |
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| Assets and liabilities measured at fair value |
Fair values of assets measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012, including financial instruments for which ProAssurance has elected fair value, are shown in the following tables. The tables also indicate the fair value hierarchy of the valuation techniques utilized to determine those fair values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. Assessments of the significance of a particular input to the fair value measurement requires judgment and consideration of factors specific to the assets being valued. | | | | | | | | | | | | | | | | | | June 30, 2013 | | Fair Value Measurements Using | | Total | (In thousands) | Level 1 | | Level 2 | | Level 3 | | Fair Value | Assets: | | | | | | | | Fixed maturities, available for sale | | | | | | | | U.S. Treasury obligations | $ | — |
| | $ | 213,822 |
| | $ | — |
| | $ | 213,822 |
| U.S. Government-sponsored enterprise obligations | — |
| | 56,925 |
| | — |
| | 56,925 |
| State and municipal bonds | — |
| | 1,248,147 |
| | 5,025 |
| | 1,253,172 |
| Corporate debt, multiple observable inputs | — |
| | 1,535,533 |
| | — |
| | 1,535,533 |
| Corporate debt, limited observable inputs: | | | | | | |
| Private placement senior notes | — |
| | — |
| | 205 |
| | 205 |
| Other corporate debt, NRSRO ratings available | — |
| | — |
| | 10,269 |
| | 10,269 |
| Other corporate debt, NRSRO ratings not available | — |
| | — |
| | 885 |
| | 885 |
| Residential mortgage-backed securities | — |
| | 272,233 |
| | — |
| | 272,233 |
| Agency commercial mortgage-backed securities | — |
| | 44,449 |
| | — |
| | 44,449 |
| Other commercial mortgage-backed securities | — |
| | 70,865 |
| | — |
| | 70,865 |
| Other asset-backed securities | — |
| | 71,396 |
| | 4,679 |
| | 76,075 |
| Equity securities | | | | | | |
| Financial | 80,579 |
| | — |
| | — |
| | 80,579 |
| Utilities/Energy | 36,798 |
| | — |
| | — |
| | 36,798 |
| Consumer oriented | 63,149 |
| | — |
| | — |
| | 63,149 |
| Technology | 17,949 |
| | — |
| | — |
| | 17,949 |
| Industrial | 38,241 |
| | — |
| | — |
| | 38,241 |
| All other | 20,116 |
| | — |
| | — |
| | 20,116 |
| Short-term investments | 80,062 |
| | 7,212 |
| | — |
| | 87,274 |
| Financial instruments carried at fair value, classified as a part of: | | | | | | | | Investment in unconsolidated subsidiaries | — |
| | — |
| | 44,549 |
| | 44,549 |
| Total assets | $ | 336,894 |
| | $ | 3,520,582 |
| | $ | 65,612 |
| | $ | 3,923,088 |
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| | | | | | | | | | | | | | | | | | December 31, 2012 | | Fair Value Measurements Using | | Total | (In thousands) | Level 1 | | Level 2 | | Level 3 | | Fair Value | Assets: | | | | | | | | Fixed maturities, available for sale | | | | | | | | U.S. Treasury obligations | $ | — |
| | $ | 205,857 |
| | $ | — |
| | $ | 205,857 |
| U.S. Government-sponsored enterprise obligations | — |
| | 56,947 |
| | — |
| | 56,947 |
| State and municipal bonds | — |
| | 1,212,804 |
| | 7,175 |
| | 1,219,979 |
| Corporate debt, multiple observable inputs | — |
| | 1,455,333 |
| | — |
| | 1,455,333 |
| Corporate debt, limited observable inputs: | | | | | | |
| Private placement senior notes | — |
| | — |
| | 346 |
| | 346 |
| Other corporate debt, NRSRO ratings available | — |
| | — |
| | 13,835 |
| | 13,835 |
| Other corporate debt, NRSRO ratings not available | — |
| | — |
| | 1,010 |
| | 1,010 |
| Residential mortgage-backed securities | — |
| | 289,850 |
| | — |
| | 289,850 |
| Agency commercial mortgage-backed securities | — |
| | 59,464 |
| | — |
| | 59,464 |
| Other commercial mortgage-backed securities | — |
| | 74,106 |
| | — |
| | 74,106 |
| Other asset-backed securities | — |
| | 67,237 |
| | 4,035 |
| | 71,272 |
| Equity securities | | | | | | |
| Financial | 70,900 |
| | — |
| | — |
| | 70,900 |
| Utilities/Energy | 31,383 |
| | — |
| | — |
| | 31,383 |
| Consumer oriented | 51,100 |
| | — |
| | — |
| | 51,100 |
| Technology | 11,495 |
| | — |
| | — |
| | 11,495 |
| Industrial | 18,200 |
| | — |
| | — |
| | 18,200 |
| All other | 19,540 |
| | — |
| | — |
| | 19,540 |
| Short-term investments | 59,761 |
| | 11,976 |
| | — |
| | 71,737 |
| Financial instruments carried at fair value, classified as a part of: | | | | | | |
| Investment in unconsolidated subsidiaries | — |
| | — |
| | 33,739 |
| | 33,739 |
| Total assets | $ | 262,379 |
| | $ | 3,433,574 |
| | $ | 60,140 |
| | $ | 3,756,093 |
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| Investments in Limited liability companies and limited partnerships |
Investment in unconsolidated subsidiaries consist of limited partnership (LP) and limited liability company (LLC) interests valued using the NAV provided by the LP/LLC, which approximates the fair value of the interest. Such interests include the following: | | | | | | | | | | | | | | Unfunded
Commitments | | Fair Value | (In thousands) | June 30,
2013 | | June 30,
2013 | | December 31,
2012 | Investments in LPs/LLCs: | | | | | | Secured debt fund (1) | $ | 28,400 |
| | $ | 11,637 |
| | $ | — |
| Long equity fund (2) | None |
| | 5,657 |
| | — |
| Long/Short equity fund (3) | None |
| | 8,602 |
| | 17,115 |
| Non-public equity funds (4) | 42,563 |
| | 18,653 |
| | 16,624 |
| | | | $ | 44,549 |
| | $ | 33,739 |
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| | (1) | The LP is structured to provide income and capital appreciation primarily through investments in senior secured debt. Redemptions are not allowed. Income and capital are to be periodically distributed at the discretion of the LP over an anticipated time frame that spans from 7 to 9 years. |
| | (2) | The LP holds long equities of public international companies. Redemptions are allowed at the end of any calendar month with a prior notice requirement of 15 days and are paid within 10 days of the end of the calendar month of the redemption request. |
| | (3) | The LP holds both long and short U.S. and North American equities, and targets absolute returns using a strategy designed to take advantage of event-driven market opportunities. Redemptions are allowed with a notice requirement of up to 45 days and are paid within 30 days of the redemption date, unless the redemption request is for 90% or more of the requestor’s capital balance. Redemptions at the 90% and above level will be paid at 90%, with the remainder paid after the LP’s annual audit. |
| | (4) | Comprised of interests in two unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, mezzanine debt, distressed debt and other private equity-oriented LPs. One LP allows redemption by special consent; the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over an anticipated time frame that spans from 4 to 7 years. |
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| Summary of quantitative information about Level 3 fair value measurements |
Quantitative Information Regarding Level 3 Valuations | | | | | | | | | | | | Quantitative Information about Level 3 Fair Value Measurements | | | Fair Value at | | | | | | | (In millions) | | June 30, 2013 | | December 31, 2012 | | Valuation Technique | | Unobservable Input | | Range
(Weighted Average) | Assets: | | | | | | | | | | | State and municipal bonds | | $5.0 | | $7.2 | | Market Comparable
Securities | | Comparability Adjustment | | 0% - 10% (5%) | | | | | | | Discounted Cash Flows | | Comparability Adjustment | | 0% - 10% (5%) | Corporate debt with limited observable inputs | | $11.4 | | $15.2 | | Market Comparable
Securities | | Comparability Adjustment | | 0% - 5% (2.5%) | | | | | | | Discounted Cash Flows | | Comparability Adjustment | | 0% - 5% (2.5%) | Other asset-backed securities | | $4.7 | | $4.0 | | Market Comparable
Securities | | Comparability Adjustment | | 0% - 5% (2.5%) | | | | | | | Discounted Cash Flows | | Comparability Adjustment | | 0% - 5% (2.5%) |
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| Summary of changes in the fair value of assets measured at fair value |
The following tables (the Level 3 Tables) present summary information regarding changes in the fair value of assets measured at fair value using Level 3 inputs. | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2013 | | Level 3 Fair Value Measurements – Assets | (In thousands) | State and Municipal Bonds | | Corporate Debt | | Asset-backed Securities | | Investment in Unconsolidated Subsidiaries | | Other Investments | | Total | Balance March 31, 2013 | $ | 7,175 |
| | $ | 9,662 |
| | $ | 7,076 |
| | $ | 47,540 |
| | $ | — |
| | $ | 71,453 |
| Total gains (losses) realized and unrealized: | | | | | | | | | | | | Included in earnings, as a part of: | | | | | | | | | | | | Net investment income | — |
| | — |
| | (1 | ) | | — |
| | — |
| | (1 | ) | Equity in earnings of unconsolidated subsidiaries | — |
| | — |
| | — |
| | 433 |
| | — |
| | 433 |
| Net realized investment gains (losses) | (44 | ) | | — |
| | — |
| | — |
| | — |
| | (44 | ) | Included in other comprehensive income | — |
| | (293 | ) | | (97 | ) | | — |
| | — |
| | (390 | ) | Purchases | — |
| | 3,595 |
| | — |
| | 5,543 |
| | — |
| | 9,138 |
| Sales | (2,106 | ) | | (249 | ) | | (18 | ) | | (8,967 | ) | | — |
| | (11,340 | ) | Transfers in | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Transfers out | — |
| | (1,356 | ) | | (2,281 | ) | | — |
| | — |
| | (3,637 | ) | Balance June 30, 2013 | $ | 5,025 |
| | $ | 11,359 |
| | $ | 4,679 |
| | $ | 44,549 |
| | $ | — |
| | $ | 65,612 |
| Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | $ | — |
| | $ | — |
| | $ | — |
| | $ | 433 |
| | $ | — |
| | $ | 433 |
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| | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2013 | | Level 3 Fair Value Measurements – Assets | (In thousands) | State and Municipal Bonds | | Corporate Debt | | Asset-backed Securities | | Investment in Unconsolidated Subsidiaries | | Other Investments | | Total | Balance December 31, 2012 | $ | 7,175 |
| | $ | 15,191 |
| | $ | 4,035 |
| | $ | 33,739 |
| | $ | — |
| | $ | 60,140 |
| Total gains (losses) realized and unrealized: | | | | | | | | | | | | Included in earnings, as a part of: | | | | | | | | | | | | Net investment income | — |
| | (102 | ) | | (17 | ) | | — |
| | — |
| | (119 | ) | Equity in earnings of unconsolidated subsidiaries | — |
| | — |
| | — |
| | 2,281 |
| | — |
| | 2,281 |
| Net realized investment gains (losses) | (44 | ) | | (69 | ) | | — |
| | — |
| | — |
| | (113 | ) | Included in other comprehensive income | — |
| | (293 | ) | | (97 | ) | | — |
| | — |
| | (390 | ) | Purchases | — |
| | 7,470 |
| | 1,356 |
| | 18,621 |
| | — |
| | 27,447 |
| Sales | (2,106 | ) | | (865 | ) | | (18 | ) | | (10,092 | ) | | — |
| | (13,081 | ) | Transfers in | — |
| | — |
| | 1,701 |
| | — |
| | — |
| | 1,701 |
| Transfers out | — |
| | (9,973 | ) | | (2,281 | ) | | — |
| | — |
| | (12,254 | ) | Balance June 30, 2013 | $ | 5,025 |
| | $ | 11,359 |
| | $ | 4,679 |
| | $ | 44,549 |
| | $ | — |
| | $ | 65,612 |
| Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2,281 |
| | $ | — |
| | $ | 2,281 |
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| | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2012 | | Level 3 Fair Value Measurements – Assets | (In thousands) | State and Municipal Bonds | | Corporate Debt | | Asset-backed Securities | | Investment in Unconsolidated Subsidiaries | | Other Investments | | Total | Balance March 31, 2012 | $ | 7,175 |
| | $ | 8,689 |
| | $ | — |
| | $ | 24,430 |
| | $ | 15,742 |
| | $ | 56,036 |
| Total gains (losses) realized and unrealized: | | | | | | | | | | | | Included in earnings, as a part of: | | | | | | | | | | | | Equity in earnings of unconsolidated subsidiaries | — |
| | — |
| | — |
| | 180 |
| | — |
| | 180 |
| Net realized investment gains (losses) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Included in other comprehensive income | — |
| | (28 | ) | | — |
| | — |
| | — |
| | (28 | ) | Purchases | — |
| | 1,937 |
| | 1,795 |
| | — |
| | — |
| | 3,732 |
| Sales | — |
| | (88 | ) | | — |
| | (582 | ) | | — |
| | (670 | ) | Transfers in | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Transfers out | — |
| | — |
| | — |
| | — |
| | (15,742 | ) | | (15,742 | ) | Balance June 30, 2012 | $ | 7,175 |
| | $ | 10,510 |
| | $ | 1,795 |
| | $ | 24,028 |
| | $ | — |
| | $ | 43,508 |
| Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | $ | — |
| | $ | — |
| | $ | — |
| | $ | 180 |
| | $ | — |
| | $ | 180 |
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| | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2012 | | Level 3 Fair Value Measurements – Assets | (In thousands) | State and Municipal Bonds | | Corporate Debt | | Asset-backed Securities | | Investment in Unconsolidated Subsidiaries | | Other Investments | | Total | Balance December 31, 2011 | $ | 7,200 |
| | $ | 8,082 |
| | $ | — |
| | $ | 23,841 |
| | $ | 15,873 |
| | $ | 54,996 |
| Total gains (losses) realized and unrealized: | | | | | | | | | | | | Included in earnings, as a part of: | | | | | | | | | | | | Equity in earnings of unconsolidated subsidiaries | — |
| | — |
| | — |
| | 770 |
| | — |
| | 770 |
| Net realized investment gains (losses) | — |
| | — |
| | — |
| | — |
| | (131 | ) | | (131 | ) | Included in other comprehensive income | — |
| | 578 |
| | — |
| | — |
| | — |
| | 578 |
| Purchases | — |
| | 1,937 |
| | 1,795 |
| | — |
| | — |
| | 3,732 |
| Sales | (25 | ) | | (87 | ) | | — |
| | (583 | ) | | — |
| | (695 | ) | Transfers in | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Transfers out | — |
| | — |
| | — |
| | — |
| | (15,742 | ) | | (15,742 | ) | Balance June 30, 2012 | $ | 7,175 |
| | $ | 10,510 |
| | $ | 1,795 |
| | $ | 24,028 |
| | $ | — |
| | $ | 43,508 |
| Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end | $ | — |
| | $ | — |
| | $ | — |
| | $ | 770 |
| | $ | — |
| | $ | 770 |
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| Summary of changes in the fair value of liabilities measured at fair value |
The following tables present information for the three and six months ended June 30, 2012 regarding liabilities for which ProAssurance had elected fair value treatment. | | | | | | | | | | | | | | June 30, 2012 | | Level 3 Fair Value Measurements - Liabilities | (In thousands) | 2019 Note Payable | | Interest rate swap agreement | | Total | Balance March 31, 2012 | $ | 14,962 |
| | $ | 4,415 |
| | $ | 19,377 |
| Total (gains) losses realized and unrealized: | | | | | | Included in earnings as a part of: | | | | | | Net realized investment (gains) losses | (99 | ) | | 319 |
| | 220 |
| Settlements | (86 | ) | | — |
| | (86 | ) | Balance June 30, 2012 | $ | 14,777 |
| | $ | 4,734 |
| | $ | 19,511 |
| Change in unrealized (gains) losses included in earnings for the above period for Level 3 liabilities outstanding at period-end | $ | (99 | ) | | $ | 319 |
| | $ | 220 |
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| | | | | | | | | | | | | | June 30, 2012 | | Level 3 Fair Value Measurements - Liabilities | (In thousands) | 2019 Note Payable | | Interest rate swap agreement | | Total | Balance December 31, 2011 | $ | 14,180 |
| | $ | 4,659 |
| | $ | 18,839 |
| Total (gains) losses realized and unrealized: | | | | | | Included in earnings as a part of: | | | | | | Net realized investment (gains) losses | 769 |
| | 75 |
| | 844 |
| Settlements | (172 | ) | | — |
| | (172 | ) | Balance June 30, 2012 | $ | 14,777 |
| | $ | 4,734 |
| | $ | 19,511 |
| Change in unrealized (gains) losses included in earnings for the above period for Level 3 liabilities outstanding at period-end | $ | 769 |
| | $ | 75 |
| | $ | 844 |
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| Financial instruments not measured at fair value |
The following table provides the estimated fair value of our financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. All fair values provided fall within the Level 3 fair value category. | | | | | | | | | | | | | | | | | | June 30, 2013 | | December 31, 2012 | (In thousands) | Carrying
Value | | Estimated
Fair
Value | | Carrying
Value | | Estimated
Fair
Value | Financial assets: | | | | | | | | Other Investments | $ | 33,311 |
| | $ | 43,296 |
| | $ | 31,085 |
| | $ | 38,656 |
| Investment in Unconsolidated Subsidiaries | 147,200 |
| | 147,717 |
| | 87,310 |
| | 91,528 |
| BOLI | 53,289 |
| | 53,289 |
| | 52,414 |
| | 52,414 |
| Other Assets | 12,274 |
| | 12,274 |
| | 11,400 |
| | 11,385 |
| | | | | | | | | Financial liabilities: | | | | | | | | Revolving credit agreement | $ | 125,000 |
| | $ | 125,000 |
| | $ | 125,000 |
| | $ | 125,000 |
| Other Liabilities | 12,003 |
| | 11,996 |
| | 12,130 |
| | 12,085 |
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