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Segment Information
 3 Months Ended
Mar. 31, 2017
Segment Reporting [Abstract]  
Segment Information
Segment Information
ProAssurance operates in four segments that are organized around the nature of the products and services provided: Specialty P&C, Workers' Compensation, Lloyd's Syndicate, and Corporate. A description of each segment follows.
Specialty P&C is primarily focused on professional liability insurance and medical technology liability insurance. Professional liability insurance is primarily offered to healthcare providers and institutions and to attorneys and their firms. Medical technology liability insurance is offered to medical technology and life sciences companies that manufacture or distribute products including entities conducting human clinical trials. The Specialty P&C segment cedes certain premium to the Lloyd's Syndicate segment under a quota share agreement with Syndicate 1729. As discussed below, Syndicate 1729 operating results are reported on a quarter delay. For consistency purposes, results from this ceding arrangement, other than cash receipts or disbursements, have been reported within the Specialty P&C segment on the same one quarter delay.
Workers' Compensation provides workers' compensation products primarily to employers with 1,000 or fewer employees. The segment also offers alternative market solutions whereby policies written are 100% ceded either to captive insurers unaffiliated with ProAssurance or to SPCs operated by a wholly owned subsidiary of ProAssurance. Each SPC is owned, fully or in part, by an agency, group or association. Operating results (underwriting profit or loss, plus investment results reported in the Corporate segment) of the SPCs are due to the owners of that cell.
Lloyd's Syndicate includes operating results from ProAssurance's 58% participation in Lloyd's of London Syndicate 1729. Syndicate 1729 underwrites risks over a wide range of property and casualty insurance and reinsurance lines in both the U.S. and international markets. The results of this segment are reported on a quarter delay, except that investment results associated with investment assets solely allocated to Syndicate 1729 operations and certain U.S. paid administrative expenses are reported concurrently as that information is available on an earlier time frame.
Corporate includes ProAssurance's investment operations, interest expense and U.S. income taxes, all of which are managed at the corporate level with the exception of investment assets solely allocated to Syndicate 1729 as discussed above. The segment also includes non-premium revenues generated outside of our insurance entities and corporate expenses.
The accounting policies of the segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2016 report on Form 10-K and Note 1 of the Notes to Condensed Consolidated Financial Statements. ProAssurance evaluates performance of its Specialty P&C and Workers' Compensation segments based on before tax underwriting profit or loss, which excludes investment performance. Performance of the Lloyd's Syndicate segment is evaluated based on underwriting profit or loss, plus investment results of investment assets solely allocated to Syndicate 1729 operations, net of U.K. income tax expense. Performance of the Corporate segment is evaluated based on the contribution made to consolidated after tax results. ProAssurance accounts for inter-segment transactions as if the transactions were to third parties at current market prices. Assets are not allocated to segments because investments and other assets are not managed at the segment level.
Financial results by segment were as follows:
 
Three Months Ended March 31, 2017
(In thousands)
Specialty P&C
 
Workers' Compensation
 
Lloyd's Syndicate
 
Corporate
 
Inter-segment Eliminations
 
Consolidated
Net premiums earned
$
113,058

 
$
55,283


$
14,562


$
—


$
—

 
$
182,903

Net investment income
—

 
—


372


22,814


—

 
23,186

Equity in earnings (loss) of unconsolidated subsidiaries
—

 
—


—


1,808


—

 
1,808

Net realized gains (losses)
—

 
—


27


13,253


—

 
13,280

Other income
1,198

 
145


391


173


(86
)
 
1,821

Net losses and loss adjustment expenses
(74,994
)
 
(34,650
)

(9,507
)

—


—

 
(119,151
)
Underwriting, policy acquisition and operating expenses
(25,977
)
 
(16,691
)

(6,211
)

(8,315
)

86

 
(57,108
)
Segregated portfolio cells dividend (expense) income (1)
28

 
(1,174
)
 
—

 
(1,229
)
 
—

 
(2,375
)
Interest expense
—

 
—

 
—

 
(4,133
)
 
—

 
(4,133
)
Income tax benefit (expense)
—

 
—

 
7

 
1,217

 
—

 
1,224

Segment operating results
$
13,313

 
$
2,913

 
$
(359
)
 
$
25,588

 
$
—

 
$
41,455

Significant non-cash items:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization, net of accretion
$
1,911

 
$
837

 
$
(3
)
 
$
5,058

 
$
—

 
$
7,803

 
Three Months Ended March 31, 2016
(In thousands)
Specialty P&C
 
Workers' Compensation
 
Lloyd's Syndicate
 
Corporate
 
Inter-segment Eliminations
 
Consolidated
Net premiums earned
$
110,755

 
$
54,383

 
$
12,441

 
$
—

 
$
—

 
$
177,579

Net investment income
—

 
—

 
315

 
25,125

 
—

 
25,440

Equity in earnings (loss) of unconsolidated subsidiaries
—

 
—

 
—

 
(3,634
)
 
—

 
(3,634
)
Net realized gains (losses)
—

 
—

 
(5
)
 
(8,347
)
 
—

 
(8,352
)
Other income
1,276

 
471

 
252

 
458

 
(103
)
 
2,354

Net losses and loss adjustment expenses (2)
(71,174
)
 
(35,027
)
 
(6,189
)
 
—

 
1,435

 
(110,955
)
Underwriting, policy acquisition and operating expenses (2)
(25,054
)
 
(17,829
)
 
(5,167
)
 
(7,507
)
 
(1,332
)
 
(56,889
)
Segregated portfolio cells dividend (expense) income (1)
—

 
(713
)
 
—

 
(463
)
 
—

 
(1,176
)
Interest expense
—

 
—

 
—

 
(3,686
)
 
—

 
(3,686
)
Income tax benefit (expense)
—

 
—

 
(84
)
 
(1,280
)
 
—

 
(1,364
)
Segment operating results
$
15,803

 
$
1,285

 
$
1,563

 
$
666

 
$
—

 
$
19,317

Significant non-cash items:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization, net of accretion
$
2,011

 
$
1,404

 
$
66

 
$
5,149

 
$
—

 
$
8,630

(1) During the first quarter of 2017, ProAssurance began reporting in the Corporate segment the portion of the SPC dividend (expense) income that is attributable to the investment results of the SPCs, all of which are reported in the Corporate segment, to better align the expense with the related investment results of the SPCs. For comparative purposes, ProAssurance has reflected the SPC dividend expense for 2016 in the same manner.
(2) In the first quarter of 2016, the portion of the management fee that was allocated to ULAE was eliminated in consolidation. During the second quarter of 2016, ProAssurance discontinued the practice of eliminating in consolidation the portion of the management fee that was allocated to ULAE, thus there was no similar elimination in the first quarter of 2017.

The following table provides detailed information regarding ProAssurance's gross premiums earned by product as well as a reconciliation to net premiums earned. All gross premiums earned are from external customers except as noted. ProAssurance's insured risks are primarily within the U.S.
 
Three Months Ended March 31
(In thousands)
2017
 
2016
Specialty P&C Segment
 
 
 
Gross premiums earned:
 
 
 
Healthcare professional liability
$
117,051

 
$
113,749

Legal professional liability
6,317

 
6,614

Medical technology liability
8,312

 
8,550

Other
102

 
268

Ceded premiums earned
(18,724
)
 
(18,426
)
Segment net premiums earned
113,058

 
110,755

 
 
 
 
Workers' Compensation Segment
 
 
 
Gross premiums earned:
 
 
 
Traditional business
41,768

 
42,650

Alternative market business
19,446

 
18,294

Ceded premiums earned
(5,931
)
 
(6,561
)
Segment net premiums earned
55,283

 
54,383

 
 
 
 
Lloyd's Syndicate Segment
 
 
 
Gross premiums earned:
 
 
 
Property and casualty*
17,185

 
13,373

Ceded premiums earned
(2,623
)
 
(932
)
Segment net premiums earned
14,562

 
12,441

 

 

Consolidated Net premiums earned
$
182,903

 
$
177,579

*Includes premium assumed from the Specialty P&C segment of $3.5 million for the three months ended March 31, 2017 and $3.6 million for the three months ended March 31, 2016.