XML 27 R9.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Investments | 6 Months Ended
--- | ---
Jun. 30, 2018
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments Available-for-sale fixed maturities at June 30, 2018 and December 31, 2017 included the following:
| June 30, 2018
(In thousands) | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Fixed maturities, available for sale |  |  |  |  |  |  |
U.S. Treasury obligations | $ | 148,588 |  |  | $ | 249 |  |  | $ | 2,380 |  |  | $ | 146,457 |
U.S. Government-sponsored enterprise obligations | 32,331 |  |  | 21 |  |  | 650 |  |  | 31,702 |
State and municipal bonds | 326,705 |  |  | 5,488 |  |  | 1,093 |  |  | 331,100 |
Corporate debt | 1,213,362 |  |  | 4,655 |  |  | 22,390 |  |  | 1,195,627 |
Residential mortgage-backed securities | 208,052 |  |  | 1,150 |  |  | 4,966 |  |  | 204,236 |
Agency commercial mortgage-backed securities | 14,080 |  |  | — |  |  | 268 |  |  | 13,812 |
Other commercial mortgage-backed securities | 33,105 |  |  | 47 |  |  | 437 |  |  | 32,715 |
Other asset-backed securities | 171,917 |  |  | 20 |  |  | 1,665 |  |  | 170,272 |
| $ | 2,148,140 |  |  | $ | 11,630 |  |  | $ | 33,849 |  |  | $ | 2,125,921 |
| December 31, 2017
(In thousands) | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Fixed maturities, available for sale |  |  |  |  |  |  |
U.S. Treasury obligations | $ | 134,323 |  |  | $ | 485 |  |  | $ | 1,181 |  |  | $ | 133,627 |
U.S. Government-sponsored enterprise obligations | 21,089 |  |  | 73 |  |  | 206 |  |  | 20,956 |
State and municipal bonds | 618,414 |  |  | 14,248 |  |  | 419 |  |  | 632,243 |
Corporate debt | 1,157,660 |  |  | 15,205 |  |  | 5,707 |  |  | 1,167,158 |
Residential mortgage-backed securities | 196,741 |  |  | 2,438 |  |  | 1,335 |  |  | 197,844 |
Agency commercial mortgage-backed securities | 10,827 |  |  | 23 |  |  | 108 |  |  | 10,742 |
Other commercial mortgage-backed securities | 16,004 |  |  | 91 |  |  | 134 |  |  | 15,961 |
Other asset-backed securities | 102,130 |  |  | 47 |  |  | 466 |  |  | 101,711 |
| $ | 2,257,188 |  |  | $ | 32,610 |  |  | $ | 9,556 |  |  | $ | 2,280,242 |
The recorded cost basis and estimated fair value of available-for-sale fixed maturities at June 30, 2018, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
(In thousands) | Amortized Cost |  | Due in one year or less |  | Due after one year through five years |  | Due after five years through ten years |  | Due after ten years |  | Total Fair Value
Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury obligations | $ | 148,588 |  |  | $ | 37,731 |  |  | $ | 84,483 |  |  | $ | 21,407 |  |  | $ | 2,836 |  |  | $ | 146,457 |
U.S. Government-sponsored enterprise obligations | 32,331 |  |  | 206 |  |  | 11,647 |  |  | 19,715 |  |  | 134 |  |  | 31,702 |
State and municipal bonds | 326,705 |  |  | 25,562 |  |  | 126,115 |  |  | 140,281 |  |  | 39,142 |  |  | 331,100 |
Corporate debt | 1,213,362 |  |  | 116,559 |  |  | 666,434 |  |  | 374,029 |  |  | 38,605 |  |  | 1,195,627 |
Residential mortgage-backed securities | 208,052 |  |  |  |  |  |  |  |  |  |  | 204,236 |
Agency commercial mortgage-backed securities | 14,080 |  |  |  |  |  |  |  |  |  |  | 13,812 |
Other commercial mortgage-backed securities | 33,105 |  |  |  |  |  |  |  |  |  |  | 32,715 |
Other asset-backed securities | 171,917 |  |  |  |  |  |  |  |  |  |  | 170,272 |
| $ | 2,148,140 |  |  |  |  |  |  |  |  |  |  | $ | 2,125,921 |
Excluding obligations of the U.S. Government, U.S. Government-sponsored enterprises and a U.S. Government obligations money market fund, no investment in any entity or its affiliates exceeded 10% of shareholders’ equity at June 30, 2018. Cash and securities with a carrying value of $45.7 million at June 30, 2018 were on deposit with various state insurance departments to meet regulatory requirements. As a member of Lloyd's and a capital provider to Syndicate 1729 and Syndicate 6131, which began active operations on January 1, 2018, ProAssurance is required to maintain capital at Lloyd's, referred to as FAL. ProAssurance's FAL investments at June 30, 2018 included available-for-sale fixed maturities with a fair value of $123.6 million and short-term investments with a fair value of approximately $1.0 million on deposit with Lloyd's in order to satisfy these FAL requirements. Investments Held in a Loss Position The following tables provide summarized information with respect to investments held in an unrealized loss position at June 30, 2018 and December 31, 2017, including the length of time the investment had been held in a continuous unrealized loss position.
| June 30, 2018
| Total |  | Less than 12 months |  | 12 months or longer
| Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
(In thousands) | Value |  | Loss |  | Value |  | Loss |  | Value |  | Loss
Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury obligations | $ | 128,506 |  |  | $ | 2,380 |  |  | $ | 96,926 |  |  | $ | 1,589 |  |  | $ | 31,580 |  |  | $ | 791 |
U.S. Government-sponsored enterprise obligations | 30,769 |  |  | 650 |  |  | 23,960 |  |  | 397 |  |  | 6,809 |  |  | 253 |
State and municipal bonds | 100,622 |  |  | 1,093 |  |  | 98,073 |  |  | 1,035 |  |  | 2,549 |  |  | 58 |
Corporate debt | 919,141 |  |  | 22,390 |  |  | 801,410 |  |  | 17,525 |  |  | 117,731 |  |  | 4,865 |
Residential mortgage-backed securities | 173,133 |  |  | 4,966 |  |  | 131,124 |  |  | 2,839 |  |  | 42,009 |  |  | 2,127 |
Agency commercial mortgage-backed securities | 13,812 |  |  | 268 |  |  | 11,929 |  |  | 135 |  |  | 1,883 |  |  | 133 |
Other commercial mortgage-backed securities | 26,251 |  |  | 437 |  |  | 24,311 |  |  | 390 |  |  | 1,940 |  |  | 47 |
Other asset-backed securities | 155,165 |  |  | 1,665 |  |  | 141,632 |  |  | 1,474 |  |  | 13,533 |  |  | 191 |
| $ | 1,547,399 |  |  | $ | 33,849 |  |  | $ | 1,329,365 |  |  | $ | 25,384 |  |  | $ | 218,034 |  |  | $ | 8,465 |
| December 31, 2017
| Total |  | Less than 12 months |  | 12 months or longer
| Fair |  | Unrealized |  | Fair |  | Unrealized |  | Fair |  | Unrealized
(In thousands) | Value |  | Loss |  | Value |  | Loss |  | Value |  | Loss
Fixed maturities, available for sale |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury obligations | $ | 110,788 |  |  | $ | 1,181 |  |  | $ | 67,135 |  |  | $ | 554 |  |  | $ | 43,653 |  |  | $ | 627 |
U.S. Government-sponsored enterprise obligations | 17,032 |  |  | 206 |  |  | 10,182 |  |  | 64 |  |  | 6,850 |  |  | 142 |
State and municipal bonds | 23,122 |  |  | 419 |  |  | 15,168 |  |  | 102 |  |  | 7,954 |  |  | 317 |
Corporate debt | 487,578 |  |  | 5,707 |  |  | 365,541 |  |  | 2,730 |  |  | 122,037 |  |  | 2,977 |
Residential mortgage-backed securities | 109,659 |  |  | 1,335 |  |  | 64,121 |  |  | 402 |  |  | 45,538 |  |  | 933 |
Agency commercial mortgage-backed securities | 4,423 |  |  | 108 |  |  | 2,458 |  |  | 34 |  |  | 1,965 |  |  | 74 |
Other commercial mortgage-backed securities | 12,878 |  |  | 134 |  |  | 7,939 |  |  | 82 |  |  | 4,939 |  |  | 52 |
Other asset-backed securities | 85,358 |  |  | 466 |  |  | 70,924 |  |  | 346 |  |  | 14,434 |  |  | 120 |
| $ | 850,838 |  |  | $ | 9,556 |  |  | $ | 603,468 |  |  | $ | 4,314 |  |  | $ | 247,370 |  |  | $ | 5,242 |
As of June 30, 2018, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 1,024 debt securities (50.0% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 548 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.6 million and $0.4 million, respectively. The securities were evaluated for OTTI as of June 30, 2018. As of December 31, 2017, excluding U.S. Government or U.S. Government-sponsored enterprise obligations, there were 629 debt securities (26.5% of all available-for-sale fixed maturity securities held) in an unrealized loss position representing 375 issuers. The greatest and second greatest unrealized loss positions among those securities were approximately $0.4 million and $0.3 million, respectively. The securities were evaluated for OTTI as of December 31, 2017. Each quarter, ProAssurance performs a detailed analysis for the purpose of assessing whether any of the securities it holds in an unrealized loss position has suffered an OTTI. A detailed discussion of the factors considered in the assessment is included in Note 1 of the Notes to Consolidated Financial Statements included in ProAssurance's December 31, 2017 Form 10-K. Fixed maturity securities held in an unrealized loss position at June 30, 2018, excluding asset-backed securities, have paid all scheduled contractual payments and are expected to continue doing so. Expected future cash flows of asset-backed securities, excluding those issued by GNMA, FNMA and FHLMC, held in an unrealized loss position were estimated as part of the June 30, 2018 OTTI evaluation using the most recently available six-month historical performance data for the collateral (loans) underlying the security or, if historical data was not available, sector based assumptions, and equaled or exceeded the current amortized cost basis of the security. Other information regarding sales and purchases of fixed maturity available-for-sale securities is as follows:
| Three Months Ended June 30 |  | Six Months Ended June 30
(In millions) | 2018 |  | 2017 |  | 2018 |  | 2017
Proceeds from sales (exclusive of maturities and paydowns) | $ | 115.8 |  |  | $ | 156.3 |  |  | $ | 495.0 |  |  | $ | 235.5 |
Purchases | $ | 184.6 |  |  | $ | 198.7 |  |  | $ | 552.5 |  |  | $ | 359.1 |
Equity Investments ProAssurance's equity investments are carried at fair value with changes in fair value recognized in income as a component of net realized investment gains (losses) during the period of change. Equity investments on the Condensed Consolidated Balance Sheet as of June 30, 2018 primarily included stocks, bonds and investment funds. Short-term Investments ProAssurance's short-term investments, which have a maturity at purchase of one year or less, are primarily comprised of investments in U.S. treasury obligations, commercial paper and money market funds. Short-term investments are carried at fair value which approximates the cost of the securities due to their short-term nature. BOLI ProAssurance holds BOLI policies that are carried at the current cash surrender value of the policies (original cost $33 million). All insured individuals were members of ProAssurance management at the time the policies were acquired. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies. ProAssurance is the owner and beneficiary of these policies. Net Investment Income Net investment income by investment category was as follows:
| Three Months Ended June 30 |  | Six Months Ended June 30
(In thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Fixed maturities | $ | 17,506 |  |  | $ | 18,841 |  |  | $ | 34,586 |  |  | $ | 38,962 |
Equities | 4,998 |  |  | 4,298 |  |  | 9,865 |  |  | 7,942 |
Short-term investments, including Other | 1,332 |  |  | 978 |  |  | 2,639 |  |  | 1,778 |
BOLI | 455 |  |  | 442 |  |  | 904 |  |  | 897 |
Investment fees and expenses | (1,907 | ) |  | (1,882 | ) |  | (3,583 | ) |  | (3,716 | )
Net investment income | $ | 22,384 |  |  | $ | 22,677 |  |  | $ | 44,411 |  |  | $ | 45,863 |
Investment in Unconsolidated Subsidiaries ProAssurance's investment in unconsolidated subsidiaries were as follows:
| June 30, 2018 |  | Carrying Value
(In thousands) | Percentage Ownership |  | June 30, 2018 |  | December 31, 2017
Qualified affordable housing project tax credit partnerships | See below |  | $ | 74,895 |  |  | $ | 84,607 |
Other tax credit partnerships | See below |  | 4,980 |  |  | 6,118 |
All other investments, primarily investment fund LPs/LLCs | See below |  | 310,339 |  |  | 239,866 |
|  |  | $ | 390,214 |  |  | $ | 330,591 |
Qualified affordable housing project tax credit partnership interests held by ProAssurance generate investment returns by providing tax benefits to fund investors in the form of tax credits and project operating losses. The carrying value of these investments reflects ProAssurance's total commitments (both funded and unfunded) to the partnerships, less any amortization. ProAssurance's ownership percentage relative to two of the tax credit partnership interests is almost 100%; these interests had a carrying value of $28.5 million at June 30, 2018 and $32.5 million at December 31, 2017. ProAssurance's ownership percentage relative to the remaining tax credit partnership interests is less than 20%; these interests had a carrying value of $46.4 million at June 30, 2018 and $52.1 million at December 31, 2017. Since ProAssurance has the ability to exert influence over the partnerships but does not control them, all are accounted for using the equity method. See further discussion of the entities in which ProAssurance holds passive interests in Note 11. Other tax credit partnerships are comprised entirely of investments in historic tax credit partnerships. The historic tax credit partnerships generate investment returns by providing benefits to fund investors in the form of tax credits, tax deductible project operating losses and positive cash flows. The carrying value of these investments reflects ProAssurance's total funded commitments less any amortization. ProAssurance's ownership percentage relative to the historic tax credit partnerships is almost 100%. Since ProAssurance has the ability to exert influence over the partnerships but does not control them, all are accounted for using the equity method. See further discussion of the entities in which ProAssurance holds passive interests in Note 11. ProAssurance holds interests in investment fund LP s/LLC s and other equity method investments and LP s/LLC s which are not considered to be investment funds. ProAssurance's ownership percentage relative to three of the LP s/LLC s is greater than 25%, which is expected to be reduced as the funds mature and other investors participate in the funds; these investments had a carrying value of $28.4 million at June 30, 2018 and $30.8 million at December 31, 2017. ProAssurance's ownership percentage relative to the remaining investments and LP s/LLC s is less than 25%; these interests had a carrying value of $281.9 million at June 30, 2018 and $209.1 million at December 31, 2017. ProAssurance does not have the ability to exert control over any of these funds. Equity in Earnings (Loss) of Unconsolidated Subsidiaries Equity in earnings (loss) of unconsolidated subsidiaries included losses from qualified affordable housing project tax credit partnerships and historic tax credit partnerships. Losses recorded reflect ProAssurance's allocable portion of partnership operating losses. Tax credits reduce income tax expense in the period they are recognized. Losses recorded and tax credits recognized related to ProAssurance's tax credit partnership investments were as follows:
| Three Months Ended June 30 |  | Six Months Ended June 30
(In thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Qualified affordable housing project tax credit partnerships |  |  |  |  |  |  |
Losses recorded | $ | 5,612 |  |  | $ | 3,964 |  |  | $ | 9,712 |  |  | $ | 7,272 |
Tax credits recognized | $ | 4,624 |  |  | $ | 4,612 |  |  | $ | 9,237 |  |  | $ | 9,225 |
Historic tax credit partnerships |  |  |  |  |  |  |
Losses recorded | $ | 1,506 |  |  | $ | 2,350 |  |  | $ | 3,382 |  |  | $ | 2,766 |
Tax credits recognized | $ | 693 |  |  | $ | 820 |  |  | $ | 1,355 |  |  | $ | 2,624 |
Net Realized Investment Gains (Losses) Realized investment gains and losses are recognized on the first-in, first-out basis. The following table provides detailed information regarding net realized investment gains (losses):
| Three Months Ended June 30 |  | Six Months Ended June 30
(In thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Total OTTI losses: |  |  |  |  |  |  |
Corporate debt | $ | (404 | ) |  | $ | — |  |  | $ | (404 | ) |  | $ | (419 | )
Portion of OTTI losses recognized in other comprehensive income before taxes: |  |  |  |  |  |  |
Corporate debt | — |  |  | — |  |  | — |  |  | 248 |
Net impairment losses recognized in earnings | (404 | ) |  | — |  |  | (404 | ) |  | (171 | )
Gross realized gains, available-for-sale fixed maturities | 438 |  |  | 746 |  |  | 4,902 |  |  | 2,599 |
Gross realized (losses), available-for-sale fixed maturities | (1,725 | ) |  | (1,401 | ) |  | (3,772 | ) |  | (1,468 | )
Net realized gains (losses), trading fixed maturities | (73 | ) |  | — |  |  | (73 | ) |  | — |
Net realized gains (losses), equity investments | 3,488 |  |  | 794 |  |  | 12,706 |  |  | 7,356 |
Net realized gains (losses), other investments | 402 |  |  | 546 |  |  | 1,090 |  |  | 1,719 |
Change in unrealized holding gains (losses), trading fixed maturities | (170 | ) |  | — |  |  | (219 | ) |  | — |
Change in unrealized holding gains (losses), equity investments | 745 |  |  | (3,191 | ) |  | (23,099 | ) |  | 424 |
Change in unrealized holding gains (losses), convertible securities, carried at fair value | 90 |  |  | 285 |  |  | (864 | ) |  | 598 |
Other | 4 |  |  | 2 |  |  | 11 |  |  | 4 |
Net realized investment gains (losses) | $ | 2,795 |  |  | $ | (2,219 | ) |  | $ | (9,722 | ) |  | $ | 11,061 |
ProAssurance recognized OTTI in earnings of $0.4 million during the three and six months ended June 30, 2018 related to debt instruments from one issuer in the energy sector. ProAssurance did no t recognize any OTTI during the three months ended June 30, 2017. During the six months ended June 30, 2017, ProAssurance recognized OTTI in earnings of $0.2 million and $0.2 million of non-credit OTTI in OCI, both of which related to corporate bonds. The following table presents a roll forward of cumulative credit losses recorded in earnings related to impaired debt securities for which a portion of the OTTI was recorded in OCI.
| Three Months Ended June 30 |  | Six Months Ended June 30
(In thousands) | 2018 |  | 2017 |  | 2018 |  | 2017
Balance beginning of period | $ | 1,313 |  |  | $ | 1,329 |  |  | $ | 1,313 |  |  | $ | 1,158 |
Additional credit losses recognized during the period, related to securities for which: |  |  |  |  |  |  |
No OTTI has been previously recognized | — |  |  | — |  |  | — |  |  | 171 |
Reductions due to: |  |  |  |  |  |  |
Securities sold during the period (realized) | — |  |  | (16 | ) |  | — |  |  | (16 | )
Balance June 30 | $ | 1,313 |  |  | $ | 1,313 |  |  | $ | 1,313 |  |  | $ | 1,313 |

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsDebtAndEquitySecuritiesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=4738149 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 954 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2289146 + Details
Name: | us-gaap_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration