ProAssurance Reports Results for Third Quarter 2023
Third Quarter 2023(2)
-
Gross premiums written:
$320 million (+4%) -
New business written:
$29 million (+82%) -
Unfavorable prior accident year reserve development of
$8 million related
to our Workers’Compensation Insurance business. -
Consolidated combined ratio of 116.7%
- Consolidated operating ratio of 103.2%
-
Net investment income of
$33 million (+32%) -
Adjusted book value per share(1) of
$25.67 as ofSeptember 30, 2023 a decrease of$0.32 per share sinceDecember 31, 2022 .
|
(1) |
Represents a Non-GAAP financial measure. See a reconciliation to its GAAP counterpart under the heading “Non-GAAP Financial Measures” that follows. |
|
|
(2) |
Comparisons are to the third quarter of 2022. |
Management Commentary & Results of Operations
“Market conditions and judicial trends in our lines of business continue to be a significant headwind to our efforts to return to our desired level of underwriting profitability. We are meeting those challenges head on in the marketplace by taking appropriate rate actions, maintaining our underwriting criteria, effectively managing claims and providing the best-in-class service that has allowed us to attract well-priced new business,” said
Driving the operating loss in the quarter was net unfavorable prior accident year reserve development of
The unfavorable development in the quarter was the primary reason our consolidated combined ratio increased 8.8 points quarter-over-quarter. However, the 32% improvement in our net investment income produced a higher investment income ratio, leading to a smaller increase in our operating ratio.
There were significant gains in new business acquired in the quarter, all of which reflected our disciplined pricing and underwriting strategy. That drove increases in gross premiums written, as did strong renewal price increases in our Specialty P&C segment, which also saw strong retention even in the face of continued market pressure.
During the quarter we made the decision to no longer participate in the results of Syndicate 1729, beginning with the 2024 underwriting year. Due to the quarter lag, our ceased participation in Syndicate 1729 will not be reflected in our results until the second quarter of 2024. The results from our participation from open underwriting years prior to 2024 will continue to earn out pro rata over the entire policy period of the underlying business. Furthermore, we entered into an agreement to sell our remaining ownership interest in the underwriting and operations entity associated with Syndicate 1729 to an unrelated third party, which is contingent upon certain approvals. Approval of this sale will not impact our decision to no longer participate in the results of Syndicate 1729.
Market conditions affecting actual and projected results of our
Book value per share at quarter end was
|
CONSOLIDATED INCOME STATEMENT HIGHLIGHTS |
|||||||||||||||||||||||
|
Selected consolidated financial data for each period is summarized in the table below. |
|||||||||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||||||
|
($ in thousands, except per share data) |
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Gross premiums written(1) |
$ |
319,762 |
|
|
$ |
308,430 |
|
|
|
3.7 |
% |
|
$ |
873,484 |
|
|
$ |
879,512 |
|
|
|
(0.7 |
%) |
|
Net premiums written |
$ |
292,023 |
|
|
$ |
281,989 |
|
|
|
3.6 |
% |
|
$ |
790,978 |
|
|
$ |
803,055 |
|
|
|
(1.5 |
%) |
|
Net premiums earned |
$ |
242,420 |
|
|
$ |
258,355 |
|
|
|
(6.2 |
%) |
|
$ |
730,068 |
|
|
$ |
771,337 |
|
|
|
(5.4 |
%) |
|
Net investment income |
|
32,754 |
|
|
|
24,745 |
|
|
|
32.4 |
% |
|
|
94,714 |
|
|
|
67,132 |
|
|
|
41.1 |
% |
|
Equity in earnings (loss) of unconsolidated subsidiaries |
|
(61 |
) |
|
|
(6,852 |
) |
|
|
99.1 |
% |
|
|
5,450 |
|
|
|
5,948 |
|
|
|
(8.4 |
%) |
|
Net investment gains (losses)(2) |
|
(2,702 |
) |
|
|
(8,262 |
) |
|
|
67.3 |
% |
|
|
3,156 |
|
|
|
(45,652 |
) |
|
|
106.9 |
% |
|
Other income (loss)(1) |
|
3,336 |
|
|
|
5,097 |
|
|
|
(34.5 |
%) |
|
|
6,864 |
|
|
|
13,215 |
|
|
|
(48.1 |
%) |
|
Total revenues(1) |
|
275,747 |
|
|
|
273,083 |
|
|
|
1.0 |
% |
|
|
840,252 |
|
|
|
811,980 |
|
|
|
3.5 |
% |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net losses and loss adjustment expenses |
|
208,891 |
|
|
|
198,073 |
|
|
|
5.5 |
% |
|
|
605,245 |
|
|
|
585,166 |
|
|
|
3.4 |
% |
|
Underwriting, policy acquisition and operating expenses(1) |
|
74,014 |
|
|
|
80,679 |
|
|
|
(8.3 |
%) |
|
|
218,779 |
|
|
|
229,788 |
|
|
|
(4.8 |
%) |
|
SPC |
|
(175 |
) |
|
|
433 |
|
|
|
(140.4 |
%) |
|
|
1,351 |
|
|
|
1,424 |
|
|
|
(5.1 |
%) |
|
SPC dividend expense (income) |
|
(2,518 |
) |
|
|
183 |
|
|
|
(1,476.0 |
%) |
|
|
3,171 |
|
|
|
1,697 |
|
|
|
86.9 |
% |
|
Interest expense |
|
5,514 |
|
|
|
5,513 |
|
|
|
— |
% |
|
|
16,478 |
|
|
|
14,872 |
|
|
|
10.8 |
% |
|
|
|
44,110 |
|
|
|
— |
|
|
nm |
|
|
44,110 |
|
|
|
— |
|
|
nm |
||||
|
Total expenses(1) |
|
329,836 |
|
|
|
284,881 |
|
|
|
15.8 |
% |
|
|
889,134 |
|
|
|
832,947 |
|
|
|
6.7 |
% |
|
Income (loss) before income taxes |
|
(54,089 |
) |
|
|
(11,798 |
) |
|
|
(358.5 |
%) |
|
|
(48,882 |
) |
|
|
(20,967 |
) |
|
|
(133.1 |
%) |
|
Income tax expense (benefit) |
|
(4,655 |
) |
|
|
(2,673 |
) |
|
|
(74.1 |
%) |
|
|
(3,901 |
) |
|
|
(6,623 |
) |
|
|
41.1 |
% |
|
Net income (loss) |
$ |
(49,434 |
) |
|
$ |
(9,125 |
) |
|
|
(441.7 |
%) |
|
$ |
(44,981 |
) |
|
$ |
(14,344 |
) |
|
|
(213.6 |
%) |
|
Non-GAAP operating income (loss) |
$ |
(3,730 |
) |
|
$ |
(2,976 |
) |
|
|
(25.3 |
%) |
|
$ |
(3,240 |
) |
|
$ |
21,033 |
|
|
|
(115.4 |
%) |
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Basic |
|
51,837 |
|
|
|
53,990 |
|
|
|
|
|
53,205 |
|
|
|
54,023 |
|
|
|
||||
|
Diluted |
|
52,006 |
|
|
|
54,124 |
|
|
|
|
|
53,339 |
|
|
|
54,151 |
|
|
|
||||
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net income (loss) per diluted share |
$ |
(0.95 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.78 |
) |
|
$ |
(0.85 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.58 |
) |
|
Non-GAAP operating income (loss) per diluted share |
$ |
(0.07 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.39 |
|
|
$ |
(0.45 |
) |
|
(1) |
Consolidated totals include inter-segment eliminations. The eliminations affect individual line items only and have no effect on net income (loss). See Note 13 of the Notes to Condensed Consolidated Financial Statements in our |
|
|
(2) |
This line item typically includes both realized and unrealized investment gains and losses, investment impairments losses, and, for the current period, the change in the fair value of the contingent consideration in relation to the NORCAL acquisition. Detailed information regarding the components of net investment gains (losses) are included in Note 3 of the Notes to Condensed Consolidated Financial Statements in our |
|
| The abbreviation “nm” indicates that the information or the percentage change is not meaningful. | ||
|
BALANCE SHEET HIGHLIGHTS |
|||||||
|
($ in thousands, except per share data) |
|
|
|
||||
|
Total investments |
$ |
4,230,257 |
|
|
$ |
4,387,683 |
|
|
Total assets |
$ |
5,573,957 |
|
|
$ |
5,699,999 |
|
|
Total liabilities |
$ |
4,562,114 |
|
|
$ |
4,595,981 |
|
|
Common shares (par value |
$ |
636 |
|
|
$ |
634 |
|
|
Retained earnings |
$ |
1,375,604 |
|
|
$ |
1,423,286 |
|
|
|
$ |
(469,702 |
) |
|
$ |
(419,214 |
) |
|
Shareholders’ equity |
$ |
1,011,843 |
|
|
$ |
1,104,018 |
|
|
Book value per share |
$ |
19.85 |
|
|
$ |
20.46 |
|
|
Non-GAAP adjusted book value per share(1) |
$ |
25.67 |
|
|
$ |
25.99 |
|
|
(1) |
Adjusted book value per share is a Non-GAAP financial measure. See a reconciliation of book value per share to Non-GAAP adjusted book value per share under the heading “Non-GAAP Financial Measures” that follows. |
| CONSOLIDATED KEY RATIOS | |||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
Current accident year net loss ratio |
83.0 |
% |
|
79.5 |
% |
|
81.8 |
% |
|
80.0 |
% |
|
Effect of prior accident years’ reserve development |
3.2 |
% |
|
(2.8 |
%) |
|
1.1 |
% |
|
(4.1 |
%) |
|
Net loss ratio |
86.2 |
% |
|
76.7 |
% |
|
82.9 |
% |
|
75.9 |
% |
|
Underwriting expense ratio |
30.5 |
% |
|
31.2 |
% |
|
30.0 |
% |
|
29.8 |
% |
|
Combined ratio |
116.7 |
% |
|
107.9 |
% |
|
112.9 |
% |
|
105.7 |
% |
|
Operating ratio |
103.2 |
% |
|
98.3 |
% |
|
99.9 |
% |
|
97.0 |
% |
|
Return on equity(1) |
(6.6 |
%) |
|
(3.3 |
%) |
|
(4.4 |
%) |
|
(1.5 |
%) |
|
Non-GAAP operating return on equity(1)(2) |
(1.4 |
%) |
|
(1.1 |
%) |
|
(0.4 |
%) |
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
||||
|
Combined ratio, excluding transaction-related costs(3) |
116.7 |
% |
|
107.9 |
% |
|
112.9 |
% |
|
105.5 |
% |
|
(1) |
Quarterly amounts are annualized. Refer to our |
|
|
(2) |
See a reconciliation of ROE to Non-GAAP operating ROE under the heading “Non-GAAP Financial Measures” that follows. |
|
|
(3) |
Our consolidated underwriting expense ratio for the nine months ended |
SEGMENT REORGANIZATION
As a result of our decision to no longer participate in the results of Syndicate 1729 for the 2024 underwriting year, we reorganized our segment reporting during the third quarter of 2023 to align with how our Chief Operating Decision Maker currently oversees the business, allocates resources and evaluates operating performance and, as a result, the number of our operating and reportable segments decreased from five to four: Specialty P&C,
SPECIALTY P&C SEGMENT RESULTS
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||||
|
($ in thousands) |
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
||||||||||
|
Gross premiums written |
$ |
256,125 |
|
|
$ |
244,887 |
|
|
4.6 |
% |
|
$ |
673,660 |
|
|
$ |
680,217 |
|
|
(1.0 |
%) |
|
Net premiums written |
$ |
241,888 |
|
|
$ |
222,344 |
|
|
8.8 |
% |
|
$ |
607,945 |
|
|
$ |
615,855 |
|
|
(1.3 |
%) |
|
Net premiums earned |
$ |
195,772 |
|
|
$ |
198,481 |
|
|
(1.4 |
%) |
|
$ |
562,206 |
|
|
$ |
593,534 |
|
|
(5.3 |
%) |
|
Other income |
|
1,089 |
|
|
|
1,000 |
|
|
8.9 |
% |
|
|
3,106 |
|
|
|
4,185 |
|
|
(25.8 |
%) |
|
Total revenues |
|
196,861 |
|
|
|
199,481 |
|
|
(1.3 |
%) |
|
|
565,312 |
|
|
|
597,720 |
|
|
(5.4 |
%) |
|
Net losses and loss adjustment expenses |
|
(162,677 |
) |
|
|
(158,518 |
) |
|
2.6 |
% |
|
|
(476,187 |
) |
|
|
(469,690 |
) |
|
1.4 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(49,395 |
) |
|
|
(53,166 |
) |
|
(7.1 |
%) |
|
|
(140,949 |
) |
|
|
(148,339 |
) |
|
(5.0 |
%) |
|
Total expenses |
|
(212,072 |
) |
|
|
(211,684 |
) |
|
0.2 |
% |
|
|
(617,136 |
) |
|
|
(618,029 |
) |
|
(0.1 |
%) |
|
Segment results |
$ |
(15,211 |
) |
|
$ |
(12,203 |
) |
|
(24.6 |
%) |
|
$ |
(51,824 |
) |
|
$ |
(20,309 |
) |
|
(155.2 |
%) |
|
SPECIALTY P&C SEGMENT KEY RATIOS |
|||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
Current accident year net loss ratio |
83.4 |
% |
|
82.2 |
% |
|
84.4 |
% |
|
82.8 |
% |
|
Effect of prior accident years’ reserve development |
(0.3 |
%) |
|
(2.3 |
%) |
|
0.3 |
% |
|
(3.7 |
%) |
|
Net loss ratio |
83.1 |
% |
|
79.9 |
% |
|
84.7 |
% |
|
79.1 |
% |
|
Underwriting expense ratio |
25.2 |
% |
|
26.8 |
% |
|
25.1 |
% |
|
25.1 |
% |
|
Combined ratio |
108.3 |
% |
|
106.7 |
% |
|
109.8 |
% |
|
104.2 |
% |
Compared to the third quarter of last year, gross written premium increased by
Within the segment, written premium in our Standard Physician line was 4.5% higher and Specialty lines were 34.1% higher than last year, driven by an almost 55% and 50% increase in Custom Physician and Hospital and Facilities policies, respectively, due to new business exceeding expectations. Premium retention in the quarter was 87%, unchanged from third quarter 2022. Standard Physician retention was 89%, unchanged from the year-ago quarter. Specialty retention was 80%, up six points quarter-over-quarter. Small Business Unit and Medical Technology Liability business retained 90% and 89% of premium, respectively.
We achieved renewal pricing increases of 7%, one point lower than the third quarter of 2022. New business written improved to
The segment current accident year net loss ratio increased by 1.2 points in the quarter as we respond to the continued effects of social inflation, higher than anticipated loss severity trends throughout healthcare, and changes in our mix of business.
We recognized net favorable prior accident year reserve development of
The expense ratio decreased to 25.2% compared to 26.8% last year driven by the impact of a decrease in amounts accrued for performance-related incentive plans in the current quarter, and one-time expenses in the prior year quarter, partially offset by lower levels of earned premium in the quarter.
|
WORKERS’ COMPENSATION INSURANCE SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||||
|
($ in thousands) |
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
||||||||||
|
Gross premiums written |
$ |
63,637 |
|
|
$ |
63,543 |
|
|
0.1 |
% |
|
$ |
199,824 |
|
|
$ |
199,295 |
|
|
0.3 |
% |
|
Net premiums written |
$ |
44,386 |
|
|
$ |
43,973 |
|
|
0.9 |
% |
|
$ |
134,280 |
|
|
$ |
131,796 |
|
|
1.9 |
% |
|
Net premiums earned |
$ |
39,885 |
|
|
$ |
42,063 |
|
|
(5.2 |
%) |
|
$ |
121,706 |
|
|
$ |
124,456 |
|
|
(2.2 |
%) |
|
Other income |
|
333 |
|
|
|
554 |
|
|
(39.9 |
%) |
|
|
1,565 |
|
|
|
1,753 |
|
|
(10.7 |
%) |
|
Total revenues |
|
40,218 |
|
|
|
42,617 |
|
|
(5.6 |
%) |
|
|
123,271 |
|
|
|
126,209 |
|
|
(2.3 |
%) |
|
Net losses and loss adjustment expenses |
|
(41,208 |
) |
|
|
(28,148 |
) |
|
46.4 |
% |
|
|
(101,813 |
) |
|
|
(83,306 |
) |
|
22.2 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(13,542 |
) |
|
|
(14,146 |
) |
|
(4.3 |
%) |
|
|
(40,923 |
) |
|
|
(40,816 |
) |
|
0.3 |
% |
|
Total expenses |
|
(54,750 |
) |
|
|
(42,294 |
) |
|
29.5 |
% |
|
|
(142,736 |
) |
|
|
(124,122 |
) |
|
15.0 |
% |
|
Segment results |
$ |
(14,532 |
) |
|
$ |
323 |
|
|
(4,599.1 |
%) |
|
$ |
(19,465 |
) |
|
$ |
2,087 |
|
|
(1,032.7 |
%) |
|
WORKERS’ COMPENSATION INSURANCE SEGMENT KEY RATIOS |
|||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
Current accident year net loss ratio |
83.1 |
% |
|
71.7 |
% |
|
76.0 |
% |
|
71.8 |
% |
|
Effect of prior accident years’ reserve development |
20.2 |
% |
|
(4.8 |
%) |
|
7.7 |
% |
|
(4.9 |
%) |
|
Net loss ratio |
103.3 |
% |
|
66.9 |
% |
|
83.7 |
% |
|
66.9 |
% |
|
Underwriting expense ratio |
34.0 |
% |
|
33.6 |
% |
|
33.6 |
% |
|
32.8 |
% |
|
Combined ratio |
137.3 |
% |
|
100.5 |
% |
|
117.3 |
% |
|
99.7 |
% |
The Workers’
Gross premiums in the third quarter were essentially unchanged compared to the same period of 2022. An increase in new business was partially offset by lower audit premium. In our traditional business, renewal results reflected rate decreases of 3% and renewal retention of 85%, both of which improved in the third quarter of 2023, but competitive market conditions persist. Audit premium was
The net loss ratio for the third quarter of 2023 included an increase in the current accident year loss ratio and
Underwriting expenses decreased by
|
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||||
|
($ in thousands) |
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
||||||||||
|
Gross premiums written |
$ |
7,930 |
|
|
$ |
17,879 |
|
|
(55.6 |
%) |
|
$ |
55,924 |
|
|
$ |
62,882 |
|
|
(11.1 |
%) |
|
Net premiums written |
$ |
5,749 |
|
|
$ |
15,672 |
|
|
(63.3 |
%) |
|
$ |
48,753 |
|
|
$ |
55,404 |
|
|
(12.0 |
%) |
|
Net premiums earned |
$ |
6,763 |
|
|
$ |
17,811 |
|
|
(62.0 |
%) |
|
$ |
46,156 |
|
|
$ |
53,347 |
|
|
(13.5 |
%) |
|
Net investment income |
|
601 |
|
|
|
294 |
|
|
104.4 |
% |
|
|
1,625 |
|
|
|
617 |
|
|
163.4 |
% |
|
Net investment gains (losses) |
|
(525 |
) |
|
|
(732 |
) |
|
28.3 |
% |
|
|
1,830 |
|
|
|
(4,225 |
) |
|
143.3 |
% |
|
Other income |
|
2 |
|
|
|
1 |
|
|
100.0 |
% |
|
|
3 |
|
|
|
2 |
|
|
50.0 |
% |
|
Net losses and loss adjustment expenses |
|
(5,006 |
) |
|
|
(11,407 |
) |
|
(56.1 |
%) |
|
|
(27,245 |
) |
|
|
(32,170 |
) |
|
(15.3 |
%) |
|
Underwriting, policy acquisition and operating expenses |
|
(3,668 |
) |
|
|
(5,599 |
) |
|
(34.5 |
%) |
|
|
(15,241 |
) |
|
|
(15,203 |
) |
|
0.2 |
% |
|
SPC |
|
175 |
|
|
|
(433 |
) |
|
(140.4 |
%) |
|
|
(1,351 |
) |
|
|
(1,424 |
) |
|
(5.1 |
%) |
|
SPC net results |
|
(1,658 |
) |
|
|
(65 |
) |
|
(2,450.8 |
%) |
|
|
5,777 |
|
|
|
944 |
|
|
512.0 |
% |
|
SPC dividend (expense) income (2) |
|
2,518 |
|
|
|
(183 |
) |
|
(1,476.0 |
%) |
|
|
(3,171 |
) |
|
|
(1,697 |
) |
|
86.9 |
% |
|
Segment results (3) |
$ |
860 |
|
|
$ |
(248 |
) |
|
446.8 |
% |
|
$ |
2,606 |
|
|
$ |
(753 |
) |
|
446.1 |
% |
|
(1) |
Represents the provision for |
|
|
(2) |
Represents the net (profit) loss attributable to external cell participants. |
|
|
(3) |
Represents our share of the net profit (loss) and OCI of the SPCs in which we participate. |
| SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT KEY RATIOS | |||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
Current accident year net loss ratio |
70.5 |
% |
|
67.7 |
% |
|
64.7 |
% |
|
67.5 |
% |
|
Effect of prior accident years’ reserve development |
3.5 |
% |
|
(3.7 |
%) |
|
(5.7 |
%) |
|
(7.2 |
%) |
|
Net loss ratio |
74.0 |
% |
|
64.0 |
% |
|
59.0 |
% |
|
60.3 |
% |
|
Underwriting expense ratio |
54.2 |
% |
|
31.4 |
% |
|
33.0 |
% |
|
28.5 |
% |
|
Combined ratio |
128.2 |
% |
|
95.4 |
% |
|
92.0 |
% |
|
88.8 |
% |
Premiums in our Segregated Portfolio Cell Reinsurance segment are primarily comprised of workers' compensation coverages assumed from our
Workers’ compensation renewal premium reflected rate decreases of 5% and renewal retention of 92% for the three months ended
Excluding the impact of the aforementioned cancelled tail coverage, the third quarter 2023 calendar year net loss ratio was 5 points higher than in the third quarter of 2022, reflecting an increase in the healthcare professional liability current accident year net loss ratio driven by an increase in expected claim frequency related to the program that cancelled the tail coverage. This was partially offset by the decrease in the workers' compensation current accident year net loss ratio primarily reflecting a reduction in claim frequency and severity, partially offset by the continuation of competitive market conditions and the resulting renewal rate decreases.
We recognized
|
CORPORATE SEGMENT |
|||||||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||||
|
($ in thousands) |
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
||||||||||
|
Net investment income |
$ |
32,153 |
|
|
$ |
24,451 |
|
|
31.5 |
% |
|
$ |
93,089 |
|
|
$ |
66,515 |
|
|
40.0 |
% |
|
Equity in earnings (loss) of unconsolidated subsidiaries: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
All other investments, primarily investment fund LPs/LLCs |
|
368 |
|
|
|
(4,688 |
) |
|
107.8 |
% |
|
|
7,744 |
|
|
|
12,347 |
|
|
(37.3 |
%) |
|
Tax credit partnerships |
|
(429 |
) |
|
|
(2,164 |
) |
|
(80.2 |
%) |
|
|
(2,294 |
) |
|
|
(6,399 |
) |
|
(64.2 |
%) |
|
Total equity in earnings (loss) of unconsolidated subsidiaries: |
|
(61 |
) |
|
|
(6,852 |
) |
|
99.1 |
% |
|
|
5,450 |
|
|
|
5,948 |
|
|
(8.4 |
%) |
|
Net investment gains (losses) |
|
(3,677 |
) |
|
|
(7,530 |
) |
|
51.2 |
% |
|
|
(3,174 |
) |
|
|
(41,427 |
) |
|
92.3 |
% |
|
Other income (loss) |
|
2,847 |
|
|
|
4,695 |
|
|
(39.4 |
%) |
|
|
5,347 |
|
|
|
10,386 |
|
|
(48.5 |
%) |
|
Operating expenses |
|
(8,344 |
) |
|
|
(8,921 |
) |
|
(6.5 |
%) |
|
|
(24,823 |
) |
|
|
(26,679 |
) |
|
(7.0 |
%) |
|
Interest expense |
|
(5,514 |
) |
|
|
(5,513 |
) |
|
— |
% |
|
|
(16,478 |
) |
|
|
(14,872 |
) |
|
10.8 |
% |
|
Income tax (expense) benefit |
|
4,655 |
|
|
|
2,673 |
|
|
74.1 |
% |
|
|
3,901 |
|
|
|
6,232 |
|
|
37.4 |
% |
|
Segment results |
$ |
22,059 |
|
|
$ |
3,003 |
|
|
634.6 |
% |
|
$ |
63,312 |
|
|
$ |
6,103 |
|
|
937.4 |
% |
|
Consolidated effective tax rate |
|
8.6 |
% |
|
|
22.7 |
% |
|
|
|
|
8.0 |
% |
|
|
31.6 |
% |
|
|
||
The rise in interest rates continues to add significantly to our net investment income, which increased to
Equity in earnings from our investment in LPs/LLCs, which are typically reported to us on a one-quarter lag, reflected a small gain in the quarter as compared to a loss of
The corporate segment results include
Other income was
Operating expenses decreased by
NON-GAAP FINANCIAL MEASURES
Non-GAAP Operating Income (Loss)
Non-GAAP operating income (loss) is a financial measure that is widely used to evaluate performance within the insurance sector. In calculating Non-GAAP operating income (loss), we have excluded the effects of the items listed in the following table that do not reflect normal results. We believe Non-GAAP operating income (loss) presents a useful view of the performance of our insurance operations; however it should be considered in conjunction with net income (loss) computed in accordance with GAAP. The following table reconciles net income (loss) to Non-GAAP operating income (loss):
|
RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP OPERATING INCOME (LOSS) |
|||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
(In thousands, except per share data) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
Net income (loss) |
$ |
(49,434 |
) |
|
$ |
(9,125 |
) |
|
$ |
(44,981 |
) |
|
$ |
(14,344 |
) |
|
Items excluded in the calculation of Non-GAAP operating income (loss): |
|
|
|
|
|
|
|
||||||||
|
Net investment (gains) losses (1) |
|
2,702 |
|
|
|
8,262 |
|
|
|
(3,156 |
) |
|
|
45,652 |
|
|
Net investment gains (losses) attributable to SPCs which no profit/loss is retained (2) |
|
(431 |
) |
|
|
(562 |
) |
|
|
1,421 |
|
|
|
(3,362 |
) |
|
Transaction-related costs (3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,862 |
|
|
|
|
44,110 |
|
|
|
— |
|
|
|
44,110 |
|
|
|
— |
|
|
Guaranty fund assessments (recoupments) |
|
103 |
|
|
|
4 |
|
|
|
29 |
|
|
|
130 |
|
|
Pre-tax effect of exclusions |
|
46,484 |
|
|
|
7,704 |
|
|
|
42,404 |
|
|
|
44,282 |
|
|
Tax effect, at 21% (4) |
|
(780 |
) |
|
|
(1,555 |
) |
|
|
(663 |
) |
|
|
(8,905 |
) |
|
After-tax effect of exclusions |
|
45,704 |
|
|
|
6,149 |
|
|
|
41,741 |
|
|
|
35,377 |
|
|
Non-GAAP operating income (loss) |
$ |
(3,730 |
) |
|
$ |
(2,976 |
) |
|
$ |
(3,240 |
) |
|
$ |
21,033 |
|
|
Per diluted common share: |
|
|
|
|
|
|
|
||||||||
|
Net income (loss) |
$ |
(0.95 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.85 |
) |
|
$ |
(0.27 |
) |
|
Effect of exclusions |
|
0.88 |
|
|
|
0.11 |
|
|
|
0.79 |
|
|
|
0.66 |
|
|
Non-GAAP operating income (loss) per diluted common share |
$ |
(0.07 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.39 |
|
|
(1) |
Net investment gains (losses) for the three and nine months ended |
|
|
(2) |
Net investment gains (losses) on investments related to SPCs are recognized in our Segregated Portfolio Cell Reinsurance segment. SPC results, including any net investment gain or loss, that are attributable to external cell participants are reflected in the SPC dividend expense (income). To be consistent with our exclusion of net investment gains (losses) recognized in earnings, we are excluding the portion of net investment gains (losses) that is included in the SPC dividend expense (income) which is attributable to the external cell participants. |
|
|
(3) |
Transaction-related costs associated with our acquisition of NORCAL. We are excluding these costs as they do not reflect normal operating results and are unique and non-recurring in nature. |
|
|
(4) |
The 21% rate is the annual expected statutory tax rate associated with the taxable or tax deductible items listed above. We utilized the discrete effective tax rate method for the three and nine months ended |
Non-GAAP Operating ROE
The following table is a reconciliation of ROE to Non-GAAP operating ROE for the three and nine months ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
|
ROE(1) |
(6.6 |
%) |
|
(3.3 |
%) |
|
(4.4 |
%) |
|
(1.5 |
%) |
|
Pre-tax effect of items excluded in the calculation of Non-GAAP operating ROE |
5.5 |
% |
|
2.8 |
% |
|
4.1 |
% |
|
4.7 |
% |
|
Tax effect, at 21%(2) |
(0.3 |
%) |
|
(0.6 |
%) |
|
(0.1 |
%) |
|
(1.0 |
%) |
|
Non-GAAP operating ROE |
(1.4 |
%) |
|
(1.1 |
%) |
|
(0.4 |
%) |
|
2.2 |
% |
|
(1) |
Quarterly amounts are annualized. Refer to our |
|
|
(2) |
The 21% rate is the statutory tax rate associated with the taxable or tax deductible items. See further discussion in footnote 4 in this section under the heading "Non-GAAP Operating Income." |
Non-GAAP Adjusted Book Value per Share
The following table is a reconciliation of our book value per share to Non-GAAP adjusted book value per share at
|
|
Book Value Per Share |
||
|
Book Value Per Share at |
$ |
20.46 |
|
|
Less: AOCI Per Share(1) |
|
(5.53 |
) |
|
Non-GAAP Adjusted Book Value Per Share at |
|
25.99 |
|
|
Increase (decrease) to Non-GAAP Adjusted Book Value Per Share during the nine months ended |
|
||
|
Dividends declared |
|
(0.05 |
) |
|
Cumulative repurchase of shares(2) |
|
0.59 |
|
|
Net income (loss)(3) |
|
(0.88 |
) |
|
Other(4) |
|
0.02 |
|
|
Non-GAAP Adjusted Book Value Per Share at |
|
25.67 |
|
|
Add: AOCI Per Share(1) |
|
(5.82 |
) |
|
Book Value Per Share at |
$ |
19.85 |
|
|
(1) |
Primarily the impact of accumulated unrealized investment gains (losses) on our available-for-sale fixed maturity investments. See Note 10 of the Notes to Condensed Consolidated Financial Statements in our |
|
|
(2) |
Represents the impact of our repurchase of 3.1 million common shares, conducted through a series of 10b5-1 stock repurchase plans during 2023. See Note 10 of the Notes to Condensed Consolidated Financial Statements in our |
|
|
(3) |
Includes the |
|
|
(4) |
Includes the impact of share-based compensation. |
Conference Call Information
Callers may also choose to pre-register to receive unique call access details and avoid operator wait times; pre-register here if desired: www.netroadshow.com/events/login?show=477bea77&confId=56230.
The conference call will also be webcast at https://events.q4inc.com/attendee/305732155.
A replay will be available by telephone for at least 7 days after the call date. US-based investors may access the replay by dialing (866) 813-9403 (toll free) or (929) 458-6194, and international investors may dial +44 (204) 525-0658. The access code for all attendees is 484795. A replay will also be available for at least one year at investor.proassurance.com.
Investors may follow @ProAssurance on Twitter to be notified of the latest news about
About
Caution Regarding Forward-Looking Statements
Any statements in this news release that are not historical facts are specifically identified as forward-looking statements. These statements are based upon our estimates and anticipation of future events and are subject to significant risks, assumptions and uncertainties that could cause actual results to differ materially from the expected results described in the forward-looking statements. Forward-looking statements are identified by words such as, but not limited to, “anticipate,” “believe,” “estimate,” “expect,” “hope,” “hopeful,” “intend,” “likely,” “may,” “optimistic,” “possible,” “potential,” “preliminary,” “project,” “should,” “will,” and other analogous expressions.
Although it is not possible to identify all of these risks and factors, they include, among others, the following: inadequate loss reserves to cover the Company's actual losses; inherent uncertainty of models resulting in actual losses that are materially different than the Company's estimates; adverse economic factors; a decline in the Company's financial strength rating; loss of one or more key executives; loss of a group of agents or brokers that generate significant portions of the Company's business; failure of any of the loss limitations or exclusions the Company employs, or change in other claims or coverage issues; adverse performance of the Company's investment portfolio; adverse market conditions that affect its excess and surplus lines insurance operations; and other risks described in the Company's filings with the
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EVP, Chief Financial Officer
800-282-6242 • 205-877-4462 • DanaHendricks@ProAssurance.com
Source:
Genworth Financial Announces Third Quarter 2023 Results
Greenlight Re Announces Third Quarter 2023 Financial Results
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