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November 9, 2020 Newswires No comments

ProSight Reports 2020 Third Quarter Results

PR Newswire

MORRISTOWN, N.J., Nov. 9, 2020 /PRNewswire/ -- ProSight Global, Inc. (New York Stock Exchange ("NYSE"): PROS) (ProSight) today reported results for the third quarter of 2020.

Highlights for the three months ended September 30, 2020 include: 

Fully diluted book value per share ("BVPS") of $13.34, an increase of 3.9% from $12.84 on June 30, 2020 and 11.1% from $12.01 on December 31, 2019.  
Rate execution of 11.8%, excluding workers compensation, and 10.9%, including workers compensation, with acceleration throughout the quarter.  
Net investment income of $20.3 million in the current quarter, an increase of 19.6% from the third quarter of 2019 driven by growth of the portfolio and strong investment results.     
Pre-tax impact of catastrophes of $22.0 million in the current quarter, including $16.9 million of net losses and $5.1 million of related reinstatement premiums on reinsurance contracts.  Most of the loss activity stems from Hurricane Laura and the California and Oregon wildfires.    
Combined ratio of 108.3% compared to 98.3% in the third quarter of 2019, reflecting 11.6 points of catastrophe losses and the impact of related reinstatement premiums in the current quarter compared to 0.0 points in the third quarter of 2019. The combined ratio excluding the impact of catastrophes is 96.7% for the current period compared to 98.3% for the third quarter of 2019.   
Current accident year loss ratio excluding the impact of catastrophes of 59.9% compared to 60.1% for the third quarter of 2019.    
Strong expense management which resulted in $23.0 million of general and administrative expenses in the current quarter, a decrease of $3.0 million or 11.5% compared to the third quarter of 2019.

Larry Hannon, President & CEO:      

"We extend our sympathies to all of those impacted by the events that caused so much damage on both coasts and in the Gulf this quarter. I'd like to thank our employees and distribution partners for responding quickly to our customers in their time of need.

"The third quarter was the largest catastrophe quarter in ProSight's history. Despite the cat losses and the ongoing impact of COVID-19 in the quarter, we did generate positive net income, grow our book value per share, and post a 59.9% loss ratio excluding cats and related items.

"We saw an increase in submissions along with strong rate execution, both of which continue into the fourth quarter. Overall, we are executing well in this environment, providing exceptional service to our insureds and distribution partners, and setting the stage for profitable growth in the years ahead."    

Results of Operations for the three months ended September 30, 2020:       

Net income from continuing operations was $1.5 million, or $0.03 per diluted share, for the third quarter of 2020 compared to $8.4 million, or $0.19 per diluted share, for the third quarter of 2019. Adjusted operating income ⁽¹⁾ was $1.5 million, or $0.03 per diluted share, for the third quarter of 2020 compared to $13.8 million, or $0.32 per diluted share, for the third quarter of 2019.   

Gross written premium ("GWP") including Other⁽²⁾, decreased 10.4% for the third quarter of 2020 when compared to the third quarter of 2019. GWP⁽²⁾ from customer segments was $201.9 million for the third quarter of 2020 compared to $223.9 million for the third quarter of 2019, a decrease of 9.8%, primarily due to the impact of COVID-19 on our Transportation and Media & Entertainment customer segments, and a contraction in the Consumer Services customer segment from a decision to reduce monoline workers' compensation.   

Underwriting loss⁽¹⁾ was $14.2 million for the third quarter of 2020 compared to an underwriting income of $3.3 million for the third quarter of 2019. The combined ratio for the third quarter of 2020 was 108.3% compared to 98.3% for the third quarter of 2019.  Excluding the impact of catastrophes, the combined ratio for the third quarter of 2020 was 96.7% compared to 98.3% in the third quarter of 2019.      

The loss ratio was 71.5% for the third quarter of 2020 compared to 62.8% for the third quarter of 2019.   The current accident year loss ratio was 71.5% for the third quarter of 2020 compared to 60.1% for the third quarter of 2019.  The current accident year loss ratio, excluding the impact of catastrophes was 59.9%.      

The loss ratio for the third quarter of 2020 included no prior accident year loss impact compared to 2.7 percentage points ($5.5 million) of unfavorable prior accident year loss development in the third quarter of 2019.       

The expense ratio was 36.8% for the third quarter of 2020 compared to 35.5% in the third quarter of 2019 (36.3% adjusted for the effect of Whole Account Quota Share ("WAQS")⁽³⁾), with the increase from reduced earned premium driven by COVID-19, reinsurance reinstatement premiums in the current quarter, and a ceding commission benefit from WAQS in the third quarter of 2019. The policy acquisition expense ratio was 23.4% in the third quarter of 2020 compared to 22.7% in the third quarter of 2019 (23.5% adjusted for the effect of WAQS⁽³⁾). The general and administrative expense ratio was 13.4% in the third quarter of 2020 compared to 12.8% in the third quarter of 2019.        

Net investment income increased by 19.6% to $20.3 million for the third quarter of 2020, compared to $17.0 million for the third quarter of 2019.  The increase in net investment income was primarily driven by year over year growth in the book value of the investment portfolio of 12.4% to $2.4 billion and unrealized gains from our limited partnerships, partially offset by a decline in investment yields on fixed maturity securities.       

Realized investment gains, net of realized losses, for the third quarter of 2020 were $1.4 million compared to $0.2 million for the third quarter of 2019.       

Total stockholders' equity was $607.9 million as of September 30, 2020, compared to $543.0 million as of December 31, 2019.  Tangible stockholders' equity⁽⁴⁾was $578.7 million as of September 30, 2020, compared to $513.8 million as of December 31, 2019. The increases in total stockholders' equity and tangible stockholders' equity ⁽⁴⁾ were primarily driven by $26.1 million of net income in the first nine months of 2020 and an increase in other comprehensive income of $33.6 million, driven by net unrealized gains on investment securities.        

Fully diluted book value per share at September 30, 2020 was $13.34, a 11.1% increase from December 31, 2019. Fully diluted tangible book value per share⁽⁴⁾ was $12.70 at September 30, 2020, a 11.7% increase from December 31, 2019.   

(1) Adjusted operating income and underwriting (loss) income are non-generally accepted accounting principles ("GAAP") measures. See "Reconciliation of Non-GAAP Measures".

(2) Total GWP for the third quarter of 2020 including Other were $203.5 million. Other includes GWP from certain niches that are no longer part of our customer segments. "Other" includes GWP from (i) primary and excess workers' compensation coverage for exited Self-Insured Groups (ii) niches exited prior to 2018, many with a concentration in commercial auto, (iii) certain fronting arrangements in which all premium written is ceded to a third party, (iv) participation in industry pools, and (v) emerging new business.

(3) In connection with the divestment of our U.K. business, New York Marine as reinsured entered into the WAQS with third party reinsurers to maintain reasonable underwriting leverage within New York Marine and its subsidiary insurance companies during a transition period following the U.K. divestment. The effective date of the WAQS was April 1, 2017. During 2018 and following the transition of the U.S. business back to New York Marine, the WAQS were terminated. Effective January 1, 2020, the WAQS was commuted at an amount equal to ceded reserves. The effect of the WAQS on our results of operations is primarily reflected in our ceded written premiums, losses and LAE, as well as our underwriting, acquisition and insurance expenses.

(4) Tangible stockholders' equity and fully diluted tangible book value per share are non-GAAP measures. Tangible stockholders' equity is total stockholders' equity excluding the value of goodwill and other intangible assets. Fully diluted tangible book value per share is total stockholders' equity excluding the value of goodwill and other intangible assets divided by the number of common shares outstanding, unvested restricted shares and vested not issued shares. See "Reconciliation of Non-GAAP Measures".

Conference Call

As previously announced, on Tuesday, November 10, 2020 at 10:00 a.m. EST, ProSight senior management will host a conference call to discuss third quarter 2020 financial results.

The call will be available via webcast at https://investors.prosightspecialty.com/ or by dialing (866) 497-6416 (within the United States) or (825) 312-2110 (international), using the passcode 6198537. A replay of the call will be available at 1:00 p.m. on Tuesday, November 10, 2020, until 11:59 p.m. Tuesday, November 17, 2020, and can be accessed by dialing (800) 585-8367 or (416) 621-4642, using the passcode 6198537. The webcast will be available one hour after the call concludes and will be archived on our website for one year.

About ProSight

Founded in 2009 and headquartered in Morristown, New Jersey, ProSight Global, Inc. is an innovative property and casualty insurance company that designs unique insurance solutions to help customers improve their business and realize value from their insurance purchasing decision. The company focuses on select niche industries, deploying differentiated underwriting and claims expertise with the goal of enhancing each customer's operating performance. ProSight's products are sold through a limited and select group of retail and wholesale distribution partners. Each of ProSight's regulated insurance company subsidiaries are rated "A-" (Excellent) by A.M. Best. ProSight's shares trade on the NYSE under the ticker symbol PROS. To learn more about ProSight visit www.prosightspecialty.com.

Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements include statements relating to future developments in ProSight's business or expectations for ProSight's future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "should," "seek," "continue," and other words and terms of similar meaning. ProSight's management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Except as required by law, ProSight undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to known and unknown risks and uncertainties, including without limitation, the following: performance of, and our relationships with, third-party agents and vendors on which we rely to distribute certain business on our behalf, adequacy of our loss reserves including as a result of changes in the legal, regulatory, and economic environments in which the Company operates or the impacts of COVID-19, judicial, legislative, regulatory and other governmental developments, including in response to COVID-19, litigation tactics and developments, the effects of natural and man-made catastrophic events, the availability and affordability of reinsurance, changes in the business, financial condition or results of operations of the entities in which we invest, infection rates and severity and duration of pandemics, including COVID-19, and their direct and indirect effects on our investments, business operations, customers (including claims activity) and third parties, as well as management's response to these factors. ProSight cautions you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this release. For a discussion of some of the risks and important factors that could affect ProSight's future results and financial condition, see our filings with the U.S. Securities and Exchange Commission ("SEC"), including, but not limited to, the risks and uncertainties included under the captions "Risk Factors" in ProSight's Annual Report on Form 10-K/A for the period ended December 31, 2019 filed on March 10, 2020, as updated by ProSight's Quarterly Reports on Form 10-Q and its other periodic filings with the SEC. References to "we," "us," "our," the "Company" and "ProSight", refer to ProSight Global, Inc. and its consolidated subsidiaries.

Reorganization

ProSight was incorporated in Delaware in 2010. Prior to July 25, 2019, ProSight was a wholly owned subsidiary of ProSight Global Holdings Limited ("PGHL"), a Bermuda holding company. Effective July 25, 2019, PGHL merged with and into ProSight, with ProSight surviving the merger. As a result of the merger, all shares of PGHL then outstanding were converted into the right to receive, without interest, 6.46 shares of ProSight for each share of PGHL. The historical share and per share figures contained in this release relating to periods prior to and including June 30, 2019 have been restated to give effect to this conversion, including reclassifying an amount equal to the change in value of common stock to additional paid-in capital, as of the stated period or date. Further details regarding this merger and related reorganization transactions are included in ProSight's Annual Report on Form 10-K/A for the period ended December 31, 2019 filed on March 10, 2020.

Non-GAAP Financial Measures

In presenting ProSight Global, Inc.'s results, management has included financial measures that are not calculated under standards or rules that comprise of U.S. GAAP. Such measures, including underwriting income, adjusted operating income, adjusted operating return on equity, adjusted operating return on tangible equity, adjusted loss excluding WAQS, adjusted expense ratio excluding WAQS, adjusted combined ratio excluding WAQS, tangible stockholders' equity, tangible book value per share and fully diluted tangible book value per share are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those measures determined in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable GAAP figures are included at the end of this press release.

Inquiries: Joe Hathaway[email protected]
973.532.1706

PROSIGHT GLOBAL, INC CONSOLIDATED BALANCE SHEETS (UNAUDITED) ($ in thousands, except share amounts)

	September 30		December 31
	2020		2019
Assets
Investments:
Fixed maturity securities, available-for-sale at fair value (amortized cost $2,176,775 in 2020 and $1,999,403 in 2019, allowance for credit losses $(1,670) in 2020 and $0 in 2019)	$	2,260,193	$	2,040,682
Commercial levered loans at amortized cost (fair value $12,991 in 2020 and $13,950 in 2019)		13,433		14,069
Non-redeemable preferred stock securities at fair value (cost $11,670 in 2020 and $0 in 2019)		11,913		—
Bond exchange-traded funds at fair value (cost $12,878 in 2020 and $0 in 2019)		12,838		—
Limited partnerships and limited liability companies at fair value (cost $73,358 in 2020 and $62,226 in 2019)		84,608		66,660
Short-term investments		154		43,873
Total investments		2,383,139		2,165,284

Cash and cash equivalents		26,609		17,284
Restricted cash		7,625		10,213
Accrued investment income		13,967		13,610
Premiums and other receivables, net		134,915		190,004
Receivable from reinsurers on paid losses, net		2,571		3,481
Reinsurance receivables on unpaid losses, net		158,856		193,952
Deferred policy acquisition costs		93,298		98,812
Prepaid reinsurance premiums		60,392		42,861
Net deferred income taxes		—		4,803
Goodwill and net intangible assets		29,166		29,189
Fixed assets and capitalized software, net		34,961		37,167
Funds withheld related to sale of affiliate		19,529		19,453
Other assets		27,708		29,537
Assets of discontinued operations		23,484		21,584
Total assets	$	3,016,220	$	2,877,234

Liabilities
Reserve for unpaid losses and loss adjustment expenses	$	1,589,162	$	1,521,648
Reserve for unearned premiums		443,528		483,223
Ceded reinsurance payable		34,693		17,768
Notes payable, net of debt issuance costs		199,947		164,693
Secured loan payable, net of debt issuance costs		24,243		—
Funds held under reinsurance agreements		21,895		58,855
Net deferred income taxes		4,976		—
Other liabilities		55,950		56,438
Liabilities of discontinued operations		33,954		31,578
Total liabilities		2,408,348		2,334,203

Stockholders' equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or outstanding		—		—
Common stock, $0.01 par value; 200,000,000 shares authorized; 43,436,134 and 43,071,186 shares issued, 43,423,214 and 43,058,266 shares outstanding in 2020 and 2019, respectively		434		431
Paid-in capital		666,875		661,761
Accumulated other comprehensive income		71,029		37,453
Retained deficit		(130,266)		(156,414)
Treasury shares - at cost (12,920 shares)		(200)		(200)
Total stockholders' equity		607,872		543,031
Total liabilities and stockholders' equity	$	3,016,220	$	2,877,234

PROSIGHT GLOBAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($ in thousands)

	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019

Gross written premiums	$	203,539		$	227,196		$	603,717		$	718,066

Revenues:
Net earned premiums		172,376			202,455			559,667			600,543
Net investment income		20,307			16,974			52,913			51,530
Realized investment gains, net		1,398			245			3,521			495
Other income		61			196			274			386
Total revenues		194,142			219,870			616,375			652,954

Expenses:
Net losses and loss adjustment expenses incurred		123,249			127,196			363,279			372,644
Policy acquisition expenses		40,387			45,953			129,406			138,059
General and administrative expenses		22,986			25,967			76,038			79,189
Interest expense		4,216			3,216			10,388			9,725
Other expense		1,394			7,162			4,521			14,332
Total expenses		192,232			209,494			583,632			613,949

Income from continuing operations before income taxes		1,910			10,376			32,743			39,005

Income tax provision:
Current		407			146			6,154			369
Deferred		5			1,869			997			7,884
Total income tax expense		412			2,015			7,151			8,253

Net income from continuing operations		1,498			8,361			25,592			30,752
Discontinued operations:
Net income (loss) from discontinued operations		20			(49)			556			(382)
Net income	$	1,518		$	8,312		$	26,148		$	30,370

Return on equity ⁽¹⁾		1.0	%		6.8	%		5.9	%		8.9	%

Adjusted operating income ⁽²⁾	$	1,495		$	13,825		$	26,374		$	41,683

Adjusted operating return on equity ⁽³⁾		1.0	%		11.2	%		6.1	%		12.1	%

(1) Return on equity is net income from continuing operations expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

(2) Adjusted operating income is a non-GAAP measure. See "Reconciliation of Non-GAAP Measures".

(3) Adjusted operating return on equity is a non-GAAP measure. Adjusted operating return on equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

PROSIGHT GLOBAL, INC. FACTORS AFFECTING THE RESULTS OF OPERATIONS (WAQS) (UNAUDITED) ($ in thousands)

	Three Months Ended September 30, 2020								Three Months Ended September 30, 2019
	Including			Effect of		Excluding			Including			Effect of		Excluding
	WAQS			WAQS		WAQS			WAQS			WAQS		WAQS
Gross written premiums	$	203,539		$	—	$	203,539		$	227,196		$	—	$	227,196
Ceded written premiums		(44,135)			—		(44,135)			(17,722)			(6)		(17,716)
Net written premiums	$	159,404		$	—	$	159,404		$	209,474		$	(6)	$	209,480
Net retention⁽¹⁾		78.3	%		—		78.3	%		92.2	%		—		92.2	%
Net earned premiums	$	172,376		$	—	$	172,376		$	202,455		$	—	$	202,455
Losses and LAE		123,249			—		123,249			127,196			1,632		125,564
Underwriting, acquisition and insurance expenses		63,373			—		63,373			71,920			(1,632)		73,552
Underwriting (loss) income ⁽²⁾	$	(14,246)		$	—	$	(14,246)		$	3,339		$	—	$	3,339
Loss and LAE ratio		71.5	%		—		—			62.8	%		—		—
Expense ratio		36.8	%		—		—			35.5	%		—		—
Combined ratio		108.3	%		—		—			98.3	%		—		—
Adjusted loss and LAE ratio⁽³⁾		—			—		71.5	%		—			—		62.0	%
Adjusted expense ratio⁽³⁾		—			—		36.8	%		—			—		36.3	%
Adjusted combined ratio⁽³⁾		—			—		108.3	%		—			—		98.3	%

Effect of prior year reserve development unfavorable ⁽⁴⁾	$	52		$	—	$	52		$	5,495		$	1,632	$	3,863


	Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2019
	Including			Effect of		Excluding			Including			Effect of		Excluding
	WAQS			WAQS		WAQS			WAQS			WAQS		WAQS
Gross written premiums	$	603,717		$	—	$	603,717		$	718,066		$	—	$	718,066
Ceded written premiums		(97,507)			—		(97,507)			(88,122)			(3)		(88,119)
Net written premiums	$	506,210		$	—	$	506,210		$	629,944		$	(3)	$	629,947
Net retention⁽¹⁾		83.8	%		—		83.8	%		87.7	%		—		87.7	%
Net earned premiums	$	559,667		$	—	$	559,667		$	600,543		$	3	$	600,540
Losses and LAE		363,279			—		363,279			372,644			3,839		368,805
Underwriting, acquisition and insurance expenses		205,444			—		205,444			217,248			(3,837)		221,085
Underwriting (loss) income ⁽²⁾	$	(9,056)		$	—	$	(9,056)		$	10,651		$	1	$	10,650
Loss and LAE ratio		64.9	%		—		—			62.1	%		—		—
Expense ratio		36.7	%		—		—			36.2	%		—		—
Combined ratio		101.6	%		—		—			98.3	%		—		—
Adjusted loss and LAE ratio⁽³⁾		—			—		64.9	%		—			—		61.4	%
Adjusted expense ratio⁽³⁾		—			—		36.7	%		—			—		36.8	%
Adjusted combined ratio⁽³⁾		—			—		101.6	%		—			—		98.2	%

Effect of prior year development unfavorable (favorable) ⁽⁴⁾	$	560		$	—	$	560		$	2,367		$	3,839	$	(1,472)

(1) Net retention is a non-GAAP measure. We define net retention as the ratio of net written premiums to gross written premiums.

(2) Underwriting (loss) income is a non-GAAP measure. See "Reconciliation of Non-GAAP Financial Measures".

(3) Adjusted loss ratio and adjusted expense ratio are non-GAAP financial measures. We define adjusted loss ratio and adjusted expense ratio as the corresponding ratio excluding the effects of the WAQS. We use these adjusted ratios as internal performance measures in the management of our operations because we believe they give our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Our adjusted loss and LAE ratio, adjusted expense ratio and adjusted combined ratio should not be viewed as substitutes for our loss and LAE ratio, expense ratio and combined ratio, respectively.

(4) The effect of prior year reserve development is included within losses and LAE.

PROSIGHT GLOBAL, INC. SUPPLEMENTARY UNDERWRITING INFORMATION (EXCLUDING WAQS) (UNAUDITED) ($ in thousands)

	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019

Gross written premiums	$	203,539		$	227,196		$	603,717		$	718,066
Net written premiums		159,404			209,480			506,210			629,947
Net earned premiums		172,376			202,455			559,667			600,540

Net losses and LAE		123,249			125,564			363,279			368,805
Catastrophe loss and LAE		16,893			—			20,526			3,000
Unfavorable (favorable) prior year reserve development		52			3,863			560			(1,472)
Underwriting, acquisition, and insurance expenses		63,373			73,552			205,444			221,085
Policy acquisition expenses		40,387			47,585			129,406			141,896
General and administrative expenses		22,986			25,967			76,038			79,189

Underwriting (loss) income	$	(14,246)		$	3,339		$	(9,056)		$	10,650

Adjusted underwriting ratios

Ex-cat current accident year loss and LAE ratio ⁽¹⁾		59.9	%		60.1	%		60.6	%		61.2	%
Catastrophe loss and LAE ratio		11.6			—			4.2			0.5
Unfavorable (favorable) prior year reserve development ratio		—			1.9			0.1			(0.3)
Adjusted loss and LAE ratio		71.5	%		62.0	%		64.9	%		61.4	%

Policy acquisition expense ratio		23.4	%		23.5	%		23.1	%		23.6	%
General and administrative expense ratio		13.4			12.8			13.6			13.2
Adjusted expense ratio		36.8	%		36.3	%		36.7	%		36.8	%

Adjusted combined ratio		108.3	%		98.3	%		101.6	%		98.2	%

(1) Ex-cat current accident year loss and LAE ratio is adjusted to exclude the impact of reinsurance reinstatement premiums related to catastrophe losses incurred during the period from net earned premium.

PROSIGHT GLOBAL, INC. SUPPLEMENTARY UNDERWRITING INFORMATION (UNAUDITED) ($ in thousands)

	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019

Gross written premiums	$	203,539		$	227,196		$	603,717		$	718,066
Net written premiums		159,404			209,474			506,210			629,944
Net earned premiums		172,376			202,455			559,667			600,543

Net losses and LAE		123,249			127,196			363,279			372,644
Catastrophe loss and LAE		16,893			—			20,526			3,000
Unfavorable prior year reserve development		52			5,495			560			2,367
Underwriting, acquisition, and insurance expenses		63,373			71,920			205,444			217,248
Policy acquisition expenses		40,387			45,953			129,406			138,059
General and administrative expenses		22,986			25,967			76,038			79,189

Underwriting (loss) income	$	(14,246)		$	3,339		$	(9,056)		$	10,651

Underwriting ratios

Ex-cat current accident year loss and LAE ratio ⁽¹⁾		59.9	%		60.1	%		60.6	%		61.2	%
Catastrophe loss and LAE ratio		11.6			—			4.2			0.5
Unfavorable prior year reserve development ratio		—			2.7			0.1			0.4
Loss and LAE ratio		71.5	%		62.8	%		64.9	%		62.1	%

Policy acquisition expense ratio		23.4	%		22.7	%		23.1	%		23.0	%
General and administrative expense ratio		13.4			12.8			13.6			13.2
Expense ratio		36.8	%		35.5	%		36.7	%		36.2	%

Combined ratio		108.3	%		98.3	%		101.6	%		98.3	%

PROSIGHT GLOBAL, INC. SHARE AND PER SHARE INFORMATION (UNAUDITED)

							September 30			December 31
							2020			2019
Shares outstanding								43,423,214			43,058,266
Fully diluted shares outstanding								45,573,410			45,196,716

Book value per share⁽¹⁾							$	14.00		$	12.61
Book value per share (fully diluted)⁽¹⁾							$	13.34		$	12.01
Tangible book value per share⁽¹⁾							$	13.33		$	11.93
Tangible book value per share (fully diluted)⁽¹⁾							$	12.70		$	11.37


	Three Months Ended September 30						Nine Months Ended September 30
(share amounts in thousands)	2020			2019			2020			2019
Weighted average basic shares outstanding		43,916			42,642			43,879			40,120
Weighted average diluted shares outstanding		44,018			43,060			44,030			40,661

Earnings per share - basic:
Net income from continuing operations	$	0.03		$	0.20		$	0.58		$	0.77
Adjusted operating income⁽²⁾	$	0.03		$	0.32		$	0.60		$	1.04

Earnings per share - diluted:
Net income from continuing operations	$	0.03		$	0.19		$	0.58		$	0.76
Adjusted operating income⁽²⁾	$	0.03		$	0.32		$	0.60		$	1.03

Adjusted operating return on equity ("ROE") ⁽³⁾		1.0	%		11.2	%		6.1	%		12.1	%
Adjusted operating return on tangible equity ("ROTE")⁽³⁾		1.1	%		11.9	%		6.4	%		12.9	%

(1) Book value per share is total stockholders' equity divided by the number of common shares outstanding. Fully diluted book value per share is total stockholders' equity divided by the number of common shares outstanding, unvested restricted shares and vested non issued shares. Tangible book value per share and fully diluted tangible book value per share are non-GAAP measures. Tangible book value per share is total stockholders' equity excluding the value of goodwill and other intangible assets divided by the number of common shares outstanding. Fully diluted tangible book value per share is total stockholders' equity excluding the value of goodwill and other intangible assets divided by the number of common shares outstanding, unvested restricted shares, and vested non-issued shares. See "Reconciliation of Non-GAAP Financial Measures".

(2) Adjusted operating income is a non-GAAP measure. See "Reconciliation of Non-GAAP Financial Measures".

(3) Adjusted operating return on equity and adjusted operating return on tangible equity are non-GAAP measures. Adjusted operating return on equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period. Adjusted operating return on tangible equity is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity, excluding goodwill and other intangible assets, during the period.

PROSIGHT GLOBAL, INC. GROSS WRITTEN PREMIUM BY CUSTOMER SEGMENT (UNAUDITED) ($ in millions)

	Three Months Ended September 30						Nine Months Ended September 30
	2020		2019		% Change		2020		2019		% Change
Construction	$	27.4	$	27.3	0.4	%	$	79.6	$	83.1	(4.2)	%
Consumer Services		23.7		35.5	(33.2)			95.0		100.9	(5.8)
Marine and Energy		27.7		26.1	6.1			87.3		71.5	22.1
Media and Entertainment		17.3		28.7	(39.7)			65.3		90.8	(28.1)
Professional Services		34.7		27.0	28.5			96.3		85.7	12.4
Real Estate		34.9		41.6	(16.1)			115.4		116.9	(1.3)
Sports		5.4		8.1	(33.3)			19.6		22.8	(14.0)
Transportation		30.8		29.6	4.1			39.9		79.4	(49.7)
Customer segments subtotal		201.9		223.9	(9.8)			598.4		651.1	(8.1)
Other		1.6		3.3	(51.5)			5.3		67.0	(92.1)
Total	$	203.5	$	227.2	(10.4)	%	$	603.7	$	718.1	(15.9)	%

Reconciliation of Non-GAAP Financial Measures

Underwriting (loss) income is a non-GAAP financial measure that we believe is useful in evaluating our underwriting performance without regard to investment income. Underwriting income represents the pre-tax profitability of our insurance operations and is derived by subtracting losses and LAE, and underwriting, acquisition and insurance expenses from net earned premiums. We use underwriting (loss) income as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations and our underlying business performance. Underwriting (loss) income should not be considered in isolation or viewed as a substitute for net income calculated in accordance with GAAP. Other companies may calculate underwriting (loss) income differently.

Net income from continuing operations for the three months and nine months ended September 30, 2020 and 2019 reconciles to underwriting income as follows:


	Three Months Ended September 30				Nine Months Ended September 30
($ in thousands)	2020		2019		2020		2019
Net income from continuing operations	$	1,498	$	8,361	$	25,592	$	30,752
Income tax expense		412		2,015		7,151		8,253
Income from continuing operations before taxes		1,910		10,376		32,743		39,005

Net investment income		20,307		16,974		52,913		51,530
Realized investment gains, net		1,398		245		3,521		495
Interest and other expense, net		5,549		10,182		14,635		23,671
Underwriting (loss) income	$	(14,246)	$	3,339	$	(9,056)	$	10,651

Adjusted operating income is a non-GAAP financial measure that we use as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and underlying business performance, by excluding items that are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future. Adjusted operating income should not be considered in isolation or viewed as a substitute for net income from continuing operations calculated in accordance with GAAP. Other companies may calculate adjusted operating income differently.

Net income from continuing operations for the three months and nine months ended September 30, 2020 and 2019 reconciles to adjusted operating income as follows:


	Three Months Ended September 30				Nine Months Ended September 30
($ in thousands)	2020		2019		2020		2019
Net income from continuing operations	$	1,498	$	8,361	$	25,592	$	30,752
Income tax expense		412		2,015		7,151		8,253
Income from continuing operations before taxes		1,910		10,376		32,743		39,005

Other expense ⁽¹⁾		1,394		7,162		4,521		14,332
Realized investment gains, net		(1,398)		(245)		(3,521)		(495)
Adjusted operating income before taxes		1,906		17,293		33,743		52,842
Less: income tax expense on adjusted operating income		411		3,468		7,369		11,159
Adjusted operating income	$	1,495	$	13,825	$	26,374	$	41,683

(1) Other expense within the adjusted operating income includes non-recurring grants of restricted stock units in connection with the initial public offering and costs associated with the transition of our former Chief Executive Officer.

Tangible stockholders' equity is a non-GAAP financial measure that we use as an internal performance measure to evaluate the strength of our balance sheet and to compare returns relative to this measure. We define tangible stockholders' equity as stockholders' equity less goodwill and net intangible assets. Tangible stockholders' equity should not be considered in isolation or viewed as a substitute for stockholders' equity calculated in accordance with GAAP. Other companies may calculate tangible stockholders' equity differently.

Stockholders' equity at September 30, 2020 and December 31, 2019 reconciles to tangible stockholders' equity as follows:


	September 30, 2020		December 31, 2019
($ in thousands except per share amounts)
Stockholders' equity	$	607,872	$	543,031
Less: goodwill and net intangible assets		29,166		29,189
Tangible stockholders' equity	$	578,706	$	513,842
Book value per share	$	14.00	$	12.61
Book value per share (fully diluted)	$	13.34	$	12.01
Tangible book value per share	$	13.33	$	11.93
Tangible book value per share (fully diluted)	$	12.70	$	11.37