NYSE: PRA

Ceded Premiums Ratio

Ceded premiums represent the amounts owed to our reinsurers for their assumption of a portion of our losses. See previous discussion in our Liquidity and Capital Resources and Financial Condition section under the heading "Reinsurance" for information regarding our MPL and Medical Technology Liability excess of loss reinsurance arrangements.

We pay our reinsurers a ceding premium in exchange for their accepting the risk, and in certain of our excess of loss arrangements, the ultimate amount of which is determined by the loss experience of the business ceded, subject to certain minimum and maximum amounts. Given the length of time that it takes to resolve our claims, many years may elapse before all losses recoverable under a reinsurance arrangement are known. As a part of the process of estimating our loss reserve we also make estimates regarding the amounts recoverable under our reinsurance arrangements. As a result, we may have an adjustment to our estimate of expected losses and associated recoveries for prior year ceded losses under certain loss sensitive reinsurance agreements. During 2025, we decreased our estimate of ceded premiums owed related to prior accident years by $2.0 million, whereas we recorded a net increase in our estimate of ceded premiums owed to reinsurers by $1.4 million in 2024 due to an increase in our estimate of expected losses and associated recoveries for certain prior year ceded losses. Changes to estimates of premiums ceded related to prior accident years are fully earned in the period the changes in estimates occur.

As shown in the table below, our ceded premiums ratio was affected in both 2025 and 2024 by revisions to our estimate of premiums owed to reinsurers related to coverages provided in prior accident years. The ceded premiums ratio was as follows:

Year Ended December 31

20252024Change

Ceded premiums ratio9.2%8.7%0.5 pts

Less the effect of adjustments in premiums owed under reinsurance agreements, prior accident years (as previously discussed)(0.3%)0.2%(0.5 pts)

Ratio, current accident year9.5%8.5%1.0 pts

The above table reflects ceded premiums written, excluding the effect of prior year ceded premium adjustments, as previously discussed, as a percentage of gross premiums written. The increase in our current accident year ceded premiums ratio for 2025 as compared to 2024 was driven by the impact of the aforementioned 100% quota share reinsurance agreement entered into during the second quarter of 2025 related to our legal professional liability policies. The increase in our current accident year ceded premiums ratio also reflected an increase in premiums ceded under our excess of loss reinsurance arrangements primarily due to the incorporation of podiatric and chiropractic policies into our MPL treaty effective October 1, 2024.

Net Premiums Earned

Net premiums earned consist of gross premiums earned less the portion of earned premiums that we cede to our reinsurers for their assumption of a portion of our losses. Because premiums are generally earned pro rata over the entire policy period, fluctuations in premiums earned tend to lag those of premiums written. The majority of our policies carry a term of one year; however, some of our Medical Technology Liability policies have a multi-year term. Tail coverage premiums are generally 100% earned in the period written because the policies insure only incidents that occurred in prior periods and are not cancellable. Retroactive coverage premiums are 100% earned at the inception of the contract, as all of the associated underlying loss events occurred in the past. Additionally, any ceded premium changes due to changes to estimates of premiums owed under reinsurance agreements for prior accident years are fully earned in the period of change.

Net premiums earned were as follows:

Year Ended December 31

($ in thousands)20252024Change

Gross premiums earned$792,753 $818,751 $(25,998)(3.2%)

Less: Ceded premiums earned68,555 70,809 (2,254)(3.2%)

Net premiums earned$724,198 $747,942 $(23,744)(3.2%)

Gross premiums earned decreased in 2025 as compared to 2024 driven by the pro rata effect of a decrease in the volume of written premium during the preceding twelve months, primarily due to proactive actions taken in certain lines to improve profitability, and our ceased participation in Syndicate 1729 for the 2024 underwriting year.

Ceded premiums earned during 2025 and 2024 included prior accident year ceded premium adjustments of $2.0 million and $1.4 million, respectively, (see previous discussion under the heading "Ceded Premiums Ratio"). After removing the effect of the prior accident year ceded premium adjustment from both years, ceded premiums earned increased by $1.1 million in 2025 as compared to 2024, primarily attributable to the aforementioned 100% quota share reinsurance agreement related to our legal professional liability policies and an increase in premium ceded under our excess of loss arrangements.

Losses and Loss Adjustment Expenses

The determination of calendar year losses involves the actuarial evaluation of incurred losses for the current accident year and the actuarial re-evaluation of incurred losses for prior accident years.

Accident year refers to the accounting period in which the insured event becomes a liability of the insurer. For claims-made policies, which represent the majority of the premiums written in our Specialty P&C segment, the insured event generally becomes a liability when the event is first reported to us and the policy that is in effect at that time covers the claim. For occurrence policies, the insured event becomes a liability when the event takes place, even though the claim may be reported to us at a later date. For retroactive coverages, the insured event becomes a liability at the inception of the underlying contract. We believe that measuring losses on an accident year basis is the best measure of the underlying profitability of the premiums earned in that period, since it associates policy premiums earned with the estimate of the losses incurred related to those policy premiums.

The following tables summarize calendar year net loss ratios for our Specialty P&C segment by separating losses between the current accident year and all prior accident years.

Net Loss Ratios(1)

Year Ended December 31

20252024Change

Calendar year net loss ratio 71.7%77.3%(5.6 pts)

Less impact of prior accident years on the net loss ratio(11.0%)(5.0%)(6.0 pts)

Current accident year net loss ratio(2)
82.7 %82.3 %0.4 pts

(1)Net losses, as specified, divided by net premiums earned.

(2)As shown in the table above, our current accident year net loss ratio increased 0.4 percentage points for the year ended December 31, 2025 as compared to 2024 primarily attributable to the following:

(In percentage points)
Increase (Decrease)

2025 versus 2024

Estimated ratio increase (decrease) attributable to:

Non-core operations(1)
0.2 pts

Ceded Premium Adjustment, Prior Accident Years(2)
(0.5 pts)

Change in ULAE
0.3 pts

All other, net0.4 pts

Increase in the current accident year net loss ratio
0.4 pts

(1) Non-core operations include our Lloyd's Syndicates operations and legal professional liability book of business, which are in run-off. See previous discussion on these non-core operations under the heading "Non-GAAP Financial Measures."

(2) See previous discussion under the heading "Ceded Premiums Ratio" for additional information.

•Excluding the impact of the items specifically identified in the table above, our current accident year net loss ratio for 2025 as compared to 2024 increased 0.4 percentage points driven by higher loss severity and frequency trends in select jurisdictions, which have resulted in an increase to certain expected loss ratios during the fourth quarter of 2025, as well as changes in the mix of business. The increase in our current accident year net loss ratio was partially offset by a decrease in our reserves related to DDR coverage endorsements due to a decrease in business eligible for tail coverage. In both 2025 and 2024, we decreased our reserves related to DDR coverage endorsements; however, the adjustment was greater in 2025 as compared to 2024.

•ULAE are costs that cannot be attributed to processing a specific claim and are allocated to net losses and loss adjustment expenses from underwriting and operating expenses. In 2025, ULAE increased primarily due to higher compensation, equipment and software costs.

We re-evaluate our previously established reserve each quarter based upon the most recently completed actuarial analysis supplemented by any new analysis, information or trends that have emerged since the date of that study. We also take into account currently available industry trend information. Our internal actuaries perform an in-depth review of our reserve for losses on at least a semi-annual basis using the loss and exposure data of our insurance subsidiaries.

We recognized net favorable (unfavorable) prior accident year reserve development as follows:

Year Ended December 31

($ in thousands)20252024Change

Total net favorable (unfavorable) reserve development$79,774$36,932$42,842 116.0%

The following table shows net favorable (unfavorable) development by component for the years ended December 31, 2025 and 2024:

•MPL: Net favorable reserve development recognized for the year ended December 31, 2025 was primarily due to lower than expected loss emergence principally related to accident years 2019 through 2022. We recognized net favorable reserve development for the year ended December 31, 2024 reflecting overall favorable trends in claim closing patterns relative to expectations, principally related to accident years 2019 through 2021.

•Medical Technology Liability: During both 2025 and 2024, we recognized net favorable reserve development due to lower than expected loss emergence. Net favorable development recognized in 2025 principally related to accident years 2021 through 2023 whereas development recognized in 2024 principally related to accident years 2022 and 2023.

•Lloyd's Syndicates Operations (Participation Discontinued): In 2025 and 2024, the net unfavorable prior accident year reserve development was driven by Syndicate 6131’s 2021 underwriting year for exposures related to aviation coverages in connection with Russia's invasion of Ukraine.

•Purchase Accounting Amortization: Net prior year reserve development for both periods presented included amortization of the purchase accounting fair value adjustment on NORCAL's assumed net reserve and amortization of the negative VOBA associated with NORCAL's DDR reserve, which is recorded as a reduction to net losses and loss adjustment expenses.

•Other: Net unfavorable prior accident year reserve development recognized in 2025 primarily represents an increase for an ECO/XPL claim in our legal professional liability book of business.

A detailed discussion of factors influencing our recognition of loss development is included in our Critical Accounting Estimates section under the heading "Reserve for Losses and Loss Adjustment Expenses." Assumptions used in establishing our reserve are regularly reviewed and updated by management as new data becomes available. Any adjustments necessary are reflected in the then current operations. Due to the size of our reserve, even a small percentage adjustment to the assumptions can have a material effect on our results of operations for the period in which the change is made.

Underwriting, Policy Acquisition and Operating Expenses

Our Specialty P&C segment underwriting, policy acquisition and operating expenses were comprised as follows:

Year Ended December 31

($ in thousands)20252024Change

DPAC amortization$97,824 $102,125 $(4,301)(4.2%)

Management fees3,702 3,845 (143)(3.7%)

Other underwriting and operating expenses98,910 98,172 738 0.8%

Total$200,436 $204,142 $(3,706)(1.8%)

DPAC amortization decreased in 2025 as compared to 2024 driven by a decrease in our share of Syndicate 1729's DPAC amortization due to our ceased participation for the 2024 underwriting year as well as a decrease in agent commissions and brokerage expenses, largely due to a lower volume of premium written.

Management fees are charged pursuant to a management agreement by the Corporate segment to the core domestic insurance subsidiaries within our Specialty P&C segment for services provided based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary. While the terms of the management agreement were consistent between 2025 and 2024, fluctuations in the amount of premium written by each subsidiary can result in corresponding variations in the management fee charged to each subsidiary during a particular period.

Other underwriting and operating expenses increased in 2025 as compared to 2024 primarily attributable to higher compensation-related expenses, partially offset by lower professional fees, lower facilities expense and a decrease in our share of Syndicate 1729's operating expenses due to our ceased participation for the 2024 underwriting year. The increase in compensation-related expenses in 2025 as compared to 2024 primarily reflected higher incentive based compensation, an increase in health insurance costs and annual merit adjustments, partially offset by a decrease in employee headcount. The decrease in professional fees in 2025 was driven by a reduction in fees associated with a data analytics services agreement. The decrease in facilities expense in 2025 was due to the sale of our Franklin, TN property during the first quarter of 2025. The remaining variance in other underwriting and operating expenses for 2025 as compared to 2024 was comprised of individually insignificant components.

Underwriting Expense Ratio (the Expense Ratio)

Our expense ratio for the Specialty P&C segment was as follows:

Year Ended December 31

20252024Change

Underwriting expense ratio27.7%27.3%0.4 pts

The change in our expense ratio in 2025 as compared to 2024 was primarily attributable to the following:

(In percentage points)Increase (Decrease) 2025 versus 2024

Estimated ratio increase (decrease) attributable to:

Change in net premiums earned and DPAC amortization(1)
0.1 pts

Tail premium(2)
(0.3 pts)

All other, net0.6 pts

Increase in the underwriting expense ratio0.4 pts

(1) Excludes tail premium and the impact of ceded premium adjustments related to prior accident years. See previous discussion on the ceded premium adjustments under the heading "Ceded Premiums Ratio."

(2) Represents the impact of tail premium written in the period as these premiums are typically earned when written with minimal associated expenses.

Excluding the impact of the items specifically identified in the table above, our expense ratio increased 0.6 percentage points in 2025 as compared to 2024 driven by higher incentive based compensation and the pressure of lower earned premium, partially offset by lower professional fees and facilities expenses.

Segment Results - Workers' Compensation Insurance

Our Workers' Compensation Insurance segment includes workers' compensation products provided to employers generally with 1,000 or fewer employees, as discussed in Note 15 of the Notes to Consolidated Financial Statements. Segment results included the following:

Year Ended December 31

($ in thousands)20252024Change

Net premiums written$167,258 $166,223 $1,035 0.6%

Net premiums earned$164,351 $167,610 $(3,259)(1.9%)

Other income2,056 1,887 169 9.0%

Net losses and loss adjustment expenses(123,795)(128,483)4,688 (3.6%)

Underwriting, policy acquisition and operating expenses(63,295)(61,999)(1,296)2.1%

Segment results$(20,683)$(20,985)$302 1.4%

Net loss ratio
75.3%76.7%(1.4 pts)

Underwriting expense ratio
38.5%37.0%1.5 pts

Premiums Written

Our workers’ compensation premium volume is driven by five primary factors: (1) the amount of new business written, (2) retention of our existing book of business, (3) premium rates charged on our renewal book of business, (4) changes in payroll exposure and (5) audit premium.

Gross, ceded and net premiums written were as follows:

Year Ended December 31

($ in thousands)20252024Change

Gross premiums written$235,763 $243,404 $(7,641)(3.1%)

Less: Ceded premiums written68,505 77,181 (8,676)(11.2%)

Net premiums written$167,258 $166,223 $1,035 0.6%

Gross Premiums Written

Gross premiums written by product were as follows:

Year Ended December 31

($ in thousands)20252024Change

Traditional business:

Direct
$175,378 $173,273 $2,105 1.2%

Other
7,206 5,950 1,256 21.1%

Change in EBUB estimate(1,600)2,900 (4,500)(155.2%)

Total traditional business(1)
180,984 182,123 (1,139)(0.6%)

Alternative market business(2)
54,779 61,281 (6,502)(10.6%)

Total
$235,763 $243,404 $(7,641)(3.1%)

(1) Traditional gross premiums written decreased during 2025 as compared to 2024 driven by changes in the carried EBUB estimate, lower audit premium and retention losses, partially offset by higher new business writings and renewal premium related to policies previously written as alternative market business. Renewal business reflected premium retention of 84% and rate decreases of 1% for 2025. Rate decreases were more than offset by an increase in payroll exposure. The renewal premium previously written in our alternative market business totaled $3.9 million and related to alternative market programs that were non-renewed in 2025. Renewal and new business results continue to reflect the competitive workers' compensation market conditions, including the impact of compounded state loss cost reductions in our core operating territories.

(2) A majority of alternative market premiums are ceded to SPCs in our Segregated Portfolio Cell Reinsurance segment. See further discussion on alternative market gross premiums written in our Segment Results - Segregated Portfolio Cell Reinsurance section under the heading "Gross Premiums Written" that follows. We retained sixteen of the twenty-one (three in the fourth quarter) workers' compensation alternative market programs that were up for renewal during the year ended December 31, 2025. Five agency-owned programs were non-renewed and placed in run-off in 2025.

New business, audit premium, renewal retention and renewal price changes for our traditional business and the alternative market business are shown in the table below:

Year Ended December 31

20252024

($ in millions)Traditional Business
Alternative Market Business(3)
Segment

ResultsTraditional Business
Alternative Market Business(3)
Segment

Results

New business$18.9 $3.7 $22.6 $17.5 $3.5 $21.0

Audit premium (excluding EBUB)$10.5 $3.9 $14.4 $12.1 $3.7 $15.8

Retention rate(1)
84%90%86%87%84%86%

Change in renewal pricing(2)
(1%)(3%)(1%)(2%)(1%)(1%)

(1) We calculate our workers' compensation retention as renewed premium divided by premium available to renew. Our retention rate can be impacted by various factors, including price or other competitive issues, insureds being acquired, or a decision not to renew based on our underwriting evaluation.

(2) The pricing of our business includes an assessment of the underlying policy exposure and market conditions. We continue to base our pricing on expected losses, as indicated by our historical loss data.

(3) Represents alternative market business ceded to SPCs in our Segregated Portfolio Cell Reinsurance segment.

Ceded Premiums Written

Ceded premiums written were as follows:

Year Ended December 31

($ in thousands)20252024Change

Premiums ceded to SPCs(1)
$48,301 $55,255 $(6,954)(12.6%)

Premiums ceded to external reinsurers(2)
13,726 15,900 (2,174)(13.7%)

Other(3)
6,478 6,026 452 7.5%

Total ceded premiums written$68,505 $77,181 $(8,676)(11.2%)

(1) Represents alternative market business that is ceded under 100% quota share reinsurance agreements to the SPCs in our Segregated Portfolio Cell Reinsurance segment. See further discussion on alternative market gross premiums written in our Segment Results - Segregated Portfolio Cell Reinsurance section under the heading "Gross Premiums Written" that follows.

(2) Premiums ceded under our traditional reinsurance treaty are based on premiums earned during the treaty period. The decrease for the year ended December 31, 2025 as compared to 2024 reflected a lower average reinsurance rate that took effect with the May 1, 2025 treaty renewal as well as a $1.6 million reduction in reinstatement premium recognized in 2025 as compared to an increase of $0.7 million in 2024. The 2025 reinstatement premium reduction is related to a large 2021 accident year claim reserve decrease.

(3) This component of ceded premiums written primarily represents alternative market business premiums ceded to unaffiliated captive insurers for two programs that are ceded under 100% quota share reinsurance agreements.

Ceded Premiums Ratio

Ceded premiums ratio was as follows:

Year Ended December 31

20252024Change

Ceded premiums ratio, as reported30.0%32.3%(2.3 pts)

Less the effect of:

Premiums ceded to SPCs (100%)
19.1%20.9%(1.8 pts)

Other3.0%2.4%0.6 pts

Ceded premiums ratio (related to external reinsurance), less the effects of above7.9%9.0%(1.1 pts)

The above table reflects traditional ceded premiums earned as a percentage of traditional gross premiums earned. As discussed above, premiums ceded under our traditional reinsurance treaty are based on premiums earned during the treaty period. The decrease in the ceded premiums ratio in 2025 as compared to 2024 primarily reflects a lower average reinsurance rate that took effect with the May 1, 2025 treaty renewal as well as the $1.6 million reduction in reinstatement premium in 2025 as compared to an increase of $0.7 million in 2024, as previously discussed.

Net Premiums Earned

Net premiums earned consist of gross premiums earned less the portion of earned premiums that we cede to SPCs in our Segregated Portfolio Cell Reinsurance segment, external reinsurers and the unaffiliated captive insurers. Because premiums are generally earned pro rata over the entire policy period, fluctuations in premiums earned tend to lag those of premiums written. Our workers’ compensation policies are twelve month term policies, and premiums are earned on a pro rata basis over the policy period. Net premiums earned also include premium adjustments related to the audit of our insureds' payrolls, changes in our estimates related to EBUB and premium adjustments related to retrospectively-rated policies. Payroll audits are conducted subsequent to the end of the policy period and any related premium adjustments are recorded as fully earned in the current period. We evaluate our estimates related to EBUB and retrospectively-rated premium adjustments on a quarterly basis with any adjustments being included in written and earned premium in the current period.

Net premiums earned were as follows:

Year Ended December 31

($ in thousands)20252024Change

Gross premiums earned$234,856 $247,745 $(12,889)(5.2%)

Less: Ceded premiums earned70,505 80,135 (9,630)(12.0%)

Net premiums earned$164,351 $167,610 $(3,259)(1.9%)

Net premiums earned decreased during the year ended December 31, 2025 as compared to 2024 primarily driven by changes in the carried EBUB estimate and lower audit premium. Partially offsetting these factors for 2025 is the impact of the $1.6 million reduction in reinstatement premium as compared to an increase of $0.7 million in 2024, as previously discussed.

Losses and Loss Adjustment Expenses

We estimate our current accident year loss and loss adjustment expenses by developing actual reported losses using historical loss development factors, adjusted to reflect current and expected trends based on various internal analyses and supplemental information. The following table summarizes calendar year net loss ratios by separating losses between the current accident year and all prior accident years. Calendar year and current accident year net loss ratios by component were as follows:

Year Ended December 31

20252024Change

Calendar year net loss ratio75.3%76.7%(1.4 pts)

Less impact of prior accident years on the net loss ratio(1.7%)(0.3%)(1.4 pts)

Current accident year net loss ratio77.0%77.0%— pts

The 2025 current accident year net loss ratio remained unchanged compared to 2024. During the fourth quarter of 2025, we increased our full year current accident year net loss ratio to 77.0%, reflecting higher severity-related claim activity on large losses, which more than offset medical cost savings related to medical cost management initiatives. The current accident year loss ratio in 2025 was also impacted by the reduction in net premiums earned related to a reduction in the carried EBUB estimate, as previously discussed.

We recognized net favorable prior accident year reserve development of $2.7 million for the year ended December 31, 2025 as compared to $0.5 million of net favorable prior accident year reserve development for 2024. The net favorable reserve development recognized in 2025 reflected a reduction of the AAD liability, overall favorable trends in claim closing patterns in the 2024 accident year as well as a large claim reserve reduction from the 2021 accident year, which had previously exceeded the per person maximum limit under our reinsurance contract. In 2024, net favorable reserve development was driven by favorable prior accident year reserve development of $1.6 million, including the reduction of the AAD liability, partially offset by an adjustment to aggregate losses assumed from the Segregated Portfolio Cell Reinsurance segment of $1.1 million. The net favorable development recognized in 2024 reflected overall favorable trends in claim closing patterns in accident years 2017 through 2019 and 2023.

Underwriting, Policy Acquisition and Operating Expenses

Underwriting, policy acquisition and operating expenses include the amortization of commissions, premium taxes and underwriting salaries, which are capitalized and deferred over the related workers’ compensation policy period, net of ceding commissions earned. The capitalization of underwriting salaries can vary as they are subject to the success rate of our contract acquisition efforts. These expenses also include a management fee charged by our Corporate segment, which represents intercompany charges pursuant to a management agreement. The management fee is based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary.

Our Workers' Compensation Insurance segment underwriting, policy acquisition and operating expenses were comprised as follows:

Year Ended December 31

($ in thousands)20252024Change

DPAC amortization(1)
$31,548 $29,072 $2,476 8.5%

Management fees1,773 1,820 (47)(2.6%)

Other underwriting and operating expenses(2)
41,336 42,055 (719)(1.7%)

SPC ceding commission offset(3)
(11,362)(10,948)(414)3.8%

Total
$63,295 $61,999 $1,296 2.1%

(1) DPAC amortization increased for the year ended December 31, 2025 as compared to 2024, reflecting an increase in state employer assessment liabilities totaling $1.6 million. The increase in the liability reflected our expectation of assessments in excess of the amounts charged and collected from policyholders as determined and promulgated by states in which we operate. The increase in DPAC amortization also reflected the impact of refunds from guaranty fund assessments totaling $0.4 million and $0.9 million in 2025 and 2024, respectively.

(2) Other underwriting and operating expenses decreased for the year ended December 31, 2025 as compared to 2024 driven by lower incentive based compensation. The remaining variance in other underwriting and operating expenses in 2025 as compared to 2024 was comprised of individually insignificant components.

(3) As previously discussed, alternative market premiums written by our Workers' Compensation Insurance segment are 100% ceded, less a ceding commission, to either the SPCs in our Segregated Portfolio Cell Reinsurance segment or unaffiliated captive insurers. The ceding commission charged to the SPCs consists of an amount for fronting fees, cell rental fees, commissions, premium taxes, claims administration fees and risk management fees. The fronting fees, commissions, premium taxes and risk management fees are recorded as an offset to underwriting, policy acquisition and operating expenses. Cell rental fees are recorded as a component of other income and claims administration fees are recorded as ceded ULAE. SPC ceding commissions earned increased for the year ended December 31, 2025 as compared to 2024, primarily reflecting the prior year impact of an adjustment to ceding commissions charged to the SPCs in prior periods related to certain fees, partially offset by the reduction in alternative market written premium.

Underwriting Expense Ratio (the Expense Ratio)

The underwriting expense ratio included the impact of the following:

Year Ended December 31

20252024Change

Underwriting expense ratio, as reported38.5%37.0%1.5 pts

Less estimated ratio increase (decrease) attributable to:

Impact of ceding commissions received from SPCs
4.7%5.5%(0.8 pts)

Impact of audit premium(1.4%)(2.1%)0.7 pts

Impact of change in EBUB estimate0.2%(0.5%)0.7 pts

Underwriting expense ratio, less listed effects35.0%34.1%0.9 pts

Excluding the items noted in the table above, the expense ratio increased for the year ended December 31, 2025 primarily reflecting the impact of the state employer assessment adjustment, as previously discussed.

Segment Results - Segregated Portfolio Cell Reinsurance

The Segregated Portfolio Cell Reinsurance segment includes the results (underwriting profit or loss, plus investment results, net of U.S. federal income taxes) of SPCs at Inova Re and Eastern Re, our Cayman Islands SPC operations, as discussed in Note 16 of the Notes to Consolidated Financial Statements. SPCs are segregated pools of assets and liabilities that provide an insurance facility for a defined set of risks. Assets of each SPC are solely for the benefit of that individual cell and each SPC is solely responsible for the liabilities of that individual cell. Assets of one SPC are statutorily protected from the creditors of the others. As of December 31, 2025, there were twenty-seven (twelve inactive) SPCs.

Segment results reflect our share of the underwriting and investment results of the SPCs in which we participate, and included the following:

Year Ended December 31

($ in thousands)20252024Change

Net premiums written
$43,887 $49,950 $(6,063)(12.1%)

Net premiums earned
$45,687 $52,698 $(7,011)(13.3%)

Net investment income
3,864 3,608 256 7.1%

Net investment gains (losses)2,259 2,369 (110)(4.6%)

Other income (expenses)
25 19 6 31.6%

Net losses and loss adjustment expenses
(22,248)(32,466)10,218 (31.5%)

Underwriting, policy acquisition and operating expenses(16,128)(18,063)1,935 (10.7%)

SPC U.S. federal income tax (expense) benefit(1)
(2,413)(1,766)(647)36.6%

SPC net results11,046 6,399 4,647 72.6%

SPC dividend (expense) income(2)
(6,873)(4,444)(2,429)54.7%

Segment results(3)
$4,173 $1,955 $2,218 113.5%

Net loss ratio
48.7%61.6%(12.9 pts)

Underwriting expense ratio35.3%34.3%1.0 pts

(1) Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs.

(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.

Premiums Written

Premiums in our Segregated Portfolio Cell Reinsurance segment are assumed from either our Workers' Compensation Insurance or Specialty P&C segments. Premium volume is driven by five primary factors: (1) the amount of new business written, (2) retention of the existing book of business, (3) premium rates charged on the renewal book of business and, for workers' compensation business, (4) changes in payroll exposure and (5) audit premium.

Gross, ceded and net premiums written were as follows:

Year Ended December 31

($ in thousands)20252024Change

Gross premiums written
$51,052 $57,904 $(6,852)(11.8%)

Less: Ceded premiums written
7,165 7,954 (789)(9.9%)

Net premiums written
$43,887 $49,950 $(6,063)(12.1%)

Gross Premiums Written

Gross premiums written reflected reinsurance premiums assumed by component as follows:

Year Ended December 31

($ in thousands)20252024Change

Workers' compensation
$48,301 $55,255 $(6,954)(12.6%)

Medical professional liability
2,751 2,649 102 3.9%

Gross Premiums Written
$51,052 $57,904 $(6,852)(11.8%)

Gross premiums written for the years ended December 31, 2025 and 2024 were primarily comprised of workers' compensation coverages assumed from our Workers' Compensation Insurance segment. We retained fourteen of the nineteen workers' compensation programs and both of the medical professional liability programs up for renewal for the year ended December 31, 2025. Workers' compensation gross premiums written decreased during the year ended December 31, 2025 as compared to 2024 primarily due to the non-renewal of five agency-owned programs in 2025, which accounted for $4.6 million of the decrease. A majority of policies expiring in these programs during 2025 were renewed as traditional business in our Workers' Compensation Insurance segment or in other alternative market programs. Policies that renewed as traditional business in our Workers' Compensation Insurance segment that were previously written as alternative market policies totaled $3.9 million for 2025. As of December 31, 2025, in-force premium related to policies in the non-renewed programs totaled $5.6 million and we expect to renew the majority of these policies as traditional business or in other alternative market programs in 2026.

Ceded Premiums Ratio

The ceded premiums ratio was as follows:

Year Ended December 31

20252024Change

Ceded premiums ratio14.8%14.4%0.4 pts

For the workers' compensation business, each SPC has in place its own external reinsurance coverage. The medical professional liability business is assumed net of reinsurance from our Specialty P&C segment; therefore, there are no ceded premiums related to the medical professional liability business reflected in the table above. Workers' compensation premiums ceded under our SPC reinsurance treaty are based on premiums written during the program year that renews during the treaty period. The above table reflects ceded premiums as a percentage of gross premiums written. The ceded premiums ratio reflects the weighted average reinsurance rates of all SPC programs.

Net Premiums Earned

Net premiums earned consist of gross premiums earned less the portion of earned premiums that the SPCs cede to external reinsurers. Because premiums are generally earned pro rata over the entire policy period, fluctuations in premiums earned tend to lag those of premiums written. Policies ceded to the SPCs are twelve month term policies and premiums are earned on a pro rata basis over the policy period. Net premiums earned also include premium adjustments related to the audit of workers' compensation insureds' payrolls. Payroll audits are conducted subsequent to the end of the policy period and any related adjustments are recorded as fully earned in the current period.

Gross, ceded and net premiums earned were as follows:

Year Ended December 31

($ in thousands)20252024Change

Gross premiums earned$53,116 $60,959 $(7,843)(12.9%)

Less: Ceded premiums earned7,429 8,261 (832)(10.1%)

Net premiums earned$45,687 $52,698 $(7,011)(13.3%)

The decrease in net premiums earned during the year ended December 31, 2025 as compared to 2024 reflected the non-renewal of three SPCs during 2024 and the non-renewal of five SPCs during 2025, as previously discussed.

Losses and Loss Adjustment Expenses

The following table summarizes the calendar year net loss ratios by separating losses between the current accident year and all prior accident years. The current accident year net loss ratio reflects the aggregate loss ratio for all programs. Loss reserves and associated reinsurance are estimated for each program on a quarterly basis. Each SPC has in place its own reinsurance agreement, and the attachment point of aggregate reinsurance coverage varies by program. Due to the size of some of the programs, quarterly loss results, including changes in estimated aggregate reinsurance, can create volatility in the current accident year net loss ratio from period to period.

Calendar year and current accident year net loss ratios for the years ended December 31, 2025 and 2024 were as follows:

Year Ended December 31

20252024Change

Calendar year net loss ratio
48.7%61.6%(12.9 pts)

Less impact of prior accident years on the net loss ratio
(17.1%)(5.2%)(11.9 pts)

Current accident year net loss ratio
65.8%66.8%(1.0 pts)

The current accident year net loss ratio decreased in 2025 as compared to 2024, primarily reflecting a reduction in average claim severity and reported claim frequency, partially offset by changes in estimated program year aggregate reinsurance recoveries, which decreased the loss ratio by 0.2 percentage points in 2025 as compared to 1.4 percentage points in 2024.

We recognized net favorable prior year reserve development of $7.8 million and $2.8 million for the years ended December 31, 2025 and 2024, respectively. The development in 2025 includes net favorable development in the workers' compensation business of $7.1 million and the medical professional liability business of $0.7 million. The net favorable development in the workers' compensation business in 2025 reflected favorable trends in claim closing patterns, primarily in accident years 2021 through 2024. The net favorable development in the medical professional liability business in 2025 primarily related to the 2023 and 2024 accident years. The development in 2024 includes net favorable development in the workers' compensation business of $3.1 million, partially offset by net unfavorable development of $0.3 million in the MPL business. The net favorable development in the workers' compensation business in 2024 reflected overall favorable trends in claim closing patterns, primarily in accident years 2018 through 2023. The net unfavorable development in the medical professional liability business in 2024 primarily reflected higher than expected claim frequency in the program that assumed both workers' compensation and medical professional liability insurance, which was non-renewed effective January 1, 2024. We do not participate in the underwriting results of this program.

Underwriting, Policy Acquisition and Operating Expenses

Underwriting Expense Ratio (the Expense Ratio)

See further information regarding our Segregated Portfolio Cell Reinsurance segment's underwriting, policy acquisition and operating expenses in Note 15 of the Notes to Consolidated Financial expenses. The underwriting expense ratio included the impact of the following:

Year Ended December 31

20252024Change

Underwriting expense ratio, as reported
35.3%34.3%1.0 pts

Less: impact of audit premium on expense ratio(3.3%)(2.6%)(0.7 pts)

Underwriting expense ratio, excluding the effect of audit premium38.6%36.9%1.7 pts

Excluding the effect of audit premium, the underwriting expense ratio increased for the year ended December 31, 2025 as compared to 2024 primarily reflecting a decrease in net premiums earned, as previously discussed.

Segment Results - Corporate

Our Corporate segment includes our investment operations excluding those reported in our Segregated Portfolio Cell Reinsurance segment as discussed in Note 15 of the Notes to Consolidated Financial Statements. In addition, this segment includes corporate expenses, interest expense, U.S. and U.K. income taxes and foreign currency exchange rate gains and losses. As previously discussed under the heading "ProAssurance Overview," we changed the composition of our operating and reportable segments during the first quarter of 2025. As a result, we now report the financial results of our subsidiary IAO, Inc. d/b/a ProAssurance Agency in the Specialty P&C segment which were previously reported in the Corporate segment. All prior period segment information has been recast to conform to the current period presentation. The change in presentation had no impact on previously reported consolidated financial results. See further information regarding this presentation change in Note 15 of the Notes to Consolidated Financial Statements.

Segment results for the years ended December 31, 2025 and 2024 exclude transaction-related costs including the associated income tax benefit and, for the year ended December 31, 2024, the change in fair value of contingent consideration as we do not consider these items in assessing the financial performance of the segment. Transaction-related costs in 2025 are attributable to the proposed merger transaction with The Doctors Company. Transaction-related costs in 2024 are associated with actuarial consulting fees paid in relation to the final determination of contingent consideration associated with the NORCAL acquisition. For additional information on the proposed merger transaction with The Doctors Company, see Note 1 of the Notes to Consolidated Financial Statements. Segment results for our Corporate segment were net earnings of $72.0 million and $93.4 million for the years ended December 31, 2025 and 2024, respectively, and included the following:

Year Ended December 31

($ in thousands)20252024Change

Net investment income
$152,634 $140,930 $11,704 8.3%

Equity in earnings (loss) of unconsolidated subsidiaries
$16,276 $22,203 $(5,927)(26.7%)

Net investment gains (losses)
$(7,745)$(7,206)$(539)(7.5%)

Other income (expense)
$(10,813)$6,820 $(17,633)(258.5%)

Operating expense
$35,292 $36,619 $(1,327)(3.6%)

Interest expense
$20,838 $22,342 $(1,504)(6.7%)

Income tax expense (benefit)
$22,229 $10,401 $11,828 113.7%

Net Investment Income

Net investment income is primarily derived from the income earned by our fixed maturity securities and also includes dividend income from equity securities, income from our short-term and cash equivalent investments, earnings from other investments and changes in the cash surrender value of BOLI contracts, net of investment fees and expenses.

Net investment income (loss) by investment category was as follows:

Year Ended December 31

($ in thousands)20252024Change

Fixed maturities$143,763 $131,333 $12,430 9.5%

Equities4,446 4,758 (312)(6.6%)

Short-term investments, including Other9,923 10,723 (800)(7.5%)

BOLI2,607 2,316 291 12.6%

Investment fees and expenses(8,105)(8,200)95 (1.2%)

Net investment income$152,634 $140,930 $11,704 8.3%

Fixed Maturities

Income from our fixed maturities increased in 2025 as compared to 2024 driven by higher average book yields as we take advantage of the current interest rate environment as our portfolio matures. Average investment balances were relatively unchanged for 2025 as compared to 2024.

Average yields for our fixed maturity portfolio were as follows:

Year Ended December 31

20252024

Average income yield3.8%3.5%

Average tax equivalent income yield3.8%3.5%

Short-term Investments and Other Investments

Short-term investments, which have a maturity at purchase of one year or less are carried at fair value, which approximates their cost basis, and are primarily composed of investments in U.S. treasury obligations, commercial paper, money market funds and a certificate of deposit. Income from our short-term and other investments decreased during 2025 as compared to 2024 primarily due to lower average investment balances and lower yields given the decrease in interest rates.

Equity in Earnings (Loss) of Unconsolidated Subsidiaries

Equity in earnings (loss) of unconsolidated subsidiaries was comprised as follows:

Year Ended December 31

($ in thousands)20252024Change

All other investments, primarily investment fund LPs/LLCs
$15,443 $21,532 $(6,089)(28.3%)

Tax credit partnerships833 671 162 24.1%

Equity in earnings (loss) of unconsolidated subsidiaries$16,276 $22,203 $(5,927)(26.7%)

We hold interests in certain LPs/LLCs that generate earnings from trading portfolios, secured debt, debt securities, multi-strategy funds and private equity investments. The performance of the LPs/LLCs is affected by the volatility of equity and credit markets. For our investments in LPs/LLCs, we record our allocable portion of the partnership operating income or loss as the results of the LPs/LLCs become available, typically following the end of a reporting period. Our investment results from our portfolio of investments in LPs/LLCs decreased for 2025 as compared to 2024 primarily due to the performance of two LPs/LLCs which reflected lower market valuations during the second and third quarters of 2025.

Our tax credit partnership investments are designed to generate returns in the form of tax credits and tax-deductible project operating losses and are comprised of qualified affordable housing project tax credit partnerships and a historic tax credit partnership. We account for our tax credit partnership investments under the equity method and record our allocable portion of the operating losses of the underlying properties based on estimates provided by the partnerships. These tax credit partnership investments are reaching the end of their lifecycle, therefore partnership operating losses and tax benefits associated with these investments have been and are expected to continue to be nominal in amount. However, we may receive distributions from time to time due to the sale of properties, as was the case in 2025 and 2024. See additional information on our tax credit partnership investments in Note 3 of the Notes to Consolidated Financial Statements.

Net Investment Gains (Losses)

The following table provides detailed information regarding our net investment gains (losses).

Year Ended December 31

(In thousands)20252024

Total impairment losses

Corporate debt$(1,514)$(2,710)

Asset-backed securities248 (588)

Other investments(590)—

Portion of impairment losses recognized in other comprehensive income before taxes:

Corporate debt355 102

Asset-backed securities3 —

Net impairment losses recognized in earnings(1,498)(3,196)

Gross realized gains, available-for-sale fixed maturities1,985 1,522

Gross realized (losses), available-for-sale fixed maturities(5,376)(4,035)

Net realized gains (losses), trading fixed securities51 34

Net realized gains (losses), equity investments(2,034)(704)

Net realized gains (losses), other investments(55)(826)

Change in unrealized holding gains (losses), trading fixed securities(59)445

Change in unrealized holding gains (losses), equity investments(366)(1,495)

Change in unrealized holding gains (losses), convertible securities, carried at fair value as a part of other investments(394)866

Other1 183

Other net investment gains (losses)
(6,247)(4,010)

Net investment gains (losses)$(7,745)$(7,206)

For the year ended December 31, 2025, we recognized $1.5 million of credit-related impairment losses in earnings and $0.4 million of non-credit impairment losses. The credit-related impairment losses in earnings in 2025 primarily related to corporate bonds in the consumer, communication and real estate sectors and a security in the technology sector. For the year ended December 31, 2024, we recognized credit-related impairment losses in earnings of $3.2 million primarily related to corporate bonds in the real estate sector and a nominal amount of non-credit impairment losses in OCI related to a bond in the consumer sector.

We recognized $6.2 million of other net investment losses for the year ended December 31, 2025 driven by net realized losses from the sale of certain available-for-sale fixed maturities and equity investments. We recognized $4.0 million of other net investment losses for the year ended December 31, 2024 driven by net realized losses from the sale of certain available-for-sale fixed maturities and, to a lesser extent, unrealized holding losses resulting from changes in the fair value of our equity investments.

Operating Expenses

Corporate segment operating expenses were comprised as follows:

Year Ended December 31

($ in thousands)20252024Change

Operating expenses$40,767 $42,284 $(1,517)(3.6%)

Management fee offset(5,475)(5,665)190 (3.4%)

Total$35,292 $36,619 $(1,327)(3.6%)

Operating expenses decreased during the year ended December 31, 2025 as compared to 2024 driven by a decrease in professional fees and various other operating expenses, none of which were individually significant, partially offset by an increase in compensation-related costs. The decrease in professional fees during 2025 primarily reflected a decrease in external audit fees and temporary personnel fees. The increase in compensation-related costs during 2025 primarily reflected an increase in share-based compensation expenses attributable to the effect of an increase in the value of projected long-term incentive awards during 2025 based upon the improvement of one of the associated performance metrics and the timing of grants of prior year share-based awards, partially offset by lower incentive based compensation.

Core domestic insurance subsidiaries within our Specialty P&C segment and our Workers' Compensation Insurance segment are charged a management fee by the Corporate segment for services provided to these subsidiaries. The management fee is based on the extent to which services are provided to the subsidiary and the amount of premium written by the subsidiary. Under the arrangement, the expenses associated with such services are reported as expenses of the Corporate segment, and the management fees charged are reported as an offset to Corporate operating expenses. While the terms of the arrangement were consistent between 2025 and 2024, fluctuations in the amount of premium written by each subsidiary can result in corresponding variations in the management fee charged to each subsidiary during a particular period.

Interest Expense

Interest expense for the years ended December 31, 2025 and 2024 was comprised as follows:

Year Ended December 31

($ in thousands)20252024Change

Contribution Certificates (including accretion)(1)
$7,053 $7,517 $(464)(6.2%)

Revolving Credit Agreement (including fees and amortization)
8,586 10,244 (1,658)(16.2%)

Term Loan (including fees and amortization)7,744 9,508 (1,764)(18.6%)

(Gain)/loss on cash flow hedges reclassified from AOCI(2,545)(4,927)2,382 (48.3%)

Interest expense$20,838 $22,342 $(1,504)(6.7%)

(1) Includes accretion of approximately $1.3 million and $1.8 million for the years ended December 31, 2025 and 2024, respectively, which is recorded as an increase to interest expense as a result of the difference between the recorded acquisition date fair value and the principal balance of the Contribution Certificates associated with our acquisition of NORCAL.

Interest expense decreased during 2025 as compared to 2024 driven by lower interest expense on our Revolving Credit Agreement and Term Loan due to a decrease in the margin component of the rates based on an improvement in our debt to capitalization ratio as of June 30, 2024. The resulting decrease in interest expense became effective during the third quarter of 2024 and continued into 2025. Interest expense in both periods also includes the impact of our Interest Rate Swaps, which are designated as highly effective cash flow hedges to manage our exposure to interest rate risk due to variability in the base rates on the borrowings under both the Revolving Credit Agreement and Term Loan. See further discussion on our outstanding debt in Note 9 of the Notes to Consolidated Financial Statements and additional information regarding our Interest Rate Swaps is provided in Note 10 of the Notes to Consolidated Financial Statements.

Taxes

Tax expense allocated to our Corporate segment includes U.S. and U.K. tax expense including U.S. tax expense incurred from our corporate membership in Lloyd's of London, if any. The SPCs at Inova Re, one of our Cayman Islands reinsurance subsidiaries, have each made a 953(d) election under the U.S. Internal Revenue Code and are subject to U.S. federal income tax; therefore, tax expense allocated to our Corporate segment also includes tax expense incurred from any SPC at Inova Re in which we have a participation interest of 80% or greater as those SPCs are required to be included in our consolidated tax return. Consolidated tax expense (benefit) reflects the tax expense (benefit) of both segments and the tax impact of items excluded from segment reporting, as shown in the table below. Our consolidated effective tax rates for the years ended December 31, 2025 and 2024 were as follows:

Year Ended December 31

(In thousands)20252024

Corporate segment income tax expense (benefit)
$22,229 $10,401

Income tax expense (benefit) - transaction-related costs*(1,075)(67)

Consolidated income tax expense (benefit)
$21,154 $10,334

Effective tax rate29.4%16.4%

*For 2025, represents the income tax benefit associated with the deductible professional fees incurred related to the proposed merger transaction with The Doctors Company (see Note 1 of the Notes to Consolidated Financial Statements). For 2024, transaction-related costs represent the income tax benefit associated with actuarial consulting fees paid in relation to the final determination of contingent consideration associated with the NORCAL acquisition. These costs are not included in a segment as we do not consider these costs in assessing the financial performance of any of our operating or reportable segments. See Note 15 of the Notes to Consolidated Financial Statements for a reconciliation of our segment results to our consolidated results.

We recognized income tax expense of $21.2 million and $10.3 million in 2025 and 2024, respectively. Our effective tax rate for the year ended December 31, 2025 of 29.4% was different from the statutory federal income tax rate of 21% primarily due to the amount of executive compensation that is in excess of the statutory limitation in 2025, which increased the effective rate 4.5%. Further, our effective tax rate for the year ended December 31, 2025 was impacted by the non-deductible portion of transaction-related costs associated with the proposed merger transaction with The Doctors Company, which accounted for a 2.1% increase in the effective tax rate. Our effective tax rate for the year ended December 31, 2024 of 16.4% differed from the statutory federal income tax rate of 21% primarily due to the benefit of tax positions whose statute of limitations had expired, which accounted for a 4.8% decrease in the effective tax rate. There were no other individually significant items impacting our effective tax rates for 2025 and 2024. See Note 5 of the Notes to Consolidated Financial Statements for a reconciliation of our "expected" consolidated income tax expense to our actual consolidated income tax expense and the associated impact on our consolidated effective tax rate for the years ended December 31, 2025 and 2024.