BIRMINGHAM, Ala.--(BUSINESS WIRE)--ProAssurance Corporation (NYSE: PRA) reports net income of $32.1 million, or $0.59 per diluted share, and operating income(1) of $33.4 million, or $0.62 per diluted share, for the three months ended December 31, 2021. For the year ended December 31, 2021, the Company reports net income of $144.1 million, or $2.67 per diluted share, and operating income of $75.9 million, or $1.40 per diluted share.
(1)Operating income is a Non-GAAP financial measure. See a reconciliation of net income to Non-GAAP operating income under the heading “Non-GAAP Financial Measures” that follows.
Highlights - Fourth Quarter and Full Year 2021(2)
- Gross premiums written of $218.1 million (+34.8%)and $960.0 million (+12.4%) in the quarter and full year, respectively
- Net premiums earned of $273.1 million (+46.0%) and 971.7 million (+22.6%) in the quarter and year, respectively
- Net favorable prior accident year reserve development of $18.3 million and $45.5 million in the quarter and year, respectively
- Improvement in the consolidated net loss ratio of 2.7 points and 6.0 points for the quarter and year, respectively
- Improvement in the consolidated underwriting expense ratio of 6.1 points and 2.4 points for the quarter and year, respectively
- Combined ratio excluding transaction-related costs of 96.5% (-9.3 points) and 102.4% (-11.0 points) for the quarter and year, respectively
-
Net investment result of $33.8 million (+28.8%) and $119.5 million (+98.9%) for the quarter and year, respectively
- Net investment income of $18.8 million (+16.7%) and $70.5 million (-2.1%), respectively
- Equity in earnings of unconsolidated subsidiaries of $15.0 million (+48.0%) and $49.0 million (+510.8%), respectively
- Book value increased $1.42 per share to $26.46 for the year ended December 31, 2021
(2) Comparisons are to the fourth quarter and/or full year of 2020
Management Commentary & Results of Operations
“We made excellent progress towards our strategic objectives in 2021,” said Ned Rand, President and Chief Executive Officer of ProAssurance. “I am proud of all that the team at ProAssurance accomplished this year. The hard work they have put in - including bringing NORCAL on board - is paying off in improved results, and we are enthusiastic about carrying this momentum into 2022.”
Higher net income in the fourth quarter and full year of 2021 was driven primarily by improved underwriting results in our Specialty Property & Casualty (“Specialty P&C”) segment and strong performance from our investments in various LPs and LLCs. For the full year, net income also benefited from the $74.4 million gain on bargain purchase recorded in the second quarter of 2021 in relation to the NORCAL transaction. The effects of factors increasing net income in the fourth quarter and full year were partly offset by a reduction in the operating results of the Workers’ Compensation Insurance and Segregated Portfolio Cell Reinsurance (“SPCR”) segments.
Consolidated gross premiums written increased for the fourth quarter and full year due to top line growth in our Specialty P&C segment through the NORCAL acquisition, partly offset by the impact of our decreased participation at Lloyd’s of London and, to a lesser extent, a decrease in gross premiums written through our Workers’ Compensation Insurance segment.
Our consolidated net loss ratio for the quarter and full year decreased by 2.7 points and 6.0 points, respectively, from the comparable periods of 2020. The decreases were driven primarily by a lower current accident year net loss ratios in our Specialty P&C and Lloyd’s Syndicates segments, partly offset by higher calendar year net loss ratios in our Workers’ Compensation Insurance and Segregated Portfolio Cell Reinsurance segments.
The consolidated underwriting expense ratio decreased 6.1 points in the fourth quarter and 2.4 points for the full year, primarily attributable to the additional earned premium contributed by NORCAL with comparatively low expenses as a result of related purchase accounting adjustments, and cost reduction strategies enacted throughout our organization.
Our consolidated net investment result increased for the fourth quarter and full year 2021 due to higher reported earnings from investments in LPs/LLCs and additional net investment income from our acquisition of NORCAL. This increase was partially offset by lower yields on our corporate debt securities and short-term investments due to the continued low interest rate environment.
|
CONSOLIDATED INCOME STATEMENT HIGHLIGHTS |
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|
Selected consolidated financial data for each period is summarized in the table below. Our results for the quarter and year ended December 31, 2021 include NORCAL's results since the date of acquisition (May 5, 2021). |
||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
|||||||||||||||||
|
($ in thousands, except per share data) |
|
2021 |
|
|
2020 |
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Gross premiums written(1) |
$ |
218,141 |
|
$ |
161,831 |
|
|
34.8 |
% |
|
$ |
960,024 |
|
$ |
854,422 |
|
|
|
12.4 |
% |
|
Net premiums written |
$ |
205,194 |
|
$ |
142,479 |
|
|
44.0 |
% |
|
$ |
882,721 |
|
$ |
747,701 |
|
|
|
18.1 |
% |
|
Net premiums earned |
$ |
273,070 |
|
$ |
187,008 |
|
|
46.0 |
% |
|
$ |
971,668 |
|
$ |
792,715 |
|
|
|
22.6 |
% |
|
Net investment income |
|
18,810 |
|
|
16,120 |
|
|
16.7 |
% |
|
|
70,522 |
|
|
71,998 |
|
|
|
(2.1 |
%) |
|
Equity in earnings (loss) of unconsolidated subsidiaries |
|
15,015 |
|
|
10,144 |
|
|
48.0 |
% |
|
|
48,974 |
|
|
(11,921 |
) |
|
|
510.8 |
% |
|
Net investment gains (losses)(2) |
|
4,097 |
|
|
15,527 |
|
|
(73.6 |
%) |
|
|
24,310 |
|
|
15,678 |
|
|
|
55.1 |
% |
|
Other income(1) |
|
2,074 |
|
|
802 |
|
|
158.6 |
% |
|
|
8,936 |
|
|
6,470 |
|
|
|
38.1 |
% |
|
Total revenues(1) |
|
313,066 |
|
|
229,601 |
|
|
36.4 |
% |
|
|
1,124,410 |
|
|
874,940 |
|
|
|
28.5 |
% |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net losses and loss adjustment expenses |
|
197,220 |
|
|
140,035 |
|
|
40.8 |
% |
|
|
752,249 |
|
|
661,447 |
|
|
|
13.7 |
% |
|
Underwriting, policy acquisition and operating expenses(1) |
|
67,795 |
|
|
57,702 |
|
|
17.5 |
% |
|
|
268,246 |
|
|
237,881 |
|
|
|
12.8 |
% |
|
SPC U.S. federal income tax expense |
|
656 |
|
|
173 |
|
|
279.2 |
% |
|
|
1,947 |
|
|
1,746 |
|
|
|
11.5 |
% |
|
SPC dividend expense (income) |
|
4,124 |
|
|
6,316 |
|
|
(34.7 |
%) |
|
|
10,050 |
|
|
14,304 |
|
|
|
(29.7 |
%) |
|
Interest expense |
|
5,516 |
|
|
3,779 |
|
|
46.0 |
% |
|
|
19,719 |
|
|
15,503 |
|
|
|
27.2 |
% |
|
Goodwill impairment |
|
— |
|
|
— |
|
nm |
|
|
— |
|
|
161,115 |
|
|
nm |
||||
|
Total expenses(1) |
|
275,311 |
|
|
208,005 |
|
|
32.4 |
% |
|
|
1,052,211 |
|
|
1,091,996 |
|
|
|
(3.6 |
%) |
|
Gain on bargain purchase |
|
— |
|
|
— |
|
nm |
|
|
74,408 |
|
|
— |
|
|
nm |
||||
|
Income (loss) before income taxes |
|
37,755 |
|
|
21,596 |
|
|
74.8 |
% |
|
|
146,607 |
|
|
(217,056 |
) |
|
|
167.5 |
% |
|
Income tax expense (benefit) |
|
5,615 |
|
|
7,291 |
|
|
(23.0 |
%) |
|
|
2,483 |
|
|
(41,329 |
) |
|
|
106.0 |
% |
|
Net income (loss) |
$ |
32,140 |
|
$ |
14,305 |
|
|
124.7 |
% |
|
$ |
144,124 |
|
$ |
(175,727 |
) |
|
|
182.0 |
% |
|
Non-GAAP operating income (loss) |
$ |
33,439 |
|
$ |
3,288 |
|
|
917.0 |
% |
|
$ |
75,892 |
|
$ |
(27,741 |
) |
|
|
373.6 |
% |
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Basic |
|
53,984 |
|
|
53,891 |
|
|
|
|
53,962 |
|
|
53,863 |
|
|
|
||||
|
Diluted |
|
54,107 |
|
|
53,935 |
|
|
|
|
54,058 |
|
|
53,906 |
|
|
|
||||
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net income (loss) per diluted share |
$ |
0.59 |
|
$ |
0.27 |
|
$ |
0.32 |
|
|
$ |
2.67 |
|
$ |
(3.26 |
) |
|
$ |
5.93 |
|
|
Non-GAAP operating income (loss) per diluted share |
$ |
0.62 |
|
$ |
0.06 |
|
$ |
0.56 |
|
|
$ |
1.40 |
|
$ |
(0.52 |
) |
|
$ |
1.92 |
|
|
(1) Consolidated totals include inter-segment eliminations. The eliminations affect individual line items only and have no effect on net income (loss). Further details will be provided in Note 18 of the Notes to Consolidated Financial Statements in our December 31, 2021 report on Form 10-K to be filed February 22, 2022, prior to the opening of trading on the NYSE. |
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|
(2) This line item includes both realized and unrealized investment gains and losses, as well as investment impairments. Detailed information regarding the components of net investment gains (losses) will be provided in Note 4 of the Notes to Consolidated Financial Statements in our December 31, 2021 report on Form 10-K to be filed February 22, 2022, prior to the opening of trading on the NYSE. |
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|
The abbreviation “nm” indicates that the information or the percentage change is not meaningful. |
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|
BALANCE SHEET HIGHLIGHTS |
||||||||
|
($ in thousands, except per share data) |
December 31, 2021 |
|
December 31, 2020 |
|||||
|
Total investments |
$ |
4,828,323 |
|
|
$ |
3,389,345 |
|
|
|
Total assets |
$ |
6,191,477 |
|
|
$ |
4,654,803 |
|
|
|
Total liabilities |
$ |
4,763,090 |
|
|
$ |
3,305,593 |
|
|
|
Common shares (par value $0.01) |
$ |
633 |
|
|
$ |
632 |
|
|
|
Retained earnings |
$ |
1,434,491 |
|
|
$ |
1,301,163 |
|
|
|
Treasury shares |
$ |
(415,962 |
) |
|
$ |
(415,962 |
) |
|
|
Shareholders’ equity |
$ |
1,428,387 |
|
|
$ |
1,349,210 |
|
|
|
Book value per share |
$ |
26.46 |
|
|
$ |
25.04 |
|
|
|
CONSOLIDATED KEY RATIOS |
|||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
|
Current accident year net loss ratio |
78.9 |
% |
|
83.4 |
% |
|
82.1 |
% |
|
89.8 |
% |
|
Effect of prior accident years’ reserve development |
(6.7 |
%) |
|
(8.5 |
%) |
|
(4.7 |
%) |
|
(6.4 |
%) |
|
Net loss ratio |
72.2 |
% |
|
74.9 |
% |
|
77.4 |
% |
|
83.4 |
% |
|
Underwriting expense ratio |
24.8 |
% |
|
30.9 |
% |
|
27.6 |
% |
|
30.0 |
% |
|
Combined ratio |
97.0 |
% |
|
105.8 |
% |
|
105.0 |
% |
|
113.4 |
% |
|
Operating ratio |
90.1 |
% |
|
97.2 |
% |
|
97.7 |
% |
|
104.3 |
% |
|
Return on equity(1) |
10.5 |
% |
|
4.3 |
% |
|
5.3 |
% |
|
(12.3 |
%) |
|
|
|
|
|
|
|
|
|
||||
|
Combined ratio, excluding transaction-related costs(2) |
96.5 |
% |
|
105.8 |
% |
|
102.4 |
% |
|
113.4 |
% |
|
(1) Quarterly amounts are annualized. Transaction-related costs associated with our acquisition of NORCAL were not annualized in our calculation of ROE for the three months ended December 31, 2021. In addition, the $74.4 million gain on bargain purchase recognized during the second quarter of 2021 was excluded in our calculation of ROE for the year ended December 31, 2021 consistent with our treatment of gains on bargain purchases from previous acquisitions. |
|||||||||||
|
(2) Our consolidated underwriting expense ratio for the 2021 quarter and year ended December 31, 2021 includes $1.4 million and $25.0 million, respectively, of transaction-related costs included in consolidated operating expenses associated with our acquisition of NORCAL. These costs do not reflect normal operating results. |
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|
SPECIALTY P&C SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2021 |
|
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
|
2020 |
|
|
% Change |
||
|
Gross premiums written |
$ |
166,095 |
|
|
$ |
102,210 |
|
|
62.5 |
% |
|
$ |
681,509 |
|
|
$ |
522,911 |
|
|
30.3 |
% |
|
Net premiums written |
$ |
158,763 |
|
|
$ |
91,681 |
|
|
73.2 |
% |
|
$ |
626,147 |
|
|
$ |
451,019 |
|
|
38.8 |
% |
|
Net premiums earned |
$ |
207,046 |
|
|
$ |
112,060 |
|
|
84.8 |
% |
|
$ |
695,008 |
|
|
$ |
477,365 |
|
|
45.6 |
% |
|
Other income |
|
572 |
|
|
|
391 |
|
|
46.3 |
% |
|
|
3,370 |
|
|
|
3,908 |
|
|
(13.8 |
%) |
|
Total revenues |
|
207,618 |
|
|
|
112,451 |
|
|
84.6 |
% |
|
|
698,378 |
|
|
|
481,273 |
|
|
45.1 |
% |
|
Net losses and loss adjustment expenses |
|
(157,275 |
) |
|
|
(96,633 |
) |
|
62.8 |
% |
|
|
(575,164 |
) |
|
|
(470,074 |
) |
|
22.4 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(36,342 |
) |
|
|
(26,702 |
) |
|
36.1 |
% |
|
|
(127,709 |
) |
|
|
(109,599 |
) |
|
16.5 |
% |
|
Total expenses |
|
(193,617 |
) |
|
|
(123,335 |
) |
|
57.0 |
% |
|
|
(702,873 |
) |
|
|
(579,673 |
) |
|
21.3 |
% |
|
Segment results |
$ |
14,001 |
|
|
$ |
(10,884 |
) |
|
228.6 |
% |
|
$ |
(4,495 |
) |
|
$ |
(98,400 |
) |
|
95.4 |
% |
|
SPECIALTY P&C SEGMENT KEY RATIOS |
|||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
|
Current accident year net loss ratio |
82.2 |
% |
|
92.3 |
% |
|
87.5 |
% |
|
104.2 |
% |
|
Effect of prior accident years’ reserve development |
(6.2 |
%) |
|
(6.1 |
%) |
|
(4.7 |
%) |
|
(5.7 |
%) |
|
Net loss ratio |
76.0 |
% |
|
86.2 |
% |
|
82.8 |
% |
|
98.5 |
% |
|
Underwriting expense ratio |
17.6 |
% |
|
23.8 |
% |
|
18.4 |
% |
|
23.0 |
% |
|
Combined ratio |
93.6 |
% |
|
110.0 |
% |
|
101.2 |
% |
|
121.5 |
% |
The Specialty P&C segment delivered a profit of $14.0 million in the fourth quarter, primarily driven by the current accident year frequency reductions in our Standard Physicians business, improved prior year development, and the transaction accounting benefits from the NORCAL transaction. The results this quarter and for the full year were supported by the underlying benefits of our comprehensive business strategy to address underwriting results, operating efficiency, and expense management. The NORCAL integration plan continues to remain on target, with achieved expense synergies of $22 million through year-end 2021 on an original stated plan of $18 million.
Gross written premiums increased to $166.1 million for the quarter and $681.5 million for the full year. The increases during the quarter and full year were due primarily to the addition of $59.3 million and $154.1 million, respectively, from the NORCAL acquisition, the majority of which is Standard Physician business.
Premium retention was 73% in the quarter, as we continued to focus on improving our underwriting results in Specialty Healthcare. These efforts resulted in a 43% retention in Specialty Healthcare and the loss of four large policies with premiums totaling $23.1 million. This was partially offset by retention gains in our Standard Physicians business, Small Business Unit, and Medical Technology Liability lines, which achieved fourth quarter retention rates of 86%, 91%, and 93% respectively. For the full year, retention in the Specialty P&C segment improved to 80%, driven by gains in all lines except Specialty Healthcare.
We achieved renewal pricing increases of 9% and 8% in the segment for the quarter and year, along with continued improvements in terms, conditions, and product structure in our Specialty Healthcare business. We secured 9% and 15% pricing increases on the NORCAL Standard and Specialty business since the close of the transaction in May of 2021.
New business writings during the quarter and full year were $12.8 million and $43.3 million, compared to $5.3 million and $23.0 million in the comparable periods of 2020. New business increases were primarily attributable to writings in our Specialty program business.
The current accident year net loss ratio was 10.1 points and 16.7 points lower in the fourth quarter and full year, respectively, from the comparable periods of 2020. We observed a reduction in claims frequency in 2020 that continued through year-end 2021, some of which was driven by the impacts of the COVID-19 pandemic and our re-underwriting efforts. Given these favorable trends, we began to recognize some of the benefits in our HCPL current accident year loss ratio during the third quarter of 2021, and increased that recognition for the fourth quarter and full year of 2021.
We recorded net favorable prior accident year reserve development of approximately $13.0 million in the fourth quarter, compared to $6.8 million in the same period of 2020. Favorable development in the quarter included $2.9 million related to the amortization of the purchase accounting fair value adjustment on NORCAL's reserves. For the full year 2021, we recognized net favorable prior accident year reserve development of $32.9 million (including $7.9 million related to the amortization of the purchase accounting fair value adjustment on NORCAL’s reserves), compared to $27.5 million in 2020.
The lower expense ratio for the fourth quarter and full year 2021 is primarily attributable to the impact of the NORCAL acquisition and related purchase accounting adjustments, which decreased our expense ratio by 5.0 points and 4.2 points in the quarter and year, respectively. Exclusive of the NORCAL impact (earned premiums and expenses), the segment expense ratio decreased approximately 1.2 points for the quarter and 0.4 points for the year.
|
WORKERS’ COMPENSATION INSURANCE SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2021 |
|
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
|
2020 |
|
|
% Change |
||
|
Gross premiums written |
$ |
45,779 |
|
|
$ |
47,344 |
|
|
(3.3 |
%) |
|
$ |
240,546 |
|
|
$ |
246,791 |
|
|
(2.5 |
%) |
|
Net premiums written |
$ |
27,496 |
|
|
$ |
29,501 |
|
|
(6.8 |
%) |
|
$ |
161,865 |
|
|
$ |
164,871 |
|
|
(1.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net premiums earned |
$ |
41,728 |
|
|
$ |
42,335 |
|
|
(1.4 |
%) |
|
$ |
164,600 |
|
|
$ |
171,772 |
|
|
(4.2 |
%) |
|
Other income |
|
481 |
|
|
|
499 |
|
|
(3.6 |
%) |
|
|
2,211 |
|
|
|
2,216 |
|
|
(0.2 |
%) |
|
Total revenues |
|
42,209 |
|
|
|
42,834 |
|
|
(1.5 |
%) |
|
|
166,811 |
|
|
|
173,988 |
|
|
(4.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net losses and loss adjustment expenses |
|
(29,381 |
) |
|
|
(26,904 |
) |
|
9.2 |
% |
|
|
(114,704 |
) |
|
|
(111,552 |
) |
|
2.8 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(13,899 |
) |
|
|
(13,845 |
) |
|
0.4 |
% |
|
|
(52,418 |
) |
|
|
(56,449 |
) |
|
(7.1 |
%) |
|
Total expenses |
|
(43,280 |
) |
|
|
(40,749 |
) |
|
6.2 |
% |
|
|
(167,122 |
) |
|
|
(168,001 |
) |
|
(0.5 |
%) |
|
Segment results |
$ |
(1,071 |
) |
|
$ |
2,085 |
|
|
(151.4 |
%) |
|
$ |
(311 |
) |
|
$ |
5,987 |
|
|
(105.2 |
%) |
|
WORKERS’ COMPENSATION INSURANCE SEGMENT KEY RATIOS |
|||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
|
Current accident year net loss ratio |
74.0 |
% |
|
68.2 |
% |
|
74.0 |
% |
|
69.0 |
% |
|
Effect of prior accident years’ reserve development |
(3.6 |
%) |
|
(4.6 |
%) |
|
(4.3 |
%) |
|
(4.1 |
%) |
|
Net loss ratio |
70.4 |
% |
|
63.6 |
% |
|
69.7 |
% |
|
64.9 |
% |
|
Underwriting expense ratio |
33.3 |
% |
|
32.7 |
% |
|
31.8 |
% |
|
32.9 |
% |
|
Combined ratio |
103.7 |
% |
|
96.3 |
% |
|
101.5 |
% |
|
97.8 |
% |
The Workers’ Compensation Insurance segment results for the fourth quarter and full year of 2021 include an increase in the current accident year net loss ratio driven by an increase in reported loss severity.
Gross premiums written during the fourth quarter and full year were lower compared to the same periods of 2020, primarily reflecting a decrease in new business, partially offset by an improvement in renewal retention and renewal pricing. Additionally, for the full year, audit premium returned to policyholders in our traditional business reduced written premium by approximately $1.9 million, compared to approximately $700,000 billed to policyholders in 2020.
Renewal retention in our traditional business improved during the quarter to 83% from 80% in the same quarter of 2020, while average renewal pricing decreases improved to 2% from 4%. For the full year, renewal retention improved to 86% from 84% in 2020, and average renewal pricing decreases improved to 1% from 4%.
Traditional new business written during the quarter and full year was $2.2 million and $17.8 million, respectively, down from $3.7 million and $23.7 million in the same periods of 2020, reflecting a reduction in submissions and the competitive market conditions.
The increase in the current accident year net loss ratio for the fourth quarter and full year reflects our response to an increase in reported loss activity in the third and fourth quarters of 2021 attributable to the impact of the pandemic on the workforce, including workers returning to full employment and the labor shortage. The 2021 accident year loss ratio was also impacted by the reduction in net premiums earned related to audit premium returned to policyholders, as previously discussed. We recognized favorable prior year reserve development totaling $1.5 million and $7.1 million in the fourth quarter and full year, respectively, compared to $2.0 million and $7.0 million in the same periods of 2020.
The increase in the underwriting expense ratio in the fourth quarter of 2021 was driven primarily by the effect of lower premiums earned during the quarter, as expenses were essentially flat. For the full year, the underwriting expense ratio decreased due to a reduction in compensation-related costs resulting from the restructuring completed in August 2020, and to a lesser extent, related severance costs of approximately $900,000 recorded in 2020.
|
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2021 |
|
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
|
2020 |
|
|
% Change |
||
|
Gross premiums written |
$ |
15,395 |
|
|
$ |
14,775 |
|
|
4.2 |
% |
|
$ |
71,850 |
|
|
$ |
72,843 |
|
|
(1.4 |
%) |
|
Net premiums written |
$ |
13,386 |
|
|
$ |
12,913 |
|
|
3.7 |
% |
|
$ |
63,042 |
|
|
$ |
64,159 |
|
|
(1.7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net premiums earned |
$ |
16,188 |
|
|
$ |
16,572 |
|
|
(2.3 |
%) |
|
$ |
63,688 |
|
|
$ |
66,352 |
|
|
(4.0 |
%) |
|
Net investment income |
|
194 |
|
|
|
252 |
|
|
(23.0 |
%) |
|
|
814 |
|
|
|
1,084 |
|
|
(24.9 |
%) |
|
Net investment gains (losses) |
|
1,308 |
|
|
|
2,191 |
|
|
(40.3 |
%) |
|
|
4,080 |
|
|
|
3,085 |
|
|
32.3 |
% |
|
Other income |
|
— |
|
|
|
2 |
|
|
nm |
|
|
3 |
|
|
|
205 |
|
|
(98.5 |
%) |
|
|
Net losses and loss adjustment expenses |
|
(6,009 |
) |
|
|
(5,714 |
) |
|
5.2 |
% |
|
|
(32,569 |
) |
|
|
(29,605 |
) |
|
10.0 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(6,556 |
) |
|
|
(5,236 |
) |
|
25.2 |
% |
|
|
(21,635 |
) |
|
|
(20,709 |
) |
|
4.5 |
% |
|
SPC U.S. federal income tax expense(1) |
|
(656 |
) |
|
|
(173 |
) |
|
279.2 |
% |
|
|
(1,947 |
) |
|
|
(1,746 |
) |
|
11.5 |
% |
|
SPC net results |
|
4,469 |
|
|
|
7,894 |
|
|
(43.4 |
%) |
|
|
12,434 |
|
|
|
18,666 |
|
|
(33.4 |
%) |
|
SPC dividend (expense) income (2) |
|
(4,124 |
) |
|
|
(6,316 |
) |
|
(34.7 |
%) |
|
|
(10,050 |
) |
|
|
(14,304 |
) |
|
(29.7 |
%) |
|
Segment results (3) |
$ |
345 |
|
|
$ |
1,578 |
|
|
(78.1 |
%) |
|
$ |
2,384 |
|
|
$ |
4,362 |
|
|
(45.3 |
%) |
|
(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) of the SPCs in which we participate. |
|||||||||||||||||||||
|
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT KEY RATIOS |
|||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
|
Current accident year net loss ratio |
69.5 |
% |
|
88.7 |
% |
|
67.1 |
% |
|
69.6 |
% |
|
Effect of prior accident years’ reserve development |
(32.4 |
%) |
|
(54.2 |
%) |
|
(16.0 |
%) |
|
(25.0 |
%) |
|
Net loss ratio |
37.1 |
% |
|
34.5 |
% |
|
51.1 |
% |
|
44.6 |
% |
|
Underwriting expense ratio |
40.5 |
% |
|
31.6 |
% |
|
34.0 |
% |
|
31.2 |
% |
|
Combined ratio |
77.6 |
% |
|
66.1 |
% |
|
85.1 |
% |
|
75.8 |
% |
The SPCR segment results in the fourth quarter primarily reflect an increase in the workers’ compensation business net loss ratio and a decrease in net investment gains. For the full year, the decrease in the segment result primarily reflects a higher workers’ compensation business net loss ratio.
The increase in gross premiums written during the fourth quarter primarily reflects higher audit premium billed to policyholders and an increase in new business written, partially offset by renewal price decreases of 3%. Retention was essentially flat. For the full year 2021, gross premiums written were lower, primarily reflecting the competitive workers’ compensation market and the resulting renewal rate decreases of 4%, partially offset by an improvement in renewal retention to 89% from 84%. We renewed 22 of the 23 alternative market programs available for renewal during the full year 2021. During the fourth quarter of 2021, we placed one program into run-off due to the continuation of unfavorable underwriting results.
The increase in the calendar year net loss ratio for the fourth quarter and full year of 2021 primarily reflects lower levels of favorable prior year reserve development, totaling $5.2 million and $10.2 million in the quarter and year, respectively, compared to $9.0 million and $16.6 million in the comparable periods of 2020.
The underwriting expense ratio was higher for the fourth quarter and full year of 2021, primarily reflecting an increase in the allowance for expected credit losses and policyholder dividends, partially offset by a decrease in professional fees. The increase in the allowance for expected credit losses and policyholder dividends relates primarily to programs in which we do not participate.
|
LLOYD’S SYNDICATES SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2021 |
|
|
|
2020 |
|
|
% Change |
|
|
2021 |
|
|
|
2020 |
|
|
% Change |
||
|
Gross premiums written |
$ |
6,267 |
|
|
$ |
12,277 |
|
|
(49.0 |
%) |
|
$ |
37,969 |
|
|
$ |
84,718 |
|
|
(55.2 |
%) |
|
Net premiums written |
$ |
5,549 |
|
|
$ |
8,384 |
|
|
(33.8 |
%) |
|
$ |
31,667 |
|
|
$ |
67,652 |
|
|
(53.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net premiums earned |
$ |
8,108 |
|
|
$ |
16,041 |
|
|
(49.5 |
%) |
|
$ |
48,372 |
|
|
$ |
77,226 |
|
|
(37.4 |
%) |
|
Net investment income |
|
284 |
|
|
|
892 |
|
|
(68.2 |
%) |
|
|
1,961 |
|
|
|
4,128 |
|
|
(52.5 |
%) |
|
Net investment gains (losses) |
|
240 |
|
|
|
(112 |
) |
|
314.3 |
% |
|
|
249 |
|
|
|
988 |
|
|
(74.8 |
%) |
|
Other income (loss) |
|
47 |
|
|
|
(167 |
) |
|
128.1 |
% |
|
|
912 |
|
|
|
51 |
|
|
1,688.2 |
% |
|
Net losses and loss adjustment expenses |
|
(4,555 |
) |
|
|
(10,784 |
) |
|
(57.8 |
%) |
|
|
(29,812 |
) |
|
|
(50,216 |
) |
|
(40.6 |
%) |
|
Underwriting, policy acquisition and operating expenses |
|
(2,736 |
) |
|
|
(6,765 |
) |
|
(59.6 |
%) |
|
|
(17,957 |
) |
|
|
(30,136 |
) |
|
(40.4 |
%) |
|
Income tax benefit (expense) |
|
— |
|
|
|
— |
|
|
nm |
|
|
— |
|
|
|
29 |
|
|
nm |
||
|
Segment results |
$ |
1,388 |
|
|
$ |
(895 |
) |
|
255.1 |
% |
|
$ |
3,725 |
|
|
$ |
2,070 |
|
|
80.0 |
% |
|
LLOYD’S SYNDICATES SEGMENT KEY RATIOS |
|||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Current accident year net loss ratio |
38.7% |
|
55.4% |
|
51.9% |
|
64.2% |
|
Effect of prior accident years’ reserve development |
17.5% |
|
11.8% |
|
9.7% |
|
0.8% |
|
Net loss ratio |
56.2% |
|
67.2% |
|
61.6% |
|
65.0% |
|
Underwriting expense ratio |
33.7% |
|
42.2% |
|
37.1% |
|
39.0% |
|
Combined ratio |
89.9% |
|
109.4% |
|
98.7% |
|
104.0% |
Contacts
Ken McEwen
Investor Relations Director
800-282-6242 • 205-439-7903 • KenMcEwen@ProAssurance.com
