PROASSURANCE CORPPRA
PROASSURANCE CORP Debt Disclosure
Debt
ProAssurance’s outstanding debt consisted of the following:
| ($ in thousands) | December 31, 2024 | December 31, 2023 | |||||||||
Contribution Certificates due 2031, interest at 3.0% (effective interest rate at 3.88%) paid annually in April | $ | 181,163 | $ | 179,387 | |||||||
Revolving Credit Agreement, outstanding borrowings are not permitted to exceed $300 million aggregately, including a $50 million accordion feature; Revolving Credit Agreement expires in 2028. The effective interest rate was 6.30% as of December 31, 2024. | 125,000 | 125,000 | |||||||||
Term Loan, principal repayments in quarterly installments began June 30, 2024; Term Loan expires in 2028. The effective interest rate was 6.43% as of December 31, 2024. | 120,313 | 125,000 | |||||||||
| Total principal | 426,476 | 429,387 | |||||||||
| Less unamortized debt issuance costs | 1,603 | 2,254 | |||||||||
| Debt less unamortized debt issuance costs | $ | 424,873 | $ | 427,133 | |||||||
Contribution Certificates
On May 5, 2021, NORCAL Insurance Company, successor to NORCAL Mutual Insurance Company, issued Contribution Certificates, which are due in 2031, to certain NORCAL policyholders in the conversion. The Contribution Certificates have a principal amount of $191 million and were recorded at their fair value of $175 million at the date of the NORCAL acquisition. The difference of $16 million between the recorded acquisition date fair value and the principal balance of the Contribution Certificates will be accreted utilizing the effective interest method over the term of the certificates of ten years as an increase to interest expense. In addition, interest payments are subject to deferral if ProAssurance does not receive permission from the California Department of Insurance prior to payment. ProAssurance received permission from the California Department of Insurance to pay the annual interest payment, which was paid in April 2024. There are no financial covenants associated with the Contribution Certificates.
Revolving Credit Agreement and Term Loan
The Revolving Credit Agreement, which expires April 2028, includes a $125 million delayed draw term loan ("Term Loan"). The Term Loan is available to be drawn during a five year period after closing, subject to customary borrowing
conditions. The Revolving Credit Agreement may be used for general corporate purposes, including, but not limited to, short-term working capital, share repurchases as authorized by the Board and support for other activities. ProAssurance's Revolving Credit Agreement permits borrowings up to $250 million and has available a $50 million accordion feature which, if successfully subscribed, would expand the permitted borrowings to a maximum of $300 million. The Revolving Credit Agreement permits ProAssurance to borrow, repay and reborrow from the lenders during the term of the Revolving Credit Agreement.
All borrowings are required to be repaid prior to the expiration date of the Revolving Credit Agreement. ProAssurance is required to pay a commitment fee, ranging from 0.20% to 0.45% based on ProAssurance’s debt to capitalization ratio, on the average unused portion of the Revolving Credit Agreement during the term of the agreement. Borrowings under the agreements may be secured or unsecured and accrue interest at a selected base rate, adjusted by a margin, which can vary from 0% to 2.375%, based on ProAssurance’s debt to capitalization ratio and whether the borrowing is secured or unsecured. The base rate selected may either be the current one-, three- or six-month SOFR, with the SOFR term selected fixing the interest period for which the rate is effective. If no selection is made, the base rate defaults to the highest of (1) Zero, (2) the Prime rate, (3) the Federal Funds rate plus 0.5% or (4) the one-month SOFR Adjusted Screen Rate plus 1.0%, determined daily. Rates are reset each successive interest period until the borrowing is repaid.
The Revolving Credit Agreement contains customary representations, covenants and events constituting default, and remedies for default. Additionally, the agreement carries the following financial covenants:
(1)ProAssurance is not permitted to have a leverage ratio of consolidated funded indebtedness (principally, obligations for borrowed money, obligations evidenced by instruments such as notes or acceptances, standby and commercial letters of credit, and contingent obligations) to consolidated total capitalization (principally, total non-trade liabilities on a consolidated basis plus consolidated shareholders’ equity, exclusive of AOCI) greater than 0.35 to 1.0, determined at the end of each fiscal quarter.
(2)ProAssurance is required to maintain a minimum net worth, excluding AOCI, of at least $912 million.
(3)ProAssurance is required to maintain minimum liquidity, which will include cash, securities, and capacity on its revolving line, of at least $25 million.
ProAssurance is currently in compliance with all covenants of the Revolving Credit Agreement.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Feb 24, 2025 | Showing above |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 23, 2016 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.