PROASSURANCE CORP (PRA)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes to those statements which accompany this report. Throughout the discussion we use certain terms and abbreviations, which can be found in the Glossary of Terms and Acronyms at the beginning of this report. In addition, a glossary of insurance terms and phrases is available on the investor section of our website. Throughout the discussion, references to "ProAssurance," "ProAssurance Group," "PRA," "Company," "we," "us" and "our" refer to ProAssurance Corporation and its consolidated subsidiaries. The discussion contains certain forward-looking information that involves significant risks, assumptions and uncertainties. As discussed under the heading "Caution Regarding Forward-Looking Statements," our actual financial condition and results of operations could differ significantly from these forward-looking statements.

ProAssurance Overview

ProAssurance Corporation is a holding company for property and casualty insurance companies. Our insurance subsidiaries provide medical professional liability insurance, liability insurance for medical technology and life sciences risks and workers' compensation insurance. Additional information on ProAssurance's four operating and reportable segments is included in Note 12 of the Notes to Condensed Consolidated Financial Statements, Note 15 of the Notes to Consolidated Financial Statements in our December 31, 2025 report on Form 10-K and in the Segment Results sections herein that follow.

Critical Accounting Estimates

Our Condensed Consolidated Financial Statements are prepared in conformity with GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the amounts we report on those statements. We evaluate these estimates and assumptions on an ongoing basis based on current and historical developments, market conditions, industry trends and other information that we believe to be reasonable under the circumstances. We can make no assurance that actual results will conform to our estimates and assumptions; reported results of operations may be materially affected by changes in these estimates and assumptions. A detailed discussion of our critical accounting estimates is included in our Critical Accounting Estimates section in Item 7 of our December 31, 2025 report on Form 10-K.

Management considers the following accounting estimates to be critical because they involve significant judgment by management and those judgments could result in a material effect on our financial statements:

•Reserve for losses and loss adjustment expenses

•Reinsurance

•Valuation of investments and impairment of securities

•Income taxes

Estimation of Taxes

For interim periods, we generally utilize the estimated annual effective tax rate method under which we determine our provision (benefit) for income taxes based on the current estimate of our annual effective tax rate. For the three months ended March 31, 2026 and March 31, 2025, we utilized the estimated annual effective tax rate method. Under this method, items which are unusual, infrequent or that cannot be reliably estimated are considered in the effective tax rate in the period in which the item is included in income and are referred to as discrete items. See further discussion on this method in Note 4 of the Notes to Condensed Consolidated Financial Statements.

Liquidity and Capital Resources and Financial Condition

Overview

ProAssurance Corporation is a holding company and is a legal entity separate and distinct from its subsidiaries. As a holding company, our principal source of external revenue is our investment revenues. In addition, dividends from our operating subsidiaries represent another source of funds for our obligations, including debt service. We also charge our core domestic operating subsidiaries within our Specialty P&C and Workers' Compensation Insurance segments a management fee based on the extent to which services are provided to the subsidiary and the amount of gross premium written by the subsidiary. At March 31, 2026, we held cash and liquid investments of approximately $143 million outside our insurance subsidiaries that were available for use without regulatory approval or other restriction. As of May 1, 2026, we also have an additional $125 million in permitted borrowings available under our Revolving Credit Agreement as well as the possibility of a $50 million accordion feature, if successfully subscribed, as discussed in this section under the heading "Debt."

Our operating subsidiaries have not paid us any dividends during 2026. In the aggregate, our insurance subsidiaries are permitted to pay dividends of approximately $164 million over the remainder of 2026 without prior approval of state insurance regulators. However, the payment of any dividend requires prior notice to the insurance regulator in the state of domicile, and

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the regulator may reduce or prevent the dividend if, in its judgment, payment of the dividend would have an adverse effect on the surplus of the insurance subsidiary. We make the decision to pay dividends from an insurance subsidiary based on the capital needs of that subsidiary and may pay less than the permitted dividend or may also request permission to pay an additional amount (an extraordinary dividend). Currently we do not expect to pay dividends in 2026 prior to the closing of the proposed merger transaction with The Doctors Company.

Cash Flows

Cash flows between periods compare as follows:

The principal components of our operating cash flows are the excess of premiums collected and net investment income over losses paid and operating costs, including income taxes. Timing delays exist between the collection of premiums and the payment of losses associated with the premiums. Premiums are generally collected within the twelve-month period after the policy is written, while our claim payments are generally paid over a more extended period of time. Likewise, timing delays exist between the payment of claims and the collection of any associated reinsurance recoveries.

Operating cash flows decreased for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The change in operating cash flows was primarily due to:

•A decrease in net premium receipts of $15.5 million primarily driven by a lower volume of written premium due to competitive market conditions as some competitors have chosen to write at a lower price and, to a lesser extent, an increase in premiums paid for reinsurance due to the 100% quota share reinsurance agreement with the third party that purchased the renewal rights related to our legal professional liability book of business during the second quarter of 2025.

•An increase in paid losses of $14.7 million driven by our Specialty P&C segment which reflected a decrease in cash received from reinsurance recoveries due to the payment of four large claims in the first quarter of 2025 as well as an increase in the volume of mid-sized claims as compared to the prior year period.

•A $2.2 million gain on the sale of our Franklin, TN property to an unrelated third party during the first quarter of 2025.

The decrease in operating cash flows was partially offset by:

•A decrease in cash paid for operating expenses of $18.3 million driven by lower incentive based compensation and transaction-related costs associated with the proposed merger transaction with The Doctors Company (see Note 1 of the Notes to the Condensed Consolidated Financial Statements).

•An increase in cash received from investment income of $3.5 million driven by higher average book yields as we take advantage of the current interest rate environment as our portfolio matures and an increase in distributed earnings and redemptions from our portfolio of investments in LPs/LLCs.

The remaining variance in operating cash flows for the three months ended March 31, 2026 as compared to the same period of 2025 was composed of individually insignificant components.

We manage our investing cash flows to ensure that we will have sufficient liquidity to meet our obligations, taking into consideration the timing of cash flows from our investments, including interest payments, dividends and principal payments, as well as the expected cash flows to be generated by our operations as discussed in this section under the heading "Investing Activities and Related Cash Flows."

Our financing cash flows are primarily comprised of repayment of debt as well as capital contributions received from or return of capital to external SPC participants. See further discussion of debt in this section under the heading "Financing Activities and Related Cash Flows."

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Operating Activities and Related Cash Flows

Reinsurance

Within our Specialty P&C segment, we use insurance and reinsurance (collectively, “reinsurance”) to provide capacity to write larger limits of liability, to provide reimbursement for losses incurred under the higher limit coverages we offer and to provide protection against losses in excess of policy limits. Within our Workers' Compensation Insurance segment, we use reinsurance to reduce our net liability on individual risks, to mitigate the effect of significant loss occurrences (including catastrophic events), to stabilize underwriting results and to increase underwriting capacity by decreasing leverage. In both our Specialty P&C and Workers' Compensation Insurance segments, we use reinsurance in risk sharing arrangements to align our objectives with those of our strategic business partners and to provide custom insurance solutions for large customer groups. The discussion in our Liquidity section under the same heading in Item 7 of our December 31, 2025 report on Form 10-K includes additional information regarding our reinsurance agreements.

Excess of Loss Reinsurance Agreements

Our MPL and Medical Technology Liability treaties renew annually on October 1 and our workers' compensation treaty renews annually on May 1. The significant coverages provided by our current excess of loss reinsurance agreements are depicted in the following table.

Current Excess of Loss Reinsurance Agreements

(1) Effective October 1, 2025, total reinsured limits decreased to $19M from $24M. Since we were not writing policies with these higher limits of coverage, the reduction in limit is not significant. One prepaid limit reinstatement of $16M and a second limit reinstatement of up to $16M for the second layer, subject to reinstatement premium, which attaches after the first reinstatement has been completely exhausted. Historically, the prepaid limit reinstatement and second limit reinstatement ranged from $16M to $21M. All limit reinstatements thereafter require no additional premium. Effective October 1, 2021, limits can be reinstated a maximum of four times.

(2) Prior to October 1, 2020, retention was $1M.

(3) Historically, retention has ranged from 0% to 32.5%.

(4) Historically, retention has ranged from $1M to $2M.

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(5) Subject to a limit of $20M per individual claimant. If an individua

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion generally focuses on the change in financial condition, results of operations and cash flows for the year ended December 31, 2025 as compared to the year ended December 31, 2024 and should be read in conjunction with the Consolidated Financial Statements and Notes to those statements which accompany this report. For a full discussion of the changes in the financial condition, results of operations and cash flows for the year ended December 31, 2024 as compared to the year ended December 31, 2023, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of ProAssurance's December 31, 2024 report on Form 10-K.

The discussion contains certain forward-looking information that involves significant risks, assumptions and uncertainties. As discussed under the heading "Caution Regarding Forward-Looking Statements," our actual financial condition and results of operations could differ significantly from these forward-looking statements.

ProAssurance Overview

ProAssurance Corporation is a holding company for property and casualty insurance companies. Our insurance subsidiaries provide medical professional liability insurance, liability insurance for medical technology and life sciences risks and workers' compensation insurance.

During the first quarter of 2025, we altered our internal management reporting structure and the financial results evaluated by our CODM; therefore, we changed the composition of our operating and reportable segments to align with how the CODM currently oversees the business, allocates resources and evaluates operating performance. 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. We operate in four segments: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance and Corporate. 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.

Additional information on our four operating and reportable segments is included in Note 15 of the Notes to Consolidated Financial Statements, Part I and in the Segment Results sections herein that follow.

Growth Opportunities and Outlook

Given the cyclical nature of our insurance operations, our financial objectives span multiple years and we target a dynamic long-term ROE of 700 basis points above the 10-year U.S. Treasury rate, which at December 31, 2025 was approximately 11.2%. To achieve our long-term ROE target, we emphasize rate adequacy, selective underwriting, use of our proprietary data and predictive analytics, effective claims management, operational efficiency gained by leveraging our scope and scale, continued investment in technology-based solutions and prudent investment management. We may forego growth in favor of improving profitability, given our focus on rate adequacy and the competitive markets in which we operate. Our overall investment strategy is to focus on maximizing current income from our investment portfolio while maintaining appropriate credit risk, liquidity, duration and portfolio diversification.

On March 19, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Doctors Company, a California-domiciled reciprocal inter-insurance exchange, and Jackson Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of The Doctors Company (“Merger Sub”), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into ProAssurance (the “Merger”). ProAssurance will continue as the surviving corporation in the Merger as a wholly owned subsidiary of The Doctors Company.

We believe that this transaction will deliver significant value to our shareholders. Both ProAssurance and The Doctors Company were founded by physicians in response to the medical liability crisis of the 1970s. Both companies have grown over the years through business combinations with other physician-founded companies. This shared history has helped both companies fulfill our shared mission to protect others and given us similar operating philosophies and cultures. Bringing the strengths and capabilities of our companies together will allow our teams to continue to serve today’s healthcare providers with the necessary scale and breadth of capabilities.

On June 24, 2025, ProAssurance held a special meeting of stockholders (the “ProAssurance Special Meeting”) at which holders of ProAssurance’s common stock approved each of the proposals voted on at the ProAssurance Special Meeting relating to the transactions contemplated by the Merger Agreement. On July 2, 2025, the U.S. Federal Trade Commission granted early termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976 with respect to the Merger.

The closing of the proposed Merger is subject to other customary closing conditions, including approval from insurance regulators in the jurisdictions where the Company’s operating subsidiaries are domiciled. As of February 23, 2026, The Doctors Company has received final approval from insurance regulators in Alabama, the District of Columbia, Illinois, Missouri, Texas

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and Vermont. Review of the proposed Merger by insurance regulators remains pending in California and Pennsylvania. The Company has also obtained final approval from Lloyd’s of London with respect to PRA Corporate Capital Ltd., and from the Cayman Islands Monetary Authority with respect to Inova Re and Eastern Re, each of which is a licensed entity in the Cayman Islands. The timing for completion of the pending reviews is uncertain and not within the Company’s control, but in light of progress made toward satisfaction of closing conditions, at the time of this filing, the Company continues to anticipate closing the transaction by June 30, 2026.

Our Specialty P&C segment includes our MPL insurance operations, which represent the largest product line in our consolidated gross premiums written (71% in 2025). The healthcare market in the U.S. is continuing to consolidate, which brings competitive challenges and opportunities. This consolidation initially took the form of hospitals acquiring physician practices and later the growth of physician groups owned by outside investors. As these trends continue, most physicians no longer practice medicine as owners of an independent practice. Large single and multi-specialty practices often operate in many states. Healthcare delivery settings are changing with the growth of retail delivery by advanced practice healthcare professionals as well as physicians practicing in distributed clinics, pharmacies, large consumer stores and online. The shifts within the healthcare settings continue to impact the overall market for medical professional liability products due to their differing risk profiles. We are focused on serving those segments of the market where we believe we can achieve our profitability objectives over time. In addition, we face consolidation within the distribution system, requiring us to adapt to fewer, larger intermediaries.

Over the past several years, we have also responded to rising severity in the medical professional liability market, driven by social inflation and eroding tort reforms that have been adversely affecting the loss environment. We believe we have stayed ahead of many in the space in achieving rate levels in MPL that outpace severity trends, achieving a cumulative premium change of more than 80% since 2018 in the medical professional liability market. We also continue to forgo renewal and new business opportunities in this loss environment that we believe do not meet our expectation of rate adequacy. As a result, retention of existing insureds remains under pressure as competitors in selected markets continue to be willing to write business at rate levels we believe are insufficient in this loss environment.

Along with our pricing actions, we remain focused on disciplined underwriting and managing claims to address these market conditions. Innovation tools also continue to enhance our risk selection, pricing decisions and workflows. Work is ongoing to maximize the use of predictive analytics to leverage our extensive data and to identify specific geographic markets and specialty sub-sectors where there are opportunities to write business that has the potential to meet our profitability objectives. We are also committed to ensuring that our insured and distribution partners find us easy to do business with - helping distinguish us in the marketplace.

Our Specialty P&C segment also includes medical technology liability insurance, which contributed 4% to consolidated gross premiums written in 2025. It is less affected by the trends impacting the healthcare sector and has the potential to increase its market share over time, although we may see slower growth if investments in healthcare-related research declines due to federal policy changes.

Our second largest product line is workers' compensation insurance which represents 23% of our consolidated gross premiums written in 2025, including alternative market premiums, which are eliminated in consolidation. The workers’ compensation market is highly competitive and multi-line insurers continue to leverage workers’ compensation in their product offerings, which has resulted in a reduction of new business writings. Our workers' compensation product offerings are designed to provide flexibility in offering solutions to our customers at a competitive price; however, the rates we charge our policyholders remain pressured by the continuation of loss cost decreases in the states within our operating territories, and most states in which we operate have approved additional loss cost decreases for 2026. We have observed higher than expected loss trends in our average cost per claim, which we primarily attributed to increased medical costs driven by wage inflation and medical advancements. In response, we have implemented various medical cost management initiatives in 2025 to address medical cost severity. These initiatives are intended to enhance medical outcomes for injured workers, improve our case reserve estimation capabilities and lighten the administrative burdens of our claims professionals. The initiatives include the utilization of a medical document intelligence platform that assists with directing care to best-performing providers to help identify high severity claims early in the in claims' life cycle. Since implementing these initiatives, we have observed improvements in the average medical cost per claim, the benefit of which was more than offset by higher severity trends (see discussion that follows in Critical Accounting Estimates under the heading "Reserve for Losses and Loss Adjustment Expenses").

We believe our focus on our organization's Mission, Vision and Core Values enhances our market position and differentiates us from other insurers. We will continue to uphold our values of integrity, leadership, relationships and enthusiasm in all of our activities. We will honor these values in the performance of our Mission and pursuit of our Vision. We believe a commitment to our Mission and Vision in the service of our customers will continue to improve retention and add new insureds.

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Key Performance Measures

We are committed to disciplined underwriting, pricing and loss reserving practices as well as strategically managing our investment portfolio. We are also committed to maintaining prudent operating and financial leverage. We recognize the importance that our

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