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•	Level 3 securities are priced by the Chief Investment Officer.

•	Level 3 valuations are computed quarterly. Prices are evaluated quarterly against prior period prices and the expected change in prices.

•	ProAssurance's Level 3 securities are primarily NRSRO rated debt instruments for which comparable market inputs are commonly available for evaluating the securities in question. Valuation of these debt instruments is not overly sensitive to changes in the unobservable inputs used.

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(1)	This investment fund is focused on the structured mortgage market. The fund will primarily invest in U.S. Agency mortgage-backed securities. Redemptions are allowed at the end of any calendar quarter with a prior notice requirement of 65 days and are paid within 45 days at the end of the redemption dealing day.

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(2)

The investment is comprised of interests in two unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent; the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from three to eight years.

(3)	The fund is a LP that holds long equities of public international companies. Redemptions are allowed at the end of any calendar month with a prior notice requirement of 15 days and are paid within 10 days of the end of the calendar month of the redemption request.

(4)

The investment is comprised of interests in multiple unrelated LP funds. The funds hold primarily long and short North American equities and target absolute returns using strategies designed to take advantage of market opportunities. The funds generally permit quarterly or semi-annual capital redemptions subject to notice requirements of 30 to 90 days. For some funds, redemptions above specified thresholds (lowest threshold is 90%) may be only partially payable until after a fund audit is completed and are then payable within 30 days.

(5)

The investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to nine years.

(6)	This fund is a LLC structured to build and manage low volatility, multi-manager portfolios that have little or no correlation to the broader fixed income and equity security markets. Redemptions are not permitted but offers to repurchase units of the LLC may be extended periodically.

(7)

The investment is comprised of two unrelated LP funds. One fund seeks to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The second fund seeks event driven opportunities across the corporate credit spectrum. For both funds, redemptions are allowed at any quarter-end with a prior notice requirement of 90 days.

(8)	This fund is a LLC invested across a broad range of commodities and focuses primarily on market neutral, relative value strategies, seeking to generate absolute returns with low correlation to broad commodity, equity and fixed income markets. Following an initial one-year lock-up period, redemptions are allowed with a prior notice requirement of 30 days and are payable within 30 days.

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•	if there is intent to sell the security;

•	if it is more likely than not that the security will be required to be sold before full recovery of its amortized cost basis; and

•	if the entire amortized basis of the security is not expected to be recovered.

•	third-party research and credit rating reports;

•	the current credit standing of the issuer, including credit rating downgrades, whether before or after the balance sheet date;

•	the extent to which the decline in fair value is attributable to credit risk specifically associated with the security or its issuer;

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•	internal assessments and the assessments of external portfolio managers regarding specific circumstances surrounding an investment, which indicate the investment is more or less likely to recover its amortized cost than other investments with a similar structure;

•	for asset-backed securities, the origination date of the underlying loans, the remaining average life, the probability that credit performance of the underlying loans will deteriorate in the future, and our assessment of the quality of the collateral underlying the loan;

•	failure of the issuer of the security to make scheduled interest or principal payments;

•	any changes to the rating of the security by a rating agency; and

•	recoveries or additional declines in fair value subsequent to the balance sheet date.

•	our ability and intent to hold the investment until the recovery of its carrying value; and

•	in situations where there was not a previous OTTI for the investment, whether the current expected cash flows from the investment, primarily tax benefits, are less than those expected at the time the investment was acquired due to various factors, such as a change in the statutory tax rate; or

•	in situations where there was a previous OTTI for the investment, whether the expected cash flows from the investment at the time of the OTTI, primarily tax benefits, are less than its current carrying value.

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•	Reinsurance is utilized on a per risk basis for the property insurance and casualty coverages in order to mitigate risk volatility.

•	Catastrophic protection is utilized on both our property insurance and casualty coverages to protect against losses in excess of policy limits as well as natural catastrophes.

•	Both quota share reinsurance and excess of loss reinsurance are utilized to manage the net loss exposure on our property reinsurance coverages.

•	Property umbrella excess of loss reinsurance is utilized for peak catastrophe and frequency of catastrophe exposures.

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•	Beginning in 2018, external excess of loss reinsurance will be utilized by Syndicate 1729 to manage the net loss exposure on the specialty property and contingency coverages ceded to Syndicate 6131 (see further discussion in Segment Operating Results - Lloyd's Syndicates section that follows).

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(1)

Physician policies were our greatest source of premium revenues in both 2018 and 2017. The increase in twelve month term policies during the 2018 three-month period was primarily driven by new business written including the addition of one large policy, largely offset by retention losses. The decline in twelve month term policies during the 2018 six-month period was primarily due to retention losses and, to a lesser extent, a timing difference related to the shifting in renewal date of one large policy, largely offset by new business written. Additionally, both the 2018 three- and six-month periods included an increase in premiums assumed in which we participate on a quota share basis. Renewal pricing increases in both the 2018 three- and six-month periods is reflective of our concern about potential increases in loss severity as well as more moderate marketplace price competition. We also offer twenty-four month term policies to our physician insureds in one selected jurisdiction. The decrease in twenty-four month term policies during the 2018 three- and six-month periods, as compared to the same periods in 2017, primarily reflected the normal cycle of renewals (policies subject to renewal in 2018 were previously written in 2016 rather than in 2017).

(2)

Our healthcare facilities premium (which includes hospitals, surgery centers and other facilities) increased during the 2018 three- and six-month periods primarily due to new business written and an increase in renewal pricing due to changes in loss experience related to a few large policies. Additionally, the increase in the 2018 six-month period reflected an increase in coverage pertaining to one large entity which consolidated certain policies that were not previously insured by us during the first quarter of 2018. Increases in both the 2018 three- and six-month periods were largely offset by a timing difference related to the renewal of one large policy in the second quarter of 2018 and, to a lesser extent, retention losses.

(3)	Our other healthcare providers are primarily dentists, chiropractors and allied health professionals.

(4)	Our legal professionals policies are primarily individual and small group policies in select areas of practice. The slight increase during the 2018 three- and six-month periods was primarily due to new business written and, to a lesser extent, an increase in the rate charged for certain renewed policies in select states due to rate filings, largely offset by retention losses.

(5)

We offer extended reporting endorsement or "tail" coverage to insureds who discontinue their claims-made coverage with us, and we also periodically offer tail coverage through custom policies. The amount of tail coverage premium written can vary significantly from period to period. The increase in tail premiums during the 2018 three- and six-month periods was driven by $7.9 million of tail coverage provided in connection with a loss portfolio transfer with a large healthcare organization entered into during the second quarter of 2018 (see further discussion in footnote 6 that follows).

(6)

We offer custom alternative risk solutions including loss portfolio transfers for large healthcare entities who, most commonly, are exiting a line of business, changing an insurance approach, or simply preferring to transfer risk. In the second quarter of 2018, we entered into a loss portfolio transfer with a large healthcare organization. Per the agreement, we will cover a specific inventory of existing claims as well as provide tail coverage. The premiums received for the

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(7)

Our medical technology liability business is marketed throughout the U.S.; coverage is offered on a primary basis, within specified limits, to manufacturers and distributors of medical technology and life sciences products including entities conducting human clinical trials. In addition to the previously listed factors that affect our premium volume, our medical technology liability premium volume is impacted by the sales volume of insureds. The slight decrease during the 2018 three-month period was primarily due to retention losses, almost entirely offset by new business written. The increase during the 2018 six-month period primarily reflected new business written and, to a lesser extent, an increase in the premium charged for certain renewed policies as a result of growth in exposure, partially offset by retention losses. Retention losses in both periods are largely attributable to an increase in competition on terms and pricing.

(8)

Our alternative market solutions include writing healthcare premium in certain SPCs of our wholly owned Cayman Islands reinsurance subsidiaries, Eastern Re and Inova Re. We wrote approximately $1.3 million and $1.4 million of healthcare professional liability premium in our physicians line of business in the 2018 three- and six-month periods, respectively, and approximately $1.2 million in the 2017 three-month period. We wrote healthcare professional liability premium in our healthcare facilities line of business of approximately $0.4 million and $3.6 million in the 2018 three- and six-month periods, respectively, and approximately $0.1 million and $2.7 million in the same respective periods of 2017. All or a portion of the premium written was ceded to the SPCs. Under the SPC structure, the operating results of each cell, net of any participation we have taken in the SPCs, accrue to the benefit of the external owners of that cell. Our Specialty P&C segment does not currently participate in the cells that write HCPL premium, and therefore retains no underwriting profit or loss. Additional information regarding the SPCs is included in the Underwriting, Policy Acquisition and Operating Expense section that follows under the heading "Segregated Portfolio Dividend Expense (Income)."

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(1)

We generally reinsure risks under our excess of loss reinsurance arrangements pursuant to which the reinsurers agree to assume all or a portion of all risks that we insure above our individual risk retention levels, up to the maximum individual limits offered. In the majority of our excess of loss reinsurance arrangements, the premium due to the reinsurer is determined by the loss experience of that business reinsured, subject to certain minimum and maximum amounts. The change in ceded premiums written under our excess of loss reinsurance arrangements for the 2018 three- and six-month periods primarily reflected adjustments in the premiums we expect to owe our reinsurers based upon adjustments to our estimates of losses recoverable from our reinsurance partners. For the 2018 three-month period, we decreased our estimate of premiums we expect to owe our reinsurers whereas in the 2018 six-month period we increased our estimate.

(2)

As previously discussed, we are the majority participant in Syndicate 1729 and normally record our pro rata share of its operating results in our Lloyd's Syndicates segment on a quarter delay, except when information is available that is material to the current period. We also recorded the cession to the Lloyd's Syndicates segment from our Specialty P&C segment on a quarter delay as the amounts were not material and that permitted the cession to be reported by both the Lloyd's Syndicates segment and the Specialty P&C segment in the same reporting period. The decrease in premiums ceded to Syndicate 1729 during the 2018 three- and six-month periods reflected the non-renewal of our quota share agreement with Syndicate 1729 on January 1, 2018; the impact of which was not reflected in ceded premiums written until the second quarter of 2018 due to the quarter delay. Additionally, the decrease in premiums ceded to Syndicate 1729 during the 2018 six-month period reflected the revised contract terms on our previous quota share agreement effective

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(3)

We have entered into various shared risk arrangements, including quota share, fronting, and captive arrangements, with certain large healthcare systems and other insurance entities. These arrangements include our Ascension Health and CAPAssurance programs. While we cede a large portion of the premium written under these arrangements, they provide us an opportunity to grow net premium through strategic partnerships. The increase in the 2018 three- and six-month periods was primarily driven by growth in our CAPAssurance program.

(4)

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 previously discussed, the premiums ultimately ceded under certain of our excess of loss reinsurance arrangements are subject to the losses ceded under the arrangements. For the 2018 three- and six-month periods and the 2017 six-month period, we reduced our estimate of expected losses and associated recoveries for prior year ceded losses, as well as our estimate of ceded premiums owed to reinsurers. During the 2017 three-month period, the overall change in expected loss recoveries resulted in an increase in estimated ceded premiums owed to reinsurers and was attributable to one large claim. Changes to estimates of premiums ceded related to prior accident years are fully earned in the period the changes in estimates occur.

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

(2)

Reductions to premiums owed under reinsurance agreements for prior accident years increased net premiums earned (the denominator of the current accident year ratio) for the 2018 three- and six-month periods and 2017 six-month period. For the 2017 three-month period, we increased the premiums owed under reinsurance agreements for prior accident years which decreased net premiums earned in the quarter. See the discussion in the Premiums section for our Specialty P&C segment under the heading "Ceded Premiums Written" for additional information.

(3)

Excluding the impact of the loss portfolio transfer and prior year ceded premium adjustments, as shown in the table above, the current accident year net loss ratio for the 2018 three- and six-month periods increased 2.0 and 1.8 percentage points, respectively, as compared to the same respective periods of 2017. The increases in both periods were primarily due to an increase in expected losses in our excess and surplus lines business, partially offset by the impact of the revision to

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(a)	Not applicable.

(b)	Not applicable.

(c)	Information required by Item 703 of Regulation S-K.

*	Under its current plan begun in November 2010, the Board has authorized $600 million for the repurchase of common shares or the retirement of outstanding debt. This is ProAssurance’s only plan for the repurchase of common shares, and the plan has no expiration date.

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