Slide 1: Forward Looking Statements and Non-GAAP Measures
This presentation contains Forward Looking Statements and other information designed to convey our projections and expectations regarding future results. There are a number of factors which could cause our actual results to vary materially from those projected in this presentation. The principal ris
Slide 2: ProAssurance
PROASSURANCE. “Treated Faily
Slide 3: ProAssurance Corporate Profile
ProAssurance Corporate Profile Specialty writer of professional liability insurance Primarily Medical Professional Liability (MPL) Only “pure play” public company MPL writer Market Cap : ~$2.1 billion Total Assets: $4.9 billion Shareholders’ Equity: $2.0 billion Annualized dividend yield is 1.4% Ini
Slide 4: Medical Professional Liability Stands Apart
Medical Professional Liability Stands Apart Long-tail vs short tail Prolonged period of “benign profitability” Premiums remain well above levels of year 2000 No large commercial competitors have entered the market in a meaningful manner Significant barriers to entry in underwriting and claims handli
Slide 5: Consistent Success in All Financial Climates
Consistent Success in All Financial Climates Historical Book Value Per Share Inception to 6/30/11 CAGR: 16% Cumulative:1653% 10 Year Summary (2001 -2010) CAGR: 15% Cumulative: 297% Up 15% Y-O-Y Founded in 1978, Demutualized to a Public Company in September, 1991
Slide 6: Consistent Success in All Financial Climates
Consistent Success in All Financial Climates Up 13% Y-O-Y Historical Stock Price (to 8/31/11) Inception to 8/31/11 CAGR: 14% Cumulative:1287% 10 Year Summary (2001-2010) CAGR: 14% Cumulative: 263% Founded in 1978, Demutualized to a Public Company in September, 1991
Slide 7: ProAssurance Business Profile
ProAssurance Business Profile Fourth largest writer in a fragmented market Top 20 writers have just 65% of the market More than 100 writers with some share of the market Majority of companies are mutual or similar Few operate in more than two or three states
Slide 8: ProAssurance Geographic Profile
ProAssurance Geographic Profile Writing across the United States, ProAssurance has broad geographic diversification Regional structure provides the local knowledge that differentiates us Corporate Headquarters Corporate Headquarters Claims / Underwriting Offices Claims / Underwriting Offices (Birmin
Slide 9: YTD 2011 Policyholders: ~71,000
YTD 2011 Policyholders: ~71,000 ProAssurance Risk Profile We insure a broad range of healthcare risks, from home health providers to large hospitals Dual Distribution Agents: 67% Direct: 33% Direct in Alabama, Florida and in all states for Podiatric business Dual distribution in DC, Texas and parts
Slide 10: Operational Highlights
Operational Highlights
Slide 11: ProAssurance Outperforms
ProAssurance Outperforms Stringent underwriting based on individual risk selection Frequent rate/loss review ensures adequate price ProAssurance Average: 93.8% Industry Average: 107.4% Source: A.M. Best Aggregates and Averages, Medical Malpractice Lines of Business
Slide 12: Physician Rate Change History
Physician Rate Change History 1 ProAssurance Rate History & Trends Frequency stable after several years of decline Yearly severity increase is manageable at ~4% Retention remains at ~90% 1 Excludes PICA for clarity of historical comparison
Slide 13: Conservative Approach to Reserves
Net Favorable Reserve Development Net Reserve per Open MPL Claim 1 Conservative Approach to Reserves No change in the historic reserving practices which help provide protection against a loss trend reversal 1 Statutory basis; Loss & LAE Acquired company data included at end of acquiring year
Slide 14: Successful Claims Defense Sets Us Apart
ProAssurance: 82% Favorable Outcomes Industry: 73% Favorable Outcomes Successful Claims Defense Sets Us Apart We leverage financial strength to give our insureds the opportunity for an uncompromising defense of their claim Differentiates our product Provides long-term financial and marketing advanta
Slide 15: The Bottom Line: The Ohio Example
Fewer Claims Closed With Indemnity More Claims Defended in Court The Payoff: Lower Average Indemnity Payment per Closed Claim The Bottom Line: The Ohio Example 2.5x
Slide 16: Malpractice Made Public
Malpractice Made Public Malpractice judgments/settlements now disclosed in 26 states Disciplinary actions now disclosed in all states Board / Discipline / Med-Mal Med-Mal disclosure legislation proposed P Source: Federation of State Medical Boards National Clearinghouse and ProAssurance research
Slide 17: Regulatory Changes = Opportunity
Regulatory Changes = Opportunity Healthcare Reform will require more providers across all levels of care More customers for certain, maybe more litigation Likely to accelerate the trend of physicians joining into hospital-owned practices and larger groups We are uniquely positioned due to geographic
Slide 18: Financial Performance and Investments
Financial Performance and Investments
Slide 19: Investments Balance Risk vs. Return
$4 Billion Overall Portfolio $3.6 Billion Fixed Income Portfolio Investments Balance Risk vs. Return Average duration: 4.1 years Average tax-equivalent yield: 4.7% Investment grade: 97% Weighted average: AA- 6/30/11 Key actions in Q2 Added short ABS Added Governments to mitigate concerns over spread
Slide 20: Share Repurchase History
Share Repurchase History Committed to Capital Management Newly announced dividend of $1.00/share/year Complements our prudent share repurchase program $315 million spent to repurchase 6.0 million shares since 2005 Enhancing shareholder value by repurchasing shares at prices that build Book Value
Slide 21: Components of Return on Equity
Components of Return on Equity (in millions) Steady Return in an Unfavorable Environment Meeting our long-term ROE target of 12% -14%
Slide 22: Current Prices Present a Compelling Buying Opportunity
Current Prices Present a Compelling Buying Opportunity Driven to Excel / Focused on Shareholder Value Maintaining profitability Sustaining book value growth Producing sustainable shareholder value Focusing on long-term—ready for the turn