Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (August 2017)
98 slides from Proassurance's investor presentation, Aug 16, 2017
Slide 1: Forward Looking Statements and Non-GAAP Measures
0 ProAssurance Investor Presentation as of August 16, 2017 Forward Looking Statements 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 coul
Slide 2: Corporate Profile
Corporate Profile
Slide 3: ProAssurance Corporate Profile
2 ProAssurance Investor Presentation as of August 16, 2017 As of 6/30/17 , except Market Cap which is 8/11/17 ProAssurance Corporate Profile Healthcare - centric specialty insurance writer Healthcare Professional Liability (HCPL) • Only public company writing predominantly HCPL Life sciences and
Slide 4: YTD 2017 Premiums, Policyholders & Distribution
3 ProAssurance Investor Presentation as of August 16, 2017 YTD 2017 Premiums, Policyholders & Distribution 6/30/17 YTD Policyholder Count: ~ 72,500 YTD 2017 Gross Premium: $ 438 mln Physicians & Dentists 44% Ancillary Healthcare 3% Life Sciences/ Medical Tech 4% Hospitals & Facilities 6% Attorneys 3
Slide 5: Our Four Reporting Segments
4 ProAssurance Investor Presentation as of August 16, 2017 Our Four Reporting Segments ProAssurance Consolidated Specialty P&C Workers’ Compensation Lloyd’s Corporate / Other Healthcare Professional Liability Products Liability Lawyers’ Professional Liability Traditional Captive Market Facility Synd
Slide 6: ProAssurance Brand Profile
5 ProAssurance Investor Presentation as of August 16, 2017 ProAssurance Brand Profile Specialty P&C Healthcare Professional Liability Workers’ Comp Alternative Risk Transfer Medical Technology & Life Sciences Products Liability Legal Professional Liability
Slide 7: ProAssurance's Path to Success
6 ProAssurance Investor Presentation as of August 16, 2017 ProAssurance’s Path to Success 1976 - 1991 Building financial strength Establishing a brand reputation for superior service Demutualized in 2001 1991 - 2012 Scope & size addressed by expansion through careful M&A and de novo expansion in tra
Slide 8: Management is Experienced & Invested
7 ProAssurance Investor Presentation as of August 16, 2017 Management is Experienced & Invested Proven e xecutive management remains in place Officer/SVP: 16 years average tenure / 29 years average total industry experience VP level: 15 years average experience /28 years average total industry e
Slide 9: Key Updates – August 2017
Key Updates – August 2017
Slide 10: Q2 2017 Recap: Looking Beyond the Noise
9 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Recap: Looking Beyond the Noise PREMIUMS GREW 6% Overall Specialty P&C: +7.6% Workers’ Compensation +5.1% FAVORABLE DEVELOPMENT : $29 million Substantial PROFITABILITY Net Income: $19.5 Million or $0.36/share Operating Income : $21.4
Slide 11: Q2 2017 Recap: So What Was the Noise?
10 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Recap: So What Was the Noise? Analysts’ ESTIMATES vs. REPORTED Wall Street Consensus: $0.54/share ProAssurance Reported: $0.40/share Accounting CHARGE $5.2 million pre - tax charge to true - up accounting for a reinsurance facility
Slide 12: YTD 2017 Recap: Strong Fundamentals
11 ProAssurance Investor Presentation as of August 16, 2017 YTD 2017 Recap: Strong Fundamentals PREMIUM GROWTH 5.3% Overall Specialty P&C: +2.9% Workers’ Compensation +6.7% Lloyd’s Syndicate: +12.9% FAVORABLE DEVELOPMENT : $58 million Sustained PROFITABILITY Net Income: $61.0 Million or $1.14/share
Slide 13: Key Updates: Return on Equity & Future Goals
12 ProAssurance Investor Presentation as of August 16, 2017 Key Updates : Return on Equity & Future Goals Revising ROE target to seven points above the ten - year Treasury rate (risk - free rate ) Prior long - term return target of 12% - 14% is unrealistic in the current interest rate environment Te
Slide 14: Components of Return on Equity
13 ProAssurance Investor Presentation as of August 16, 2017 Components of Return on Equity 11.5% 9.2% 2.4% 5.5% 1.1% 0.2% - 2.5% Pre-Tax Underwriting Profit $22 Pre-Tax Investment Result $50 Non-Operating Gains $10 Taxes $2 Interest, SPC Dividend, & Intangibles $(23) Q2 2017 YTD Return on Equity: 6.
Slide 15: Subsidiary Dividend History
14 ProAssurance Investor Presentation as of August 16, 2017 $59 $144 $149 $229 $99 $150 $162 $56 $158 $294 $311 $285 YTD 17 2016 2015 2014 Ordinary Extraordinary Subsidiary Dividends to Corporate Subsidiary Dividend History (in Millions) 2017 ORDINARY Dividend Capacity is $174 Million Ordinary divid
Slide 16: Capital and Liquidity Decisions
15 ProAssurance Investor Presentation as of August 16, 2017 Capital and Liquidity Decisions All decisions must recognize that we hold significant capital at the subsidiary level to maintain operating company ratings and satisfy regulatory requirements. Dividends from subsidiaries to the holding comp
Slide 17: Key Updates: Capital Management
16 ProAssurance Investor Presentation as of August 16, 2017 Key Updates: Capital Management Regular quarterly dividends of $0.31/per common share Special dividend of $4.69/per common share paid on January 9, 2017 Dividends declared through June 30, 2017 have returned $33 million of capital to shareh
Slide 18: Superb Track Record of Capital Management
17 ProAssurance Investor Presentation as of August 16, 2017 Superb Track Record of Capital Management Current Management Team’s Tenure Began Q2 2007 At 6/30/17 | $ in 000’s Year Dividends Declared Share Repurchase Strategic Acquisitions Total* Special Regular 2007 ࡳ ࡳ $54,201 ࡳ $54,201 2008 ࡳ ࡳ 87,5
Slide 19: Capital Growth: 2008–Q2 2017
18 ProAssurance Investor Presentation as of August 16, 2017 Capital Growth: 2008‒Q2 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 Beginning Equity* $ 1,255 $ 1,424 $ 1,705 $ 1,856 $ 2,164 $ 2,271 $ 2,394 $ 2,158 $ 1,958 $ 1,799 Cumulative - effect adjustment: ASU 2016 - 09 adoptio n - -
Slide 20: Strong Capital Position and Minimal Debt
19 ProAssurance Investor Presentation as of August 16, 2017 $411 million debt at 7/31/17 $250 million 10 - year notes due 11/15/2023 @ 5.30% Coupon $161 million drawn on revolver (Fully Collateralized) Strong Capital Position and Minimal Debt Ten - Year Premiums to Equity Ten - Year Debt to Equi
Slide 21: Capital Management Priorities
20 ProAssurance Investor Presentation as of August 16, 2017 Capital Management Priorities Conceptual Model of Projected A. M. Best BCAR Scores if Increase Premium Reduce Surplus “A+” Rating Threshold The manner in which capital is used has an effect on financial ratings Excess Capital vs. Excess Cap
Slide 22: Consistent Value Creation
21 ProAssurance Investor Presentation as of August 16, 2017 Consistent Value Creation Reflects all stock splits and includes all dividends in the year declared. Source: SNL 52% 88% 160% 521% 229% 314% 671% 884% 941% 1095% 1698% 2040% 2853% 91 96 01 06 11 16 Scorecard at 8/11/17 Total Return CAGR Sin
Slide 23: Consolidated Financial & Operational Highlights
Consolidated Financial & Operational Highlights
Slide 24: Q2 2017 Income Statement Highlights
23 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Income Statement Highlights Strong results from a focused strategy Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $206.2 $195.0 $437.6 $415.5 Net Investment Result $25.2 $25.0 $50.2 $4
Slide 25: Balance Sheet Highlights
24 ProAssurance Investor Presentation as of August 16, 2017 $1.26 $1.42 $1.70 $1.86 $2.16 $2.27 $2.39 $2.16 $1.96 $1.80 $1.84 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 Balance Sheet Highlights Maintaining the financial strength required to keep our insurance promise while continuing
Slide 26: Book Value per Share History
25 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 $21.35 $26.30 $30.17 $35.42 $36.85 $39.13 $38.17 $36.88 $33.78 $34.41 $20.80 $23.13 $25.29 $29.80 $30.98 $34.67 $31.63 $30.72 $27.91 $28.45 $20.26 $24.04 $26.58 $31.93 $33.34 $35.64 $32.66 $31.17 $28.24 $28.94 12/31/08 12/31/09 12/3
Slide 27: Book Value per Share History Components
26 ProAssurance Investor Presentation as of August 16, 2017 Book Value per Share History Components 6/30/17 12/31/16 Change Total Book Value $34.41 $33.78 $(0.63) Less: Goodwill & Intangible Assets 5.47 5.54 ( 0.07) Tangible Book Value $28.94 $28.24 $(0.70) Less: Unrealized Gain / Loss 0.49 0.33 $
Slide 28: Strong Operational Results / Consistent Profitability
27 ProAssurance Investor Presentation as of August 16, 2017 Combined ratio average 2009 - 2016: 72.7% Operating ratio average 2009 - 2016: 50.2% Strong Operational Results / Consistent Profitability Combined Ratio and Operating Ratio History 69.1% 68.0% 52.5% 57.3% 70.6% 82.1% 90.5% 91.4% 96.3% 38.8
Slide 29: Disciplined Approach to Reserves
28 ProAssurance Investor Presentation as of August 16, 2017 $16 $20 $19 $25 $40 $48 $53 $48 $34 $29 $29 $20 $31 $37 $38 $50 $60 $39 $42 $35 $37 $29 $25 $30 $43 $33 $52 $50 $49 $43 $36 $29 $44 $104 $108 $138 $184 $114 $82 $49 $56 $49 $11 $17 $23 $36 $105 $185 $207 $234 $326 $272 $223 $182 $161 $144 $
Slide 30: Reinsurance Programs
29 ProAssurance Investor Presentation as of August 16, 2017 Reinsurance Programs Professional Liability Medical Technology & Life Sciences Workers' Compensation Retention Reinsured Coverage Offered up to $25 million -------- 5% to 12.5% retained based on layer Coverage Offered up to $9 million -----
Slide 31: Segment Financial Highlights & Strategic Review: Specialty P&C
Segment Financial Highlights & Strategic Review Specialty P & C
Slide 32: Q2 2017 Specialty P&C Financial Highlights
31 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Specialty P&C Financial Highlights Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $124.9 $116.1 $261.7 $254.4 Net Premiums Earned $109.0 $108.1 $222.1 $218.9 Total Revenues $110.5 $109
Slide 33: Q2 2017 Specialty P&C Gross Written Premium
32 ProAssurance Investor Presentation as of August 16, 2017 Total Gross Written Premiums were $124.9 mil — increase of 7.6% Q - o - Q Physician increase is due to normal cycle of 24 - month policy renewals. Retention: 90% Physician new business: $4.5 mil Facilities decrease is due to renewal timing.
Slide 34: Q2 2017 YTD Specialty P&C Gross Written Premium
33 ProAssurance Investor Presentation as of August 16, 2017 Total Gross Written Premiums were $261.7 mil — increase of 2.9% Y - o - Y Physician increase is due to normal cycle of 24 - month policy renewals. Retention: 90%. Physician new business: $10.9 mil Facilities decrease is due to renewal timin
Slide 35: Retention Remains Strong
34 ProAssurance Investor Presentation as of August 16, 2017 Retention remains strong Continued underwriting vigilance is being used today to ensure future success Market share is important, but NOT as important as profitability Strong Retention Despite Competition Year - over - Year Premium Retent
Slide 36: No Overall Change in HCPL Loss Trends
35 ProAssurance Investor Presentation as of August 16, 2017 No Overall Change in HCPL Loss Trends PICA excluded to facilitate accurate comparisons over time Current accident year loss ratio adjustments have been minor — in either direction Minimal changes on renewed business MD/DO Charged Rate Histo
Slide 37: ProAssurance Outperforms in Insurance
36 ProAssurance Investor Presentation as of August 16, 2017 Source: A.M. Best Aggregates and Averages for Each Line of Business (1991 - 2015) ProAssurance Outperforms in Insurance Average Combined Ratio 103.9% 99.7% 100.5% 106.7% 89.2% 95.0% 87.5% 68.3% 63.2% 88.5% 71.5% 67.2% 1991-2015 10-Year 2005
Slide 38: ProAssurance Outperforms in HCPL
37 ProAssurance Investor Presentation as of August 16, 2017 Source: 1991 - 2015 A.M. Best Aggregates and Averages, Medical Malpractice Lines of Business. Policyholder Dividends Included. ProAssurance Outperforms in HCPL ProAssurance consistently outperforms in a volatile line of business Calendar Ye
Slide 39: Strategy Update: Healthcare Costs are the Real Issue
38 ProAssurance Investor Presentation as of August 16, 2017 The question is cost vs. care — we can deliver more care than we can afford Restructuring is producing profound changes in healthcare The U.S. spends a greater proportion of GDP on healthcare and the percentage is increasing Strategy Upda
Slide 40: The Future of Healthcare Costs
39 ProAssurance Investor Presentation as of August 16, 2017 The Future of Healthcare Costs Adapted from HBR: The Strategy that Will Fix Healthcare Greater reliance on a value - based payment system Providers shouldering more of the risk of costs • Drives the need for efficiency in order to optimiz
Slide 41: Strategy Update: Traditional Practices are Fading
40 ProAssurance Investor Presentation as of August 16, 2017 The fork in the road for traditional HCPL companies Their core markets are disappearing and they do not have the financial size and capability to insure large, more complex risks Strategy Update: Traditional Practices are Fading Source: 2
Slide 42: Strategy Update: ProAssurance Can Meet the Challenges
41 ProAssurance Investor Presentation as of August 16, 2017 The HCPL Industry Traditional practices are fading Excess capital is being used to try to maintain market share at the expense of a sustainable future Capital & geographic constraints challenge many small insurers Few companies are able to
Slide 43: Emerging Issues in Healthcare
42 ProAssurance Investor Presentation as of August 16, 2017 Emerging Issues in Healthcare Consolidation of providers into larger groups or within facilities/systems Evolution of new delivery systems to address cost pressures Multi - state expansion to achieve scale Challenges for HCPL Insurers Broke
Slide 44: ProAssurance is Positioned to Succeed in HCPL
43 ProAssurance Investor Presentation as of August 16, 2017 Berkshire Hathaway Specialty MPL Carriers Only $865 Doctor’s Company $673 ProAssurance Size, Scope & Experience $453 MLMIC NY Only $392 Coverys $390 NORCAL $330 MCIC $288 PRI NY Only Negative Surplus $288 MAG Mutual $288 Hospitals Insurance
Slide 45: ProAssurance is Positioned to Succeed in HCPL
44 ProAssurance Investor Presentation as of August 16, 2017 ProAssurance is Positioned to Succeed in HCPL Our long - term focus on financial strength is central to our overall strategy and success We have proven our ability to thrive across insurance cycles We have an unmatched combination of financ
Slide 46: Strategy Update: Successes in the Evolving Market
45 ProAssurance Investor Presentation as of August 16, 2017 The Certitude tm program in partnership with Ascension Health Shared risk through quota share participation by Ascension’s captive on first $1M ~ 2,500 insured physicians ~$ 18.2 million inforce Certitude direct premium YTD Active i
Slide 47: Addressing a Wide Spectrum of Risk Appetites
46 ProAssurance Investor Presentation as of August 16, 2017 Addressing a Wide Spectrum of Risk Appetites Traditional Policies Primarily agent - sold or direct Remains the majority of our business Proven performance supports discipline pricing Transitional Risk sharing/high deductible programs contro
Slide 48: Emerging Strategic Opportunities: ProAssurance Risk Solutions
47 ProAssurance Investor Presentation as of August 16, 2017 Emerging Strategic Opportunities ProAssurance Risk Solutions sm Proven expertise to address complex risk financing challenges in both healthcare and workers’ compensation Run - off liabilities in M&A transactions Assumption of existing rese
Slide 49: Leveraging Existing Expertise in New Ways
48 ProAssurance Investor Presentation as of August 16, 2017 Leveraging Existing Expertise in New Ways Syndicate 1729 at Lloyds Our 58% participation provides potential access to international medical professional liability opportunities Increases flexibility for ProAssurance when working with comple
Slide 50: Segment Highlights & Strategic Review: Workers' Compensation
Segment Highlights & Strategic Review Workers’ Compensation
Slide 51: Workers' Compensation Expansion
50 ProAssurance Investor Presentation as of August 16, 2017 Workers’ Compensation Expansion Eastern Alliance Insurance Group acquiring renewal rights to the workers’ compensation book of Great Falls Insurance Company Administrative hearing set for late August with closing anticipated by the end of Q
Slide 52: Eastern Specialty Risk: Higher Risk But NOT High Risk
51 ProAssurance Investor Presentation as of August 16, 2017 Eastern Specialty Risk: Higher Risk But NOT High Risk Focusing on the next level of risk: higher hazard but not typical “high hazard” Some classes previous written by Eastern in High Modification programs $2.3 million in direct premiums
Slide 53: Q2 2017 Workers' Compensation Financial Highlights
52 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Workers’ Compensation Financial Highlights Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $59.3 $56.5 $143.6 $134.5 Net Premiums Earned $56.9 $55.1 $112.1 $109.5 Total Revenues $57.1 $
Slide 54: Consistent Profitability in Workers' Comp
53 ProAssurance Investor Presentation as of August 16, 2017 79.1% 65.6% 80.2% 87.7% 96.0% 89.7% 91.8% 93.0% 96.0% 95.9% 95.5% 90.9% 92.7% 94.3% 93.7% 90.3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 17 GAAP GAAP (excluding fair value adjustments, intangible asset amortization, transa
Slide 55: Eastern Outperforms in Workers' Compensation
54 ProAssurance Investor Presentation as of August 16, 2017 Source: 1996 - 2015 A.M. Best Aggregates and Averages, Workers’ Compensation. Policyholder Dividends Included. Eastern Outperforms in Workers’ Compensation Eastern consistently outperforms in a volatile line of business Calendar Year Combin
Slide 56: Strategy Update: How Eastern Differentiates
55 ProAssurance Investor Presentation as of August 16, 2017 Strategy Update: How Eastern Differentiates Understands market dynamics and regulatory concerns Use of local knowledge that has always differentiated ProAssurance Disciplined individual account underwriting with focus on rate adequacy in
Slide 57: Workers' Compensation Business Profile & Overview
56 ProAssurance Investor Presentation as of August 16, 2017 Eastern Alliance Insurance Group Best - in - Class Claims, Risk Management and Underwriting Business Model Broad Product Spectrum 41 State Licenses – Core Operations in 16 States Select Agency Partnerships 231 Contracts / 669 Locations Wo
Slide 58: Broad Workers' Compensation Product Spectrum
57 ProAssurance Investor Presentation as of August 16, 2017 Guaranteed Cost Policies Loss - Sensitive Dividend Plans Deductible Plans Retrospective Rating Plans Alternative Market Programs ParallelPay – “Pay as you Go” TPA Services Claims Administration and Risk Management Broad Workers’ Compensat
Slide 59: Diversified Book With Significant Healthcare Profile
58 ProAssurance Investor Presentation as of August 16, 2017 Healthcare as a Percentage of Overall Workers’ Compensation Writings Wide diversification by class code and market segment Over 600 class codes actively written Approximately 7,000 active policies in Traditional Programs Approximately
Slide 60: Workers' Comp Claim Closing Pattern: Traditional
59 ProAssurance Investor Presentation as of August 16, 2017 No claims open from 2002 and earlier 31 net claims open 2011 and prior Recognized as a short - tail writer of workers’ compensation Workers’ Comp Claim Closing Pattern: Traditional 6/30/2017 364 536 590 570 687 590 717 778 890 954 1,076 1
Slide 61: Strategy Update: Alternative Market Overview
60 ProAssurance Investor Presentation as of August 16, 2017 Strategy Update: Alternative Market Overview Inova® is our alternative insurance brand Alternative insurance s tructure u tilizes a segregated p ortfolio c ompany (Eastern Re) with segregated p ortfolio c ells housing captives Alternative m
Slide 62: Strategy Update: How Eastern Re Differentiates
61 ProAssurance Investor Presentation as of August 16, 2017 Strategy Update: How Eastern RE Differentiates Captive insurance solutions provided through Eastern Re Value - added risk management services cements brand loyalty Strategic partnerships with select independent agencies that share philosoph
Slide 63: How Inova Benefits Insureds
62 ProAssurance Investor Presentation as of August 16, 2017 How Inova ® Benefits Insureds “A” Rated Paper – WC / “A+” Rated Paper – MPL / GL Stable Off - Shore Facility Eastern Re Ltd, S.P.C. established in 1987 Cayman Islands Monetary Authority regulation Segregated portfolio cells statutoril
Slide 64: Workers' Comp Claim Closing Pattern: Alternative
63 ProAssurance Investor Presentation as of August 16, 2017 No claims open from 2006 and earlier Nine open claims from 2013 and prior Recognized as a short - tail writer of workers’ compensation Workers’ Comp Claim Closing Pattern: Alternative 6/30/2017 66 103 175 267 407 422 310 325 336 385 404 5
Slide 65: Inova: Direct Written Premium Trends
64 ProAssurance Investor Presentation as of August 16, 2017 Inova: Direct Written Premium Trends DPW in 000’s 18 year track record of growth and profitability 2016 DWP = $75.9 million Year - over - year growth of 7.4% $847 $2,451 $5,082 $12,159 $17,257 $25,786 $28,512 $27,032 $26,912 $29,113 $28,790
Slide 66: Inova Program Structure
65 ProAssurance Investor Presentation as of August 16, 2017 PROASSURANCE EASTERN Re Ltd., S.P.C. Cayman Domicile Founded in 1987 Segregated Portfolio Cell (SPC) Segregated Portfolio Cell (SPC) Segregated Portfolio Cell (SPC) Individual Segregated Portfolio Cell Loss Fund * Commission Front (Underwri
Slide 67: Segment Highlights & Strategic Review: Lloyd's
Segment Highlights & Strategic Review Lloyd’s
Slide 68: Q2 2017 Lloyd's Segment Financial Highlights
67 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Lloyd’s Segment Financial Highlights Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $23.3 $25.0 $36.0 $31.9 Net Premiums Earned $14.5 $13.5 $29.1 $26.0 Total Revenues $14.8 $14.1 $30.2
Slide 69: Lloyd's Strategy Review
68 ProAssurance Investor Presentation as of August 16, 2017 Lloyd’s Strategy Review ProAssurance provides 58% of capital to Syndicate 1729 Small ownership interest in the underlying underwriting arm, Dale Underwriting Partners $220 million capital commitment is best viewed as an investment Early sta
Slide 70: Lloyd's Strategy Update
69 ProAssurance Investor Presentation as of August 16, 2017 Lloyd’s Strategy Update Special Purpose Arrangement (SPA) within Syndicate 1729 will begin writing business in 2018 Four experienced underwriters with established books of business joining Planned premium is $22 million Business focus is co
Slide 71: Lloyd's Syndicate 1729: Business Detail
70 ProAssurance Investor Presentation as of August 16, 2017 Current Underwriting capacity: $130 million ProAssurance 57.6% share is $75.0 million 2016 Syndicate 1729 Gross Written Premium was $113.2 million ProAssurance 57.6% Share was $65.2 million Lloyd’s Syndicate 1729: Business Detail For th
Slide 72: Segment Highlights & Strategic Review: Corporate & Investments
Segment Highlights & Strategic Review Corporate & Investments
Slide 73: Q2 2017 Corporate Segment Financial Highlights
72 ProAssurance Investor Presentation as of August 16, 2017 Segment operating results for Q2 2017 were lower than Q2 2016 due to net realized investment losses in Q2 2017 caused by mark - to - market adjustments Investment income continues to decline due to lower average balances and the low interes
Slide 74: 2017 Investment Strategy
73 ProAssurance Investor Presentation as of August 16, 2017 Seeking better risk - adjusted returns Remaining sensitive to potential changes in tax rates 2017 Investment Strategy Optimizing our allocation E nsures non - correlation of returns Continuing capital management activities reduced the size
Slide 75: Q2 2017 Consolidated Net Investment Result
74 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Consolidated Net Investment Result 6/30/17 6/30/16 Change Net Investment Income Fixed maturities $ 18,427 $ 20 , 853 $ ( 2, 426 ) Equities 4 , 298 3, 561 737 Short - term and Other investments 958 673 285 BOLI 4 42 4 39 3 Investment
Slide 76: Q2 2017 YTD Consolidated Net Investment Result
75 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 YTD Consolidated Net Investment Result 6/30/17 6/30/16 Change Net Investment Income Fixed maturities $ 38,152 $ 43,099 $ ( 4,947 ) Equities 7,942 7,204 738 Short - term and Other investments 1,736 1,068 668 BOLI 897 899 (2 ) Investm
Slide 77: ProAssurance Investment Profile
76 ProAssurance Investor Presentation as of August 16, 2017 06/30/17 Full portfolio disclosure on our website: investor.proassurance.com/CustomPage/Index?KeyGenPage=305596 ProAssurance Investment Profile $ 2.5 Billion Fixed Income Portfolio (69% of Invested Assets) $ 3.7 Billion Overall Portfolio So
Slide 78: ProAssurance Recent Investment Performance
77 ProAssurance Investor Presentation as of August 16, 2017 ProAssurance Recent Investment Performance Management reporting item which is ‘tax equivalent,’ unaudited, and non GIPS Contribution to Returns 2013 - 2017 / PRA vs Benchmarks 2017 YTD 2016 2015 2014 2013 % of Assets PRA Benchmark % of Asse
Slide 79: Portfolio Detail: Asset Backed
78 ProAssurance Investor Presentation as of August 16, 2017 06/30/17 Subject to Rounding ProAssurance Portfolio Detail: Asset Backed $348 Million ( 14% of Fixed Income/9% of Invested Assets) RMBS 59% Other (Primarily Auto & Credit Card) … CMBS 9% Weighted Average Rating: “AAA”
Slide 80: Portfolio Detail: Corporate
79 ProAssurance Investor Presentation as of August 16, 2017 06/30/17 ProAssurance Portfolio Detail: Corporate Corporates: $1.3 Billion (52% of Fixed Assets/36% of Invested Assets) Top 20 Banks/Financials: $222 million in millions JPM $27 BBT $10 PNC $18 Simon Property $9 Goldman $17 Athene $9 Wells
Slide 81: Portfolio Detail: Municipals
80 ProAssurance Investor Presentation as of August 16, 2017 06/30/17 ProAssurance Portfolio Detail: Municipals Municipals: $722 Million (28% of Fixed Income / 20% Invested Assets) General Obligation 19% Prerefunded 9% Special Revenue 72% Weighted Average Rating: AA Top 10 Municipal Holdings in milli
Slide 82: Portfolio: Equities & Other
81 ProAssurance Investor Presentation as of August 16, 2017 06/30/17 ProAssurance Portfolio: Equities & Other Equities & Other: $822 Million ( 22% of Invested Assets) Equities 36% Alternative Equity & Debt 15% Real Estate LP 5% Private Equity 13% Convertible Bonds 4% Bond Funds 6% Inflation Focused
Slide 83: Additional Financial Detail
Additional Financial Detail
Slide 84: Inside ProAssurance's Income Statement: YTD 2017
83 ProAssurance Investor Presentation as of August 16, 2017 Inside ProAssurance’s Income Statement: YTD 2017 Net Premiums Earned 84.8% Net Investment Income 10.7% Net Realized Investment Gains (Losses) 2.6% Other: 1.9% Net Losses and Loss Adjustment Expenses 54.8% Underwriting, Policy Acquisitions,
Slide 85: Inside ProAssurance's Balance Sheet: Q2 2017
84 ProAssurance Investor Presentation as of August 16, 2017 Cash & Investments 78.4% Insurance Receivables 11.7% Goodwill & Intangible Assets 6.0% Other Assets 3.9% Retained Earnings 38.1% Loss Reserves 41.0% Reinsurance Payable & Other Liabilities 13.0% Unearned Premiums 8.2% Other Equity - 0.3% As
Slide 86: Tax Credit Impact on Operating Results
85 ProAssurance Investor Presentation as of August 16, 2017 Tax Credit Impact on Operating Results Substantial tax benefits and amortization expenses - $0.8 - $5.6 - $6.2 - $10.0 - $10.7 - $10.3 - $24.8 - $23.1 - $20.0 - $21.3 - $21.1 - $15.7 - $7.3 - $3.2 - $1.3 $1.2 $7.7 $12.3 $20.8 $21.7 $26.0 $3
Slide 87: Combined Tax Credits Portfolio Detail & Projections
86 ProAssurance Investor Presentation as of August 16, 2017 Combined Tax Credits Portfolio Detail & Projections Year Capital Contributions GAAP Income/(Loss) from Operations, Disposition & Impairment Total Credits (Source IRR Schedule) Tax Provision after Impairment Impact on Earnings 2016 $ 8,701,8
Slide 88: 2017 YTD Ceded Premiums Written
87 ProAssurance Investor Presentation as of August 16, 2017 2017 YTD Ceded Premiums Written HCPL including Podiatry Products Lawyers Workers’ Compensation Lloyd’s Traditional Alternative Markets 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 Gross wri
Slide 89: Q2 2017 Condensed Results by Segment
88 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 Condensed Results by Segment Second Quarter 2017 Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Q2 201 7 Q2 201 6 Gross premiums written $ 124 , 887 $ 59 , 325 $ 2 3 , 311 $ — $ ( 1 , 283 ) $ 2 06 , 240
Slide 90: Q2 2017 YTD Condensed Results by Segment
89 ProAssurance Investor Presentation as of August 16, 2017 Q2 2017 YTD Condensed Results by Segment Second Quarter 2017 Year to Date Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Q2 201 7 Q2 201 6 Gross premiums written $ 261,748 $ 143,554 $ 36,023 $ — $ ( 3 , 740 ) $
Slide 91: 2016 Condensed Results by Segment
90 ProAssurance Investor Presentation as of August 16, 2017 2016 Condensed Results by Segment Year Ended 12/31/16 Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Total YTD 2016 Total YTD 2015 Gross premiums written $ 535,725 $ 247,940 $ 65,157 $ — $ (13,808 ) $ 835,014 $
Slide 92: Additional Strategic Information: Specialty P&C Segment
Additional Strategic Information Specialty P & C Segment
Slide 93: Key State Rate Comparison
92 ProAssurance Investor Presentation as of August 16, 2017 Annual Premium for a $ 1M / $3M Policy Filed or Approved at 1/01/17 Key State Rate Comparison 92 Birmingham Indianapolis Denver Louisville Dallas St Louis Cleveland New York, NY Washington Miami Detroit Chicago Family Practice (No Surgery)
Slide 94: Broad Experience Across the Healthcare Market
93 ProAssurance Investor Presentation as of August 16, 2017 More than 30 year of experience insuring hospitals and other healthcare facilities Experience ranges from community - based hospitals to major medical centers Enhanced coverages (ProControl) and existing programs respond to today’s emerging
Slide 95: Claims Defense Still Defines ProAssurance
94 ProAssurance Investor Presentation as of August 16, 2017 We leverage our financial strength to give our insureds the opportunity for an uncompromising defense of each claim Differentiates our product Provides long - term financial and marketing advantages Retains business and deters future
Slide 96: Substantial HPL Claims Experience
95 ProAssurance Investor Presentation as of August 16, 2017 Substantial HPL Claims Experience 12/31/16 More than 10,000 Hospital Professional Liability (HPL) claims handled since the inception of ProAssurance Higher proportion of HPL settlements than for physician claims, due to the requests of hosp
Slide 97: The Ohio Example: 2005–2014 Data
96 ProAssurance Investor Presentation as of August 16, 2017 Comprehensive, reliable data provided by the Ohio Department of Insurance Broad range of competitors and business approaches The Ohio Example: 2005 – 2014 Data www.insurance.ohio.gov/Legal/Reports/Documents/Ohio2013MedicalProfessionalLiabil
Slide 98: The Bottom Line Benefits of Strong Defense
97 ProAssurance Investor Presentation as of August 16, 2017 Source: 2008 - 2015, Statutory Basis, A.M. Best Aggregates & Averages 2014: Preliminary data from SNL The Bottom Line Benefits of Strong Defense Our ability and willingness to defend claims allows us to achieve better results ProAssurance S