Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (March 2020)
94 slides from Proassurance's investor presentation, Mar 2, 2020
Slide 1: ProAssurance Investor Briefing, February 2020
February 2020 & PROASSURANCE. Treated Fairly
Slide 2: Table of Contents
ProAssurance Investor Briefing | February 2020 2 The Latest NewsAppendix PRA Overview3-9Capital Management79-81 Topics of Importance & Key Themes10-13Investment Strategy82 Financial / Operating Performance14-20Net Investment Result83 PRA Performance vs. Benchmark84 Segment-Specific DiscussionDetaile
Slide 3: ProAssurance Overview
ProAssurance Overview February 2020
Slide 4: Mission, Vision, & Values
ProAssurance Investor Briefing | February 2020 4 The ProAssurance Mission We exist to Protect Others. Our Shared Vision We will be the best in the world at understanding and providing solutions for the risks our customers encounter as healers, innovators, employers, and professionals. Through an int
Slide 5: ProAssurance Corporate Profile
Liability 1 118 (Accounting, Legal, etc.) Podiatry & Chiropractic Captive Facilities (all lines) Legal Professional Liability ProAssurance Investor Briefing | February 2020 5 Cayman Islands Underwriting Offices laims Offices laims/Underwriting Offices orporate Headquarters Lloyds C C C • Total Asset
Slide 6: ProAssurance Brand Profile
ProAssurance Investor Briefing | February 2020 6 Alternative Risk Transfer Legal Professional Liability Medical Technology & Life Sciences Products Liability Healthcare Professional Liability ProAssurance Brand Profile Workers’ Comp Specialty P&C
Slide 7: Executive Team
General Counsel Insurance Group Executive Team bios available on our website at https://investor.proassurance.com/OD ProAssurance Investor Briefing | February 2020 7 Jeff Lisenby Executive Vice President & Kevin Shook President Eastern Alliance Noreen Dishart Chief Human Resources Officer Dana Hendr
Slide 8: Premiums, Policyholders & Distribution for 2019
ProAssurance Investor Briefing | February 2020 8 All Data as of 12/31/19, subject to rounding Premium allocated by line does not reflect inter-segment eliminations Our Distribution Sources HCPL LPL Life Sciences Workers’ Comp Agent/Broker63%100%100%100% Direct37%------Premiums, Policyholders & Distr
Slide 9: The Current State of the Markets We Serve
• Lloyd’s Syndicates ◦ ◦ Regulators are focused on excess capital and prudent business plans Signs of pricing improvement in recent renewal rounds ProAssurance Investor Briefing | February 2020 9 The Current State of the Markets We Serve • Healthcare Professional Liability (HCPL) ◦Broader market is
Slide 10: Topics of Importance and Key Themes
KeyThemes TopicsofImportanceand
Slide 11: Key Update: Positives in 2019
11 ProAssurance Investor Briefing | February 2020 *Includes business ceded to our Segregated Portfolio Cell Reinsurance segment Key Update: Positives in 2019 • Renewal Pricing Momentum Continued in Specialty P&C Despite Competition… ◦For the year, Facilities up 14%, Physicians up 6% ◦Other Healthcar
Slide 12: Confronting the Challenges Ahead
12 ProAssurance Investor Briefing | February 2020 Confronting the Challenges Ahead • Maintaining Caution as Loss Trends Develop in HCPL ◦Our caution is prompted by our own experience and the general industry outlook ◦Increasing current accident year loss picks to protect insureds, investors, and our
Slide 13: Key Themes
Strategy 13 ProAssurance Investor Briefing | February 2020 •Successfully adapting to serve evolving risks through new distribution partners •Coverages that span the broad spectrum of healthcare and related risks •Dedicated to creating long-term value Forward Thinking •World class knowledge & experti
Slide 14: Financial/Operating Performance
ormance Financial/OperatingPerf
Slide 15: Combined Ratio and Operating Ratio History
• Combined ratio average 2009 – 2019: 81.6% 15 ProAssurance Investor Briefing | February 2020 Operational Results / Long-Term Profitability • Operating ratio average 2009 – 2019: 62.0% Combined Ratio and Operating Ratio History Combined Ratio Operating Ratio 125.0% 100.0% 75.0% 50.0% 25.0% —% 2001*
Slide 16: Income Statement Highlights (12/31/19)
16 ProAssurance Investor Briefing | February 2020 In millions, except per share data Subject to rounding Three Months EndedYear Ended December 31 2019 2018 2019 2018 Gross Premiums Written $200.8 $211.7 $967.5 $957.3 Net Premiums Earned $214.4 $202.0 $847.5 $818.9 Net Investment Result $20.4 $20.9 $
Slide 17: Corporate Segment Financial Highlights (12/31/19)
17 ProAssurance Investor Briefing | February 2020 In millions Subject to rounding Corporate Segment Financial Highlights (12/31/19) Three Months EndedYear Ended December 31 2019 2018 2019 2018 Net investment income $21.6 $22.8 $87.1 $87.0 Equity in earnings (loss) of unconsolidated subsidiaries $(2.
Slide 18: Dividends and Share Repurchase
Shareholders’ Equity $1.5 $1.5 $1.6 $1.8 $2.0 $2.2 Total Investments $3.4 $3.3 $3.7 $3.9 $3.7 $4.0 Total Assets $4.8 $4.6 $4.9 $5.1 $4.9 $5.2 Total Policy Liabilities $2.8 $2.6 $2.5 $2.4 $2.4 $2.4 Book Value per Share $28.11 $28.39 $29.83 $33.78 $36.88 $38.17 Dividends and Share Repurchase In billio
Slide 19: Growth in Book Value + Dividends Since Inception
Cumulative: 2,807% / CAGR: 12.3% 19 ProAssurance Investor Briefing | February 2020 Growth in Book Value + Dividends Since Inception (Sep 1991) Book Value per Share History to December 31, 2019 • 2016 and 2017 each includes a $4.69/share special dividend • 2018 includes a $0.50/share special dividend
Slide 20: ProAssurance Leverage Update
10% • $288 million debt at 12/31/19 effective capital management 20 CapitalDebtDebt to Capital $2.50 $2.00 $1.50 20% 21% 15%16% 16% $1.00 $0.50 $— 09 10 11 12 13 14 15 16 17 18 19 EquityNet Premiums WrittenPremiums to Equity $2.50 $2.00 $1.50 $1.00 $0.50 $— 09 10 11 12 13 14 15 16 17 18 19 • $250 mi
Slide 21: Segment Highlights: Specialty P&C
Segment Highlights Specialty P&C, February 2020
Slide 22: Specialty P&C Financial Highlights (12/31/19)
22 ProAssurance Investor Briefing | February 2020 In millions, except ratios Subject to rounding Current Accident Year Net Loss Ratio 141.0 % 100.3 % 105.5 % 93.8 % Effect of Prior Accident Year Reserve Development 29.7 % (19.5)% 1.2 % (15.6)% Net Loss Ratio 170.7 % 80.8 % 106.7 % 78.2 % Underwritin
Slide 23: Q4 2019 Specialty P&C Gross Written Premium
$8.8 $6.7 $6.4 $4.0 23 ProAssurance Investor Briefing | February 2020 Q4 2019 Specialty P&C Gross Written Premium $ in millions, subject to rounding $82.3 $82.7 $15.7 $4.5 $78.9 $77.8 $9.7 $7.6 $5.0 $5.0 $5.4 Q4 2018 Q4 2019 Physician 12-mo Physician 24-mo Healthcare facilities Other healthcare Lega
Slide 24: YTD 2019 Specialty P&C Gross Written Premium
liability 24 ProAssurance Investor Briefing | February 2020 YTD 2019 Specialty P&C Gross Written Premium $ in millions, subject to rounding YTD 2018 YTD 2019 YTD 2018 YTD 2019 65.0 63.4 32.2 34.2 34.5 35.1 26.2 26.4 $26.1 $23.9 18.7 0.9 Healthcare Other healthcare Legal Tail & other Retroactive Medi
Slide 25: Strong Retention Despite Competition
Premium Retention – Physicians 89% 88% 25 ProAssurance Investor Briefing | February 2020 Trailing Four Quarters’ 91% Q1 19 Q2 19 Q3 19 Q4 19 84% Year-over-Year Premium Retention – Physicians 90% 90% 89% 90% 89% 89% 89% 89% 88% 90% 88% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 • Continue
Slide 26: Physician Liability Pricing Trend
26 ProAssurance Investor Briefing | February 2020 MD/DO Charged Rate History 200% 150% 100% 50% —% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual 23% 28% 28% 19% 11% 3% (2)% (6)% (4)% (2)% (2)% —% (1)% —% —% —% 1% 3% 8% Cumulative 23% 57% 101% 1
Slide 27: Metro Area Rate Comparison
Metro Area Rate Comparison $375,000 $350,000 $325,000 $300,000 $275,000 $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 49,921 49, 578 38,131 86,.032 93,078 95, 851 108,020 124, 867 147,595 356,.938 Annual Premium for a $1M I $3M Policy Filed or Approved at 12/
Slide 28: Segment Strategic Review: Specialty P&C
Segment Strategic Review Specialty P&C, February 2020
Slide 29: How Healthcare Costs Will Force Changes in Our Market
17.7% of GDP in 2018 Expected to average 5.5% growth annually from 2018-2027, and reach ~20% of GDP by 2027 http://data.worldbank.org/indicator/ SH.XPD.TOTL.ZS 29 ProAssurance Investor Briefing | February 2020 Source: Centers for Medicare and Medicaid Services. Office of the Actuary. National Health
Slide 30: We Are Approaching a Tipping Point
30 ProAssurance Investor Briefing | February 2020 Median Compensation (Wages + Health Benefits)$68,600 $105,800 $149,000 Health Spending as a Percentage of Compensation13.4% 24.4% 33.9% Average Annual Healthcare Spending per Working Household Includes Out-of-Pocket Expenses and Insurance Premiums We
Slide 31: How Healthcare Costs Will Force Changes in Our Market
• Greater reliance on a value-based payment system • • Greater reliance on on technology efficiency to maximize care-per-spend Increasing focus 31 ProAssurance Investor Briefing | February 2020 Adapted from HBR: The Strategy that Will Fix Healthcare Coordination of Care Physician/Specialty-Driven Pa
Slide 32: Strategy Update: Traditional Practices are Fading
Industry are changing more complex risks 32 ProAssurance Investor Briefing | February 2020 Source: 2018 Physicians Foundation Survey of America’s Physicians, and prior editions The HCPL Traditional practices Excess capital is being used to try to maintain market share at the expense of a sustainable
Slide 33: Risk Drivers in Healthcare
l medicine 33 RISK ProAssurance Investor Briefing | February 2020 • Healthcare Advances ◦ Longer life expectancies ◦ More expensive and complex procedures → increased risk of complications • High Deductible Health Plans ◦ Patients pay more out of pocket ▪ Higher expectations → lower tolerance for un
Slide 34: Driving Forces Behind HCPL Severity Trends
• Jury Sentiment ◦ Angry with perceived social inequality (“Haves” vs. “Have-Nots”) ◦ Increasingly interested in Compensation over Causation ◦ Institutional defendants rather than an individual ◦ Value of a dollar is distorted by high-earning public figures ▪ Athletes, musicians with multi-million d
Slide 35: Large HCPL Verdicts at Record Highs in 2018
35 ProAssurance Investor Briefing | February 2020 •Unmistakable trend to higher severity evident in the broader industry ◦Prompting greater caution in ProAssurance reserves on larger risks where deeper pockets may have been created by consolidation ◦Greater caution also translates into higher curren
Slide 36: ProAssurance is Positioned to Succeed in HCPL
strategy and success •Prudently leveraging our success and experience with the addition of specialized expertise •Traditional HCPL companies deepen our capabilities 36 ProAssurance Investor Briefing | February 2020 Broad capabilities to meet evolving demands in professional liability •Eastern, Medma
Slide 37: Emerging Issues in Healthcare
systems • Multi-state expansion to achieve through Lloyd’s syndicates 37 ProAssurance Investor Briefing | February 2020 Emerging Issues in Healthcare • Consolidation of providers into larger groups or within facilities/ • Evolution of new delivery systems to address cost pressures scale ProAssurance
Slide 38: Strategy Update: Successes in the Evolving Market
38 ProAssurance Investor Briefing | February 2020 12/31/19 *http://ascension.org/our-work/ascension-health/sites-of-care • The Certitudetm program in partnership with Ascension Health ◦Program crafted to meet the specific needs of a large healthcare organization. ◦Shared risk through quota share par
Slide 39: Traditional, Transitional and Alternative Risk Solutions
39 ProAssurance Investor Briefing | February 2020 workers’ compensation customers to workers’ compensation programs are Coordinated sales & marketing efforts target insureds in these classes for additional products and services Alternative Risk • Captive insurance programs allow large, sophisticated
Slide 40: Growth Opportunities Across Specialty Lines
development efforts are a natural fit with Lloyd’s This will be reflected in our results beginning in Q2, 2020. 40 ProAssurance Investor Briefing | February 2020 Segregated Portfolio Cell Reinsurance • Allows any organization to control their own risk • High ROE product with significant retention Mi
Slide 41: Planned Acquisition of NORCAL Group
NORCAL PlannedAcquisitionof Group
Slide 42: About NORCAL Group
insurance companies in the country with more than 32,000 NORCAL has been committed to healthcare providers and their Line of Business Total 2018 DPW: $342mm Source: Company website, 2018 NAIC filings for all MPL lines 42 ProAssurance Investor Briefing | February 2020 MPL Premiums By MPL Premiums Wri
Slide 43: Acquisition Rationale
Enhanced Scale and Capabilities 1 • • • Positions company as #3 player in the industry Enhances ProAssurance’s HCPL business: adds additional scale, capabilities and strong California presence Ability to underwrite larger risks from integrated systems with national footprint Product, Customer, & Geo
Slide 44: Transaction Overview
transaction consideration ¹ Final consideration mix may be a function of policyholder election of proceeds. 44 ProAssurance Investor Briefing | February 2020 Transaction •ProAssurance will purchase all of the outstanding stock of NORCAL Group following the demutualization Consideration •$450 million
Slide 45: Combination Creates the #3 HCPL Insurer in the U.S.
1 1 1 Pro forma for the merger of TDC and Hospitals Ins. (closed in 2019) filings for all MPL lines 45 ProAssurance Investor Briefing | February 2020 •NORCAL target market complements ProAssurance’s existing HCPL footprint, especially in the California market •NORCAL’s has a consistent track record
Slide 46: Combination Creates the #3 HCPL Insurer in the U.S.
• • combination Creates the #3 HCPL Insurer in the U.S. PROAS+SURANCE. ·l n:ltl'(] b1rl) PROASSURANCE. Ifl tl:'d l-1irh NORCAL ' '\\ GROUP Product Liability $35m Product Liability $35m Hospitals Facilities $1m Other HCP ------., .-------$3m $5m - + 2018 Total DPW: $830M $342M $1,172M Source: 2018 NA
Slide 47: Protecting More Physicians
3 Protecting More Physicians book value and tangible book value per share meaningful accretion thereafter leverage of approximately 25% ¹ Final consideration mix may be a function of policyholder election of proceeds. 47 ProAssurance Investor Briefing | February 2020 •Significant annual pre-tax syne
Slide 48: Shared Vision, Mission and History
In addition to the scale benefits of large HCPL players, ProAssurance and NORCAL bring complementary skills, history, and a shared vision to the combined entity to create the leading organization in the HCPL industry healthcare commitment physicians guides them through the company committed to servi
Slide 49: ProAssurance's Proven History of Successful Acquisitions
ProAssurance’s Proven History of Successful Acquisitions 1996 Acquisition 2001 ProNational & Me&dical Assurance Merge to Form Acquisition 49 ProAssurance Investor Briefing | February 2020 2006 Acquisition 1994 Acquisition 2010 Acquisition 020 1998 Demutualization/Merger 2008 Acquisition 2012 Acquisi
Slide 50: Acquisition of NORCAL: Stronger, Better Positioned HCPL Specialty Insurer
Acquisition of NORCAL: Stronger, Better Positioned HCPL Specialty Insurer 1 Enhanced Scale and Capabilities 2 Product, Customer, & Geographic Diversification 3 Conservatively Priced and Financed Transaction 4 Value Creation for Customers and All Key Stakeholders 5 Strong Strategic Alignment and Rati
Slide 51: Segment Highlights: Workers' Compensation Insurance
Segment Highlights Workers’ Compensation Insurance, February 2020
Slide 52: Workers' Compensation Insurance Financial Highlights (12/31/19)
52 ProAssurance Investor Briefing | February 2020 In millions, except ratios Subject to rounding Current Accident Year Net Loss Ratio 69.0 % 68.0 % 68.4 % 68.0 % Effect of Prior Accident Year Reserve Development (9.3%) (7.6%) (4.1%) (4.3%) Net Loss Ratio 59.7 % 60.4 % 64.3 % 63.7 % Underwriting Expe
Slide 53: Workers' Compensation Business Profile & Overview
dison, MS shville, TN Austin, TX 53 •Individual Account Underwriting •Broad Product Spectrum •43 State/DC Licenses – Core Operations in 19 States •Select Agency Partnerships ◦375 Contracts / 973 Locations business Gulf South Region • Ma • Na • ProAssurance Investor Briefing | February 2020 Eastern R
Slide 54: Broad Workers' Compensation Product Spectrum
54 ProAssurance Investor Briefing | February 2020 Traditional Markets •Guaranteed Cost Policies •Loss-Sensitive Dividend Plans •Deductible Plans •Retrospective Rating Plans •ParallelPay–“Pay as you Go” •Specialty Risk (high hazard) •Claims Administration and Risk Management 11,103 active policies as
Slide 55: Diversified Book of Business – Traditional Markets
• Wide diversification by class code and market segment ◦ 11,103 active policies in Traditional Programs ▪ Over 600 class codes actively written 55 ProAssurance Investor Briefing | February 2020 Subject to rounding Non-Healthcare Healthcare Related Top 10 Classes of Business by Payroll Exposure as o
Slide 56: Consistent Profitability in Workers' Compensation
Average 89.3% 2006 – 2019 93.6% 93.1% 93.0% 92.7% 91.8% 91.1% 56 ProAssurance Investor Briefing | February 2020 GAAP GAAP (excluding fair value adjustments, intangible asset amortization, transaction-related and other one-time charges) 96.0% 96.0% 95.9% 94.3% 95.5% 93.7% 94.7% 94.3% 87.7% 89.7% 89.1
Slide 57: Workers' Comp Claim Closing Pattern: Traditional
57 ProAssurance Investor Briefing | February 2020 12/31/19 of workers’ compensation •No claims open from 2004 and earlier ◦37 net claims open from 2014 and prior Workers’ Comp Claim Closing Pattern: Traditional •Eastern’s proactive claim-closing strategies are key to being recognized as a short-tail
Slide 58: Segment Strategic Review: Workers' Compensation Insurance
Segment Strategic Review Workers’ Compensation Insurance, February 2020
Slide 59: Eastern Outperforms in Workers' Compensation
Source: 1996-2018 A.M. Best Aggregates and Averages, Workers’ Compensation. Policyholder Dividends Included. 59 ProAssurance Investor Briefing | February 2020 Data is inclusive of Segregated Portfolio Cell Reinsurance results as of 12/31/2018. Eastern consistently outperforms in a volatile line of b
Slide 60: Opportunities in Workers' Compensation Insurance
60 ProAssurance Investor Briefing | February 2020 12/31/19 Subject to Rounding • $5.5 million in new business written in Q4 2019 ◦Traditional: $4.7 million ◦Alternative Market: $0.8 million • Launched Eastern Specialty Risk in 2017 ◦High Hazard product offering ▪Construction, Forestry, and Transport
Slide 61: Strategy Update: How Eastern Differentiates
61 ProAssurance Investor Briefing | February 2020 •Dedicated to effective claims management and returning injured workers to wellness •Disciplined individual account underwriting with focus on rate adequacy in rural territories •Understands market dynamics and regulatory concerns ◦ Use of local know
Slide 62: Specialty Risk: Higher Risk But NOT High Risk
62 ProAssurance Investor Briefing | February 2020 12/31/2019 SpecialtyRisk:HigherRiskButNOTHighRisk •Business Overview ◦Focusing on the next level of risk: higher hazard but not typical “high hazard” ▪Some classes previous written by Eastern in High Modification programs ▪$1.6 million in direct prem
Slide 63: Segment Highlights: Segregated Portfolio Cell Reinsurance
Segment Highlights Segregated Portfolio Cell Reinsurance, February 2020
Slide 64: Segregated Portfolio Cell Program Structure
Fronting Arrangement establishes/funds a Cell Asset Management Fee Income to ProAssurance Participates in profits/ losses of carefully selected cells 64 ProAssurance Investor Briefing | February 2020 Services + Cell Rental Expenses + Agency group or Association Underwriting Claims Administration Ris
Slide 65: Segregated Portfolio Cell Financial Highlights (12/31/19)
65 ProAssurance Investor Briefing | February 2020 In millions, except ratios Subject to rounding Current Accident Year Net Loss Ratio 71.2 % 60.3 % 79.6 % 64.5 % Effect of Prior Accident Year Reserve Development (11.6)% (3.6)% (12.9)% (12.1)% Net Loss Ratio 59.6 % 56.7 % 66.7 % 52.4 % Underwriting E
Slide 66: Alternative Market Written Premium Trends
• 20 year track record of growth and profitability $28,512 $27,032 $26,912 $29,113 $28,790 $847 lternative Markets business only, GPW in 000’s 66 ProAssurance Investor Briefing | February 2020 Workers’ Compensation Insurance – Alternative Market Written Premium Trends • • $15.2 million in alternativ
Slide 67: Diversified Book of Business – Segregated Portfolio Cell Programs
• Wide diversification by class code and market segment Subject to Rounding 67 ProAssurance Investor Briefing | February 2020 Diversified Book of Business - Segregated Portfolio Cell Programs ◦2,586 active policies in Segregated Portfolio Cell Market programs ▪Over 400 actively written class codes i
Slide 68: Claim Closing Pattern – Segregated Portfolio Cell Programs
68 ProAssurance Investor Briefing | February 2020 12/31/19 •Eastern’s proactive claim-closing strategies are key to being recognized as a short-tail writer of workers’ compensation •No claims open from 2009 and earlier ◦20 net claims open from 2015 and prior Claim Closing Pattern – Segregated Portfo
Slide 69: Segment Strategic Review: Segregated Portfolio Cell Reinsurance
Segment Strategic Review Segregated Portfolio Cell Reinsurance, February 2020
Slide 70: How the SPC Segment Differentiates
70 ProAssurance Investor Briefing | February 2020 •Successfully driving new business opportunities for healthcare professional liability business •Segregated cell company based in Cayman •Strategic partnerships with select independent agencies that share philosophies on controlling workers’ compensa
Slide 71: How Segregated Portfolio Cells Benefit ProAssurance
71 ProAssurance Investor Briefing | February 2020 • Alternative market solutions are in high demand ◦Fast growing sector of the Property and Casualty marketplace • Segregated Portfolio Cells are a high ROE product with significant retention ◦Low capital requirement by not assuming risk ◦Fee-based re
Slide 72: How Segregated Portfolio Cells Benefit Insureds
• “Turn-key” Operation to finish ◦ Flexible ownership ◦ Account management, underwriting, claims, 72 ProAssurance Investor Briefing | February 2020 HowSegregatedPortfolioCellsBenefitInsureds ◦Provides simple and easy transition from start ◦Minimal start-up capitalization • Monthly and Annual Reporti
Slide 73: Advantages of the Cayman Islands Domicile
73 ProAssurance Investor Briefing | February 2020 * 6/30/19. Cayman Islands Monetary Authority: https://www.cima.ky/upimages/commonfiles/StatsbyPrimaryClassofBusiness-website_1563201694.pdf AdvantagesoftheCaymanIslandsDomicile • Second largest captive domicile in the world ◦Largest healthcare captiv
Slide 74: Segment Highlights: Lloyd's of London
Segment Highlights Lloyd’s of London, February 2020
Slide 75: Lloyd's Segment Financial Highlights (12/31/19)
75 ProAssurance Investor Briefing | February 2020 In millions, except ratios Subject to rounding Current Accident Year Net Loss Ratio 52.7 % 104.5 % 58.2 % 74.0 % Effect of Prior Accident Year Reserve Development 1.6% 9.3% 0.5% 2.9% Net Loss Ratio 54.3 % 113.8 % 58.7 % 76.9 % Underwriting Expense Ra
Slide 76: Lloyd's Syndicates Business Detail
*$ in millions and based on exchange rates at 12/31/2019 76 ProAssurance Investor Briefing | February 2020 † Participation in operating results of Syndicate 1729 decreased to 29% for the 2020 Underwriting Year. This will be reflected beginning in our Q2 2020 results. • Property is primarily US •Synd
Slide 77: Why Lloyd's? Our Investment Thesis
• Particularly appealing to Medmarc as Medical Technology & Life Sciences 77 ProAssurance Investor Briefing | February 2020 Opportunity to invest alongside a recognized leader in Duncan Dale Universal distribution & licensure developing and testing expands globally Why Lloyd’s? Our Investment Thesis
Slide 78: Appendix
Appendix
Slide 79: Capital and Liquidity Decisions
Share repurchase at prices with a reasonable payback period Options for deploying remaining capital Recurring regular dividend dividend Decreasing tax efficiency 79 ProAssurance Investor Briefing | February 2020 Special Add & Liquidity Amounts needed for quarterly dividends and debt service Capital
Slide 80: Capital Management: Capital Returned and Acquisitions
challenges of an evolving insurance announced on February 20, 2020, targeted *Capital Returned is all declared dividends + share buybacks †Additional $150 million to be paid contingent upon ultimate loss estimates as of the acquisition date developing favorably. Acquisition is subject to required po
Slide 81: Key Source of Capital: Subsidiary Dividends to Corporate
primary source of liquidity Subsidiary capital requirements play a major role pre-approval 81 ProAssurance Investor Briefing | February 2020 Extraordinary dividends require regulatory approval Ordinary dividends are permitted without regulatory ◦Amounts and criteria vary by domiciliary state Ordinar
Slide 82: Investment Strategy and 2020 Outlook
82 ProAssurance Investor Briefing | February 2020 • Ongoing analysis of holdings to ensure lasting quality and profitability • Duration management remains paramount ◦We will not extend duration in search of incremental yield • Optimizing our allocations for better risk-adjusted returns ◦Ensures non-
Slide 83: Net Investment Result
83 ProAssurance Investor Briefing | February 2020 •Equity income yield is down due to ~18% lower average asset balances •Income yield is 3.4% (3.4% tax equivalent) for 2019 and 3.3% (3.4% tax equivalent) for 2018 •Excludes Lloyd’s Syndicates investment income of $4.6M for 2019 and $3.4M for 2018 and
Slide 84: ProAssurance Recent Investment Performance vs. Benchmark
ProAssurance Recent Investment Performance - o/a of Benchmark Assets -0.14% 12% 0.09% 0.02% 11% 0.58% 0.46% 6% -0.19% ed '-- - - PRA Performance Over Benchmark 7°/o 5°/o 3°/o 1°/o 2019 2018 2017 •PRA •Benchmark 2016 2015 As of June 30, 2019.Management reporting item which is 'tax equivalent,'unaudit
Slide 85: ProAssurance Investment Profile
85 ProAssurance Investor Briefing | February 2020 • Average duration: 2.96 years • Average tax-equivalent income yield: 3.4% • Investment grade: 94% 12/31/19 Subject to Rounding • Weighted average: A+ Full portfolio disclosure on our website: investor.proassurance.com/CustomPage/Index?KeyGenPage=305
Slide 86: ProAssurance Portfolio Detail: Corporate
86 ProAssurance Investor Briefing | February 2020 12/31/19 Subject to Rounding Weighted Average Rating: A-Top 20 Banks/Financials: $245 million in millions Bank of America $23 HSBC $9 Citi Group $22 Bank of Nova Scotia $8 J.P. Morgan $21 Charles Schwab $8 Goldman Sachs $18 Huntington National $8 Wel
Slide 87: ProAssurance Portfolio Detail: Asset Backed
87 ProAssurance Investor Briefing | February 2020 12/31/19 Subject to Rounding Weighted Average Rating: “AAA” Asset-Backed Securities: (23% of Fixed Income / 15% of Invested Assets) $525 Million ProAssurance Portfolio Detail: Asset Backed
Slide 88: ProAssurance Portfolio Detail: Fixed-Trading
Weighted Average Rating: “AA” 88 ProAssurance Investor Briefing | February 2020 12/31/19 Subject to Rounding All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 Fixed Maturities: $47 Million (2% of Fixed Income / 1% of Invested Assets) ProAssurance Portfolio Detail: Fixed-Trading
Slide 89: ProAssurance Portfolio Detail: Municipals
89 ProAssurance Investor Briefing | February 2020 12/31/19 Subject to Rounding Weighted Average Rating: AA Top 10 Municipal Holdings in millions New York, NY $14 Texas St A&M University $10 Connecticut St. Hsq Fin Authority $8 New York State Urban Dev $8 Houston Tx Utility $8 Oregon State $7 Utah St
Slide 90: ProAssurance Portfolio: Equities & Other
90 ProAssurance Investor Briefing | February 2020 12/31/19 Subject to Rounding Equities & Ot (19% of Invested Assets) her: $648 Million ProAssurance Portfolio: Equities & Other
Slide 91: Combined Tax Credits Portfolio Detail & Projections
Contributions Disposition after Impairment Earnings 91 ProAssurance Investor Briefing | February 2020 GAAP Income/(Loss) YearCapitalfrom Operations,Total CreditsTax ProvisionImpact on & Impairment 2019$150,596(21,120,408)(18,537,352)(22,972,638)1,852,230 2020$136,251(20,769,996)(17,474,158)(21,835,8
Slide 92: Change in Capital: 2009 – 2019
92 ProAssurance Investor Briefing | February 2020 * Equity shown in millions; all other data shown in thousands 20092010201120122013201420152016201720182019 Beginning Equity*$1,424 $1,705 $1,856 $2,164 $2,271 $2,394 $2,158 $1,958 $1,799 $1,595 $1,523 Cumulative-effect adjustments— — — — — — — — 149
Slide 93: Ceded Premiums Written (12/31/19)
including Subject to rounding (1) All other reinsurance arrangements primarily represent alternative market business ceded under a 100% quota share reinsurance agreement, net of a ceding commission, to SPCs in our Segregated Portfolio Cell Reinsurance segment. (2) All other reinsurance arrangements
Slide 94: Safe Harbor & Non-GAAP Notices
94 ProAssurance Investor Briefing | February 2020 review this presentation in conjunction with a thorough reading and understanding of these risk factors. This presentation contains Non-GAAP measures, and we may reference Non-GAAP measures in our remarks and discussions with investors. The primary N