Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (November 2021)
53 slides from Proassurance's investor presentation, Nov 18, 2021
Slide 1: Investor Update Third Quarter 2021
PROASSURANCE. ‘Treated Fairly Investor Update Third Quarter 2021 November
Slide 2: ProAssurance Overview
ProAssurance Overview
Slide 3: Mission, Vision, & Values
ProAssurance Investor Briefing | November 2021 3 Mission, Vision, & Values 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 pro
Slide 4: At a Glance
ProAssurance Investor Briefing | November 2021 4 At a Glance All employee and financial data as of 9/30/21. Office locations and employee counts include NORCAL. Business Unit Principal Offices Employees Lines of Business HCPL 6 534 Healthcare Professional Liability Medmarc 1 26 Medical Technology Li
Slide 5: ProAssurance Executive Leadership
ProAssurance Investor Briefing | November 2021 5 ProAssurance Executive Leadership Ned Rand - President & Chief Executive Officer Mr. Rand, who assumed this position at ProAssurance on July 1, 2019, was formerly Chief Operating Officer, and has served as Chief Financial Officer, Executive Vice Presi
Slide 6: ProAssurance Board of Directors
ProAssurance Investor Briefing | November 2021 6 ProAssurance Board of Directors Director bios available on our website at Investor.ProAssurance.com/OD Maye Head Frei C M. James Gorrie N/C Ziad R. Haydar, MD C Edward L. Rand, Jr E Frank A. Spinosa, DPM N/C Katisha T. Vance, MD N/C A ‐ Audit Committe
Slide 7: ProAssurance Brand Profile
ProAssurance Investor Briefing | November 2021 7 ProAssurance Brand Profile Specialty P&C Healthcare Professional Liability Workers’ Comp Alternative Risk Transfer Medical Technology & Life Sciences Products Liability Legal Professional Liability
Slide 8: ProAssurance Specialty Property & Casualty
ProAssurance Investor Briefing | November 2021 8 ProAssurance Specialty Property & Casualty Specialty P&C is comprised of three major divisions. Healthcare Professional Liability (HCPL) offers coverage to healthcare providers and facilities. Excess and surplus coverage and alternative risk solutions
Slide 9: ProAssurance Specialty Property & Casualty
ProAssurance Investor Briefing | November 2021 9 ProAssurance Specialty Property & Casualty Specialty Healthcare MedmarcInnovative Specialty Team Standard Physicians Healthcare Professional Liability Insurance $167.9M $71.6M $29.9M$84.7M$110.8M $14.3M Each block represents $5 million of premium ProA
Slide 10: Workers' Compensation Insurance
ProAssurance Investor Briefing | November 2021 10 Disciplined individual account underwriting with focus on rate adequacy in rural territories • Guaranteed Cost Policies • Loss-Sensitive Dividend Plans • Deductible Plans • Retrospective Rating Plans • ParallelPay–“Pay as you Go” • Specialty Risk (hi
Slide 11: Segregated Portfolio Cell Reinsurance
ProAssurance Investor Briefing | November 2021 11 Segregated Portfolio Cell Reinsurance ProAssurance Fronting Arrangement Agency Group or Association establishes/funds a cell Underwriting Claims Administration Risk Management Reinsurance Audit Asset Management Services + Cell Rental Fees + Participa
Slide 12: Lloyd's of London Syndicates
ProAssurance Investor Briefing | November 2021 12 Lloyd’s of London Syndicates ProAssurance Funds at Lloyd’s (FAL) $72.5 Million 1 Property Insurance (All Other - Mainly US) 30% Casualty (Mainly US) 22% Catastrophe Reinsurance (Excess of Loss) 14% Specialty 13% Facility (US) 7% General Liability (US
Slide 13: Consolidated Premiums, Policyholders & Distribution for 2021
ProAssurance Investor Briefing | November 2021 13 Specialty P&C 65% Workers' Comp 31% Standard Physicians 30% ($239.5M) Specialty 16% ($125.1M) Small Business Unit 11% ($84.7M) Tail Coverages + Other 5% ($36.3M) Medical Technology Liability 4% ($29.9M) Segregated Portfolio Cell Reinsurance 7% ($56.5
Slide 14: Financial Ratings & Balance Sheet Highlights
ProAssurance Investor Briefing | November 2021 14 • ProAssurance is recognized for our financial strength by top rating agencies • We maintain a balance sheet that ensures stability and security for our customers • Our conservative reserving philosophy enables success over the insurance cycles Finan
Slide 15: ProAssurance Leverage Update
ProAssurance Investor Briefing | November 2021 15 • $425 million debt at 9/30/2021 o Includes $176 million of Contribution Certificates related to NORCAL acquisition o $250 million 10-year notes due 11/15/2023 5.30% Coupon • $250 million revolving credit facility, $50 million "accordion" option o
Slide 16: Investment Philosophy & Portfolio
ProAssurance Investor Briefing | November 2021 16 Corporate 50% Asset Backed 29% State & Muni 13% Govt & Agency 7% Fixed Trading 1% • We maintain a conservative, highly-liquid investment philosophy • Effective stewardship of capital ensures a position of financial strength through turbulent market c
Slide 17: COVID-19 and the Markets We Serve
ProAssurance Investor Briefing | November 2021 17 COVID-19 and the Markets We Serve • Healthcare Professional Liability (HCPL) ◦ Primary exposures in broader markets: misdiagnoses, complications from delayed elective procedures, and failure to prevent infection in Senior Care settings May be mitig
Slide 18: Why We Will Be Successful
Why We Will Be Successful
Slide 19: A Foundation in Excellence
ProAssurance Investor Briefing | November 2021 19 A Foundation in Excellence “From our earliest days, we have operated with a strategy both responsive to near‐term challenges and proactive to long‐term opportunity.” ‐Ned Rand President & CEO Superior brand identity and reputation in the market Speci
Slide 20: In 2020, We… Focused on Underwriting
ProAssurance Investor Briefing | November 2021 20 In 2020, We… Fo cu se d on U nd er w rit in g • Specialty Property & Casualty: o Completed the re‐underwriting of our HCPL Specialty book of business o Enhanced organizational structure and leadership Added new Senior Executive underwriting and act
Slide 21: In 2020, We… Achieved Strong Rate Gains
ProAssurance Investor Briefing | November 2021 21 In 2020, We… • Specialty Property & Casualty o Achieved renewal rate gains outpacing severity o Improved product structure, terms, and conditions for complex risks o Secured average renewal pricing increases of: +10% in Specialty in 4Q, +15% full y
Slide 22: In 2020, We… Implemented Business Model Adjustments
ProAssurance Investor Briefing | November 2021 22 In 2020, We… • Implemented adjustments to our business model, including regional operating structure and staffing assignments o Streamlined organizational structure by reducing number of field offices by 50% in Specialty P&C (since July 2019) Execu
Slide 23: To date in 2021… We continue to execute our comprehensive strategy
ProAssurance Investor Briefing | November 2021 23 To date in 2021… W e co nt in ue to e xe cu te o ur co m pr eh en siv e st ra te gy We seek constantly to be more efficient and effective as an organization Here’s how we’re doing it *NAIC Data †NAIC before purchase accounting All data as of 9/30/202
Slide 24: Cyclicality in Insurance
ProAssurance Investor Briefing | November 2021 24 Cyclicality in Insurance Loss Trends Decelerate Market Softens Loss Trends Accelerate Market Hardens CatalystAvailability crisis Mergers & acquisitions Tort reform Competitors withdraw Underwriting criteria tightens Prices increase Pricing outpaces l
Slide 25: Strategic Update
Strategic Update @ PROASSURANCE + NORCAL *) GROUP
Slide 26: Acquisition Created the #3 HCPL Insurer in the U.S.
ProAssurance Investor Briefing | November 2021 26 Physicians $647.3M Other HCP $98.3M Hospitals $46.2M Facilities $4.3M Physicians $299.5M Other HCP $89.4M Hospitals $45.8M Facilities $1.5M Physicians $347.8M Other HCP $8.9M Hospitals $0.4M Facilities $2.8M Source: 2020 NAIC filings for all MPL line
Slide 27: Combination with NORCAL Creates the #3 HCPL Insurer
ProAssurance Investor Briefing | November 2021 27 Combination with NORCAL Creates the #3 HCPL Insurer in the U.S. Source: 2020 NAIC filings for all MPL lines Top Ten Market Share by DPW ($ in millions) • Ability to attract and retain key talent • Specialized products focused on healthcare profession
Slide 28: ProAssurance + NORCAL Competitive Position
ProAssurance Investor Briefing | November 2021 28 MPL Market Position Ranked in Top 3 (17 States, 7 new) Alabama Alaska Arizona California Delaware Illinois Indiana Kentucky Maryland Michigan Nevada Pennsylvania Tennessee Texas West Virginia Wisconsin Washington DC Ranked in Top Ten (29 states) Arka
Slide 29: Overview of NORCAL Insurance Company
ProAssurance Investor Briefing | November 2021 29 Overview of NORCAL Insurance Company NORCAL Overview NORCAL Brands • NORCAL is one of the leading providers of medical professional insurance companies in the country with ~33,000 insured physicians • Created during California’s medical malpractice c
Slide 30: Transaction Benefits
ProAssurance Investor Briefing | November 2021 30 Enhanced Scale and Capabilities1 • Positions company as #3 writer of MPL insurance in the industry • Enhances ProAssurance’s HCPL business: adds additional scale, capabilities and strong California presence • Ability to underwrite larger risks from i
Slide 31: Integration Goals & Objectives
ProAssurance Investor Briefing | November 2021 31 • Build a true national platform and enhance state market leadership • Provide best in class service • Improve overall business quality and profitability • Improve bench strength by retaining the best talent • Establish an effective regional/field op
Slide 32: HCPL Regional Structure
ProAssurance Investor Briefing | November 2021 32 HCPL Regional Structure Note: Overland Park, KS is PPM Office Regional Office Satellite Office Five Regions Northeast Mechanicsburg, PA (Hub) Midwest Greenwood, IN (Hub) Okemos, MI Madison, WI Southeast Birmingham, AL (Hub) Jacksonville, FL Mobile, A
Slide 33: ProAssurance's Proven History of Successful Acquisitions
ProAssurance Investor Briefing | November 2021 33 ProAssurance’s Proven History of Successful Acquisitions & 1995 Acquisition 1996 Acquisition OHiC 1994 Acquisition 1998 Demutualization/Merger Forms ProNational 1995 Acquisitions 1996 Acquisition 1999 Acquisition 2004 Hospital Renewal Rights Purchase
Slide 34: Appendix
Appendix
Slide 35: Income Statement Highlights (9/30/21)
ProAssurance Investor Briefing | November 2021 35 Income Statement Highlights (9/30/21) Three Months Ended Nine Months Ended September 30 2021 2020 2021 2020 Gross Premiums Written $ 308.7 $ 245.1 $ 741.9 $ 692.6 Net Premiums Earned $ 272.2 $ 194.6 $ 698.6 $ 605.7 Net Investment Result $ 34.5 $ 21.8
Slide 36: Corporate Segment Financial Highlights (9/30/21)
ProAssurance Investor Briefing | November 2021 36 Corporate Segment Financial Highlights (9/30/21) Three Months Ended Nine Months Ended September 30 2021 2020 2021 2020 Net investment income $ 18.7 $ 15.7 $ 49.4 $ 51.8 Equity in earnings (loss) of unconsolidated subsidiaries $ 15.2 $ 4.9 $ 34.0 $ (2
Slide 37: Specialty P&C Financial Highlights (9/30/21)
ProAssurance Investor Briefing | November 2021 37 Current Accident Year Net Loss Ratio 90.0 % 89.8 % 89.7 % 107.9 % Effect of Prior Accident Year Reserve Development (3.4%) (2.4%) (4.1%) (5.7%) Net Loss Ratio 86.6 % 87.4 % 85.6 % 102.2 % Underwriting Expense Ratio 17.7 % 23.8 % 18.7 % 22.7 % Combine
Slide 38: Workers' Compensation Insurance Financial Highlights (9/30/21)
ProAssurance Investor Briefing | November 2021 38 Workers’ Compensation Insurance Financial Highlights (9/30/21) Three Months Ended Nine Months Ended September 30 2021 2020 2021 2020 Gross Premiums Written $ 64.6 $ 63.0 $ 194.8 $ 199.4 Net Premiums Earned $ 42.2 $ 42.5 $ 122.9 $ 129.4 Total Revenues
Slide 39: Segregated Portfolio Cell Reinsurance Financial Highlights (9/30/21)
ProAssurance Investor Briefing | November 2021 39 Segregated Portfolio Cell Reinsurance Financial Highlights (9/30/21) Three Months Ended Nine Months Ended September 30 2021 2020 2021 2020 Gross Premiums Written $ 15,244 $ 15,933 $ 56,455 $ 58,068 Net Premiums Earned $ 15,344 $ 16,052 $ 47,500 $ 49,
Slide 40: Lloyd's Segment Financial Highlights (9/30/21)
ProAssurance Investor Briefing | November 2021 40 Lloyd’s Segment Financial Highlights (9/30/21) Three Months Ended Nine Months Ended September 30 2021 2020 2021 2020 Gross Premiums Written $ 9.0 $ 23.9 $ 31.7 $ 72.4 Net Premiums Earned $ 11.0 $ 18.1 $ 40.3 $ 61.2 Total Revenues $ 11.7 $ 20.0 $ 42.8
Slide 41: Subject to rounding (1) All other reinsurance arrangements primarily represent alternative market business ceded
ProAssurance Investor Briefing | November 2021 41 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.
Slide 42: Investment Strategy and 2021 Outlook
ProAssurance Investor Briefing | November 2021 42 Investment Strategy and 2021 Outlook • Duration management remains paramount ◦ We will not extend duration in search of incremental yield • Optimizing our allocations for better risk-adjusted returns ◦ Ensures non-correlation of returns • Effective s
Slide 43: Net Investment Result
ProAssurance Investor Briefing | November 2021 43 ($ in millions) 9/30/2021 9/30/2020 Change Net Investment Income Fixed maturities $ 53,969 $ 52,863 $ 1,106 Equities 1,790 3,598 (1,808) Short-term investments including Other 1,539 2,386 (847) BOLI 1,752 1,568 184 Investment fees and expenses (7,337
Slide 44: ProAssurance Recent Investment Performance
ProAssurance Investor Briefing | November 2021 44 ProAssurance Recent Investment Performance Contribution to Returns 2017-2021 / PRA vs Benchmarks 2021 2020 2019 2018 2017 % of Assets PRA Benchmark % of Assets PRA Benchmark % of Assets PRA Benchmark % of Assets PRA Benchmark % of Assets PRA Benchmar
Slide 45: Change in Capital: 2011 - 3Q 2021
ProAssurance Investor Briefing | November 2021 45 Change in Capital: 2011 ‒ 3Q 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 Beginning Equity* $1,856 $2,164 $2,271 $2,394 $2,158 $1,958 $1,799 $1,595 $1,523 $1,512 $1,349 Cumulative-effect adjustments — — — — — — 149 8,334 (444) (4,0
Slide 46: ProAssurance Portfolio Detail: Corporate
ProAssurance Investor Briefing | November 2021 46 Utilities /Energy 10% Non US Sovrgn & Gov't 2% Basic Materials 3% Other 3% Technology 5% Communications 8% Consumer Oriented 23% Financials 40% Industrials 8% 9/30/2021 Subject to Rounding ProAssurance Portfolio Detail Corporate: $2.0 Billion (50% of
Slide 47: Portfolio Detail: Asset Backed
ProAssurance Investor Briefing | November 2021 47 9/30/2021 Subject to rounding ProAssurance Portfolio Detail: Asset Backed Weighted Average Rating: “AA” Asset-Backed Securities: $1.2 Billion (30% of Fixed Income / 24% of Invested Assets) RMBS 40% Student Loans 2% Auto 9% Credit Cards 1% CLOs 2% Oth
Slide 48: Portfolio Detail: Fixed-Trading
ProAssurance Investor Briefing | November 2021 48 9/30/2021 Subject to rounding ProAssurance Portfolio Detail: Fixed-Trading Weighted Average Rating: “AA” Fixed Maturities: $45 Million (1% of Fixed Income / 1% of Invested Assets) All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 ABS &
Slide 49: Portfolio Detail: Municipals
ProAssurance Investor Briefing | November 2021 49 General Obligation 16% Pre-refunded 5% Special Revenue 79% 9/30/2021 Subject to rounding ProAssurance Portfolio Detail: Municipals Municipals: $523 Million (13% of Fixed Income / 10% Invested Assets) Weighted Average Rating: AA Top 10 Municipal Holdi
Slide 50: Portfolio: Equities & Other
ProAssurance Investor Briefing | November 2021 50 9/30/2021 Subject to Rounding ProAssurance Portfolio: Equities & Other Common Equities 2% Private Equity 24% Private Credit 14% Real Estate LP 9% Other 1% Bond Funds 33% Convertible Bonds 16% Tax Credits 3% Equities & Other: $642 Million (13% of Inve
Slide 51: Combined Tax Credits Portfolio Detail & Projections
ProAssurance Investor Briefing | November 2021 51 Combined Tax Credits Portfolio Detail & Projections Year Capital Contributions GAAP Income/(Loss) from Operations, Disposition & Impairment Total Credits Tax Provision after Operating Losses/Impairments and Tax Credits Impact on Earnings 2021 $ 124,8
Slide 52: Forward Looking Statements Non-GAAP Measures
ProAssurance Investor Briefing | November 2021 52 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 could cause our
Slide 53: Contact
© ProAssurance Corporation. All rights reserved. MAILING ADDRESS: ProAssurance Corporation 100 Brookwood Place Birmingham, AL 35209 CONTACT: Ken McEwen Investor Relations Manager 205.439.7903 KenMcEwen@ProAssurance.com