Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (June 2021)
53 slides from Proassurance's investor presentation, Jun 11, 2021
Slide 1: Investor Update First Quarter 2021
PROASSURANCE. ‘Treated Fairly Investor Update First Quarter 2021 June
Slide 2: ProAssurance Overview
ProAssurance Overview *All data excludes NORCAL unless specifically referenced
Slide 3: Mission, Vision, & Values
ProAssurance Investor Briefing | June 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 profess
Slide 4: At a Glance
4ProAssurance Investor Briefing | June 2021 At a Glance All data as of 3/31/21. Office locations and employee counts include NORCAL. Business Unit Principal Offices Employees Lines of Business HCPL 11 641 Healthcare Professional Liability Medmarc 1 31 Medical Technology Liability Innovative Specialt
Slide 5: ProAssurance Executive Leadership
ProAssurance Investor Briefing | June 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 President
Slide 6: ProAssurance Board of Directors
ProAssurance Investor Briefing | June 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 Committee C
Slide 7: ProAssurance Brand Profile
ProAssurance Investor Briefing | June 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 | June 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 (in
Slide 9: Specialty Property & Casualty
9ProAssurance Investor Briefing | June 2021 • Deep expertise and broad product spectrum in healthcare and related sciences • Consolidation in HCPL → demand for comprehensive insurance solutions • Innovative Specialty Team (Small Business Unit) → strategy to deliver product and related services effic
Slide 10: Workers' Compensation Insurance
10ProAssurance Investor Briefing | June 2021 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 (high ha
Slide 11: Segregated Portfolio Cell Reinsurance
11ProAssurance Investor Briefing | June 2021 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 + Participation
Slide 12: Lloyd's of London Syndicates
12ProAssurance Investor Briefing | June 2021 Lloyd’s of London Syndicates ProAssurance Funds at Lloyd’s (FAL) $106.8 Million 1 Property Insurance (All Other - Mainly US) 30% Casualty (Mainly US) 23% Specialty 22% Facility (US) 10% General Liability (US) 6% Contingency 6% All Other Reinsurance (Mainl
Slide 13: Consolidated Premiums, Policyholders & Distribution for 2021
ProAssurance Investor Briefing | June 2021 13 Specialty P&C 57% Workers' Comp 34% Standard Physicians 21% ($52.6M) Specialty 19% ($47.7M) Small Business Unit 9% ($22.8M) Tail Coverages + Other 3% ($8.3M) Medical Technology Liability 3% ($7.0M) Segregated Portfolio Cell Reinsurance 10% ($25.2M) Worke
Slide 14: Financial Ratings & Balance Sheet Highlights
14ProAssurance Investor Briefing | June 2021 • 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 Financial
Slide 15: ProAssurance Leverage Update
15ProAssurance Investor Briefing | June 2021 • $284 million debt at 3/31/2021 o $250 million 10-year notes due 11/15/2023 5.30% Coupon o $36 million in office building mortgages • $250 million revolving credit facility, $50 million "accordion" option o 5/6/2021 – borrowed $15 million to pay certai
Slide 16: Investment Philosophy & Portfolio
16ProAssurance Investor Briefing | June 2021 Corporate 55% Asset Backed 27% State & Muni 12% Govt & Agency 4% Fixed Trading 2% • We maintain a conservative, highly-liquid investment philosophy • Effective stewardship of capital ensures a position of financial strength through turbulent market cycles
Slide 17: COVID-19 and the Markets We Serve
17ProAssurance Investor Briefing | June 2021 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 mitigated
Slide 18: Why We Will Be Successful
Why We Will Be Successful
Slide 19: A Foundation in Excellence
19ProAssurance Investor Briefing | June 2021 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 Specializa
Slide 20: In 2020, We… Focused on Underwriting
20ProAssurance Investor Briefing | June 2021 In 2020, We… Fo cu se d on U nd er w ri ti ng • 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 actuaria
Slide 21: In 2020, We… Achieved Strong Rate Gains
21ProAssurance Investor Briefing | June 2021 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 year 2
Slide 22: In 2020, We… Implemented business model adjustments
22ProAssurance Investor Briefing | June 2021 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) Executed a
Slide 23: To date in 2021…
23ProAssurance Investor Briefing | June 2021 To date in 2021… W e co nt in ue to e xe cu te o ur co m pr eh en si ve s tr at eg y • Specialty Property & Casualty: o Closed our acquisition of the NORCAL Group Adds ~$300 million* of business to our Standard Physicians line Adds ~$1.5 billion† to o
Slide 24: Cyclicality in Insurance
24ProAssurance Investor Briefing | June 2021 Cyclicality in Insurance Loss Trends Decelerate Market Softens Loss Trends Accelerate Market Hardens Catalyst Availability crisis Mergers & acquisitions Tort reform Competitors withdraw Underwriting criteria tightens Prices increase Pricing outpaces losse
Slide 25: Merger Update
ed ans Merger Update @ PROASSURANCE. + NORCAL‘®) GROUP’ It’s go time.
Slide 26: Acquisition Creates the #3 HCPL Insurer in the U.S.
ProAssurance Investor Briefing | June 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 lines, f
Slide 27: Transaction Rationale
ProAssurance Investor Briefing | June 2021 27 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 integ
Slide 28: Integration Goals & Objectives
28ProAssurance Investor Briefing | June 2021 Integration Goals & Objectives • 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 e
Slide 29: Overview of NORCAL Insurance Company
ProAssurance Investor Briefing | June 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 ~29,000 insured physicians • Created during California’s medical malpractice crisi
Slide 30: Strategic Alignment and Rationale
ProAssurance Investor Briefing | June 2021 30 Strategic Alignment and Rationale Provides a Strong, Shared Foundation • Shared history provides solid foundation for shared future • Scaled platform to produce strong results driven by disciplined underwriting • Embrace the culture of service and innova
Slide 31: HCPL Regional Structure
ProAssurance Investor Briefing | June 2021 31 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, AL So
Slide 32: Combination with NORCAL Creates the #3 HCPL Insurer
ProAssurance Investor Briefing | June 2021 32 Combination with NORCAL Creates the #3 HCPL Insurer in the U.S. Source: 2020 NAIC filings for all MPL lines Pro Forma Top Ten Market Share by DPW ($ in millions) • Ability to attract and retain key talent • Specialized products focused on healthcare prof
Slide 33: NORCAL Transaction Creates Value for Customers and Stakeholders
ProAssurance Investor Briefing | June 2021 33 NORCAL Transaction Creates Value for Customers and Stakeholders Protecting More Physicians Financial Benefits • Combined company serves 86k+ healthcare professionals • Expanded product capabilities (admitted, E&S, and RRG capabilities) • Broader geograph
Slide 34: ProAssurance's Proven History of Successful Acquisitions
ProAssurance Investor Briefing | June 2021 34 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 200
Slide 35: Appendix
Appendix
Slide 36: Income Statement Highlights
ProAssurance Investor Briefing | June 2021 36 Income Statement Highlights (3/31/21) Three Months Ended March 31 2021 2020 Gross Premiums Written $ 224.7 $ 262.4 Net Premiums Earned $ 187.4 $ 203.9 Net Investment Result $ 21.8 $ 19.3 Net Realized Investment Gains (Losses) $ 8.8 $ (28.7) Total Revenue
Slide 37: Corporate Segment Financial Highlights
37ProAssurance Investor Briefing | June 2021 Corporate Segment Financial Highlights (3/31/21) Three Months Ended March 31 2021 2020 Net investment income $ 14.1 $ 19.4 Equity in earnings (loss) of unconsolidated subsidiaries $ 6.8 $ (1.6) Net realized investment gains (losses) $ 8.0 $ (25.5) Operati
Slide 38: Specialty P&C Financial Highlights
ProAssurance Investor Briefing | June 2021 38 Current Accident Year Net Loss Ratio 89.8 % 94.2 % Effect of Prior Accident Year Reserve Development (2.3%) (2.0 %) Net Loss Ratio 87.5 % 92.2 % Underwriting Expense Ratio 22.8 % 24.6 % Combined Ratio 110.3 % 116.8 % Specialty P&C Financial Highlights (3
Slide 39: Workers' Compensation Insurance Financial Highlights
ProAssurance Investor Briefing | June 2021 39 Workers’ Compensation Insurance Financial Highlights (3/31/21) Three Months Ended March 31 2021 2020 Gross Premiums Written $ 72.3 $ 79.2 Net Premiums Earned $ 40.0 $ 44.5 Total Revenues $ 40.4 $ 45.3 Net Losses & Loss Adjustment Expenses $ (26.2) $ (29.
Slide 40: Segregated Portfolio Cell Reinsurance Financial Highlights
ProAssurance Investor Briefing | June 2021 40 Segregated Portfolio Cell Reinsurance Financial Highlights (3/31/21) Three Months Ended March 31 2021 2020 Gross Premiums Written $ 25,151 $ 27,140 Net Premiums Earned $ 15,884 $ 16,980 Net Investment Income $ 221 $ 254 Net Realized Gains (Losses) $ 987
Slide 41: Lloyd's Segment Financial Highlights
ProAssurance Investor Briefing | June 2021 41 Lloyd’s Segment Financial Highlights (3/31/21) Three Months Ended March 31 2021 2020 Gross Premiums Written $ 14.1 $ 27.9 Net Premiums Earned $ 15.9 $ 22.0 Total Revenues $ 16.7 $ 23.0 Net Losses & Loss Adjustment Expenses $ (13.0) $ (14.8) Underwriting,
Slide 42: Ceded Premiums Written
ProAssurance Investor Briefing | June 2021 42 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)
Slide 43: Investment Strategy and 2021 Outlook
43ProAssurance Investor Briefing | June 2021 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 stewar
Slide 44: YTD 2021 Net Investment Result
44ProAssurance Investor Briefing | June 2021 ($ in millions) 3/31/2021 3/31/2020 Change Net Investment Income Fixed maturities $ 15,692 $ 18,285 $ (2,593) Equities 694 1,909 (1,215) Short-term investments including Other 273 1,472 (1,199) BOLI 444 456 (12) Investment fees and expenses (2,086) (1,292
Slide 45: Recent Investment Performance
45ProAssurance Investor Briefing | June 2021 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 Benchmark Cor
Slide 46: Portfolio Detail: Corporate
46ProAssurance Investor Briefing | June 2021 Utilities /Energy 11% Non US Sovrgn & Gov't 2% Basic Materials 2% Other 4% Technology 5% Communications 7% Consumer Oriented 21% Financials 41% Industrials 7% 3/31/2021 Subject to Rounding ProAssurance Portfolio Detail Corporate: $1.4 Billion (55% of Fixe
Slide 47: Portfolio Detail: Asset Backed
47ProAssurance Investor Briefing | June 2021 3/31/2021 Subject to rounding ProAssurance Portfolio Detail: Asset Backed Weighted Average Rating: “AA+” Asset-Backed Securities: $697 Million (27% of Fixed Income / 20% of Invested Assets) RMBS 38% Student Loans 2% Auto 14% Credit Cards 4% CLOs 3% Other
Slide 48: Portfolio Detail: Fixed-Trading
48ProAssurance Investor Briefing | June 2021 3/31/2021 Subject to rounding ProAssurance Portfolio Detail: Fixed-Trading Weighted Average Rating: “AA” Fixed Maturities: $45 Million (2% of Fixed Income / 1% of Invested Assets) All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 ABS & Othe
Slide 49: Portfolio Detail: Municipals
49ProAssurance Investor Briefing | June 2021 General Obligation 24% Pre-refunded 5% Special Revenue 71% 3/31/2021 Subject to rounding ProAssurance Portfolio Detail: Municipals Municipals: $322 Million (12% of Fixed Income / 9% Invested Assets) Weighted Average Rating: AA Top 10 Municipal Holdings in
Slide 50: Portfolio: Equities & Other
50ProAssurance Investor Briefing | June 2021 3/31/2021 Subject to Rounding ProAssurance Portfolio: Equities & Other Common Equities 1% Private Equity 31% Private Credit 22% Real Estate LP 8% other 1% Bond Funds 17% Convertible Bonds 14% Tax Credits 5% Equities & Other: $448 Million (13% of Invested
Slide 51: Combined Tax Credits Portfolio Detail & Projections
ProAssurance Investor Briefing | June 2021 51 Combined Tax Credits Portfolio Detail & Projections Year CapitalContributions GAAP Income/(Loss) from Operations, Disposition & Impairment Total Credits Tax Provision after Operating Losses/Impairments and Tax Credits Impact on Earnings 2021 $ 124,829 (1
Slide 52: Change in Capital: 2011 - Q1 2021
ProAssurance Investor Briefing | June 2021 52 Change in Capital: 2011 ‒ Q1 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 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) (4,076) —
Slide 53: Forward Looking Statements; Non-GAAP Measures
ProAssurance Investor Briefing | June 2021 53 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 act