Proassurance Corporation · NYSE:PRA
Proassurance — Raymond James 36th Annual Institutional Investors Conference (March 2015)
82 slides from Proassurance's conference presentation, Mar 2, 2015
Slide 1: Investor Meetings, Raymond James 36th Annual Institutional Investors Conference
March 2, 2015 Investor Meetings Raymond James 36th Annual Institutional Investors Conference W. Stancil Starnes Chairman Chief Executive Officer Edward L. Rand, Jr. Executive Vice President Chief Financial Officer Frank B. O’Neil Senior Vice President Chief Communications Officer
Slide 2: Forward Looking Statements
Forward Looking Statements 2 This presentation contains Forward Looking Statements and other information designed to convey our projections and expectations regarding future results. There are a number of factors which could cause our actual results to vary materially from those projected in this pr
Slide 3: ProAssurance Corporate Profile
ProAssurance Corporate Profile Healthcare - centric specialty insurance writer Healthcare Professional Liability (HCPL) Only public company writing predominately HCPL Life sciences and medical device liability Workers' compensation Legal professional liability ProAssurance Mission Statement We Exist
Slide 4: Financial Results YTD
Financial Results YTD Our commentary on YTD 2014 results and updates on recent transactions and strategy
Slide 5: 2014 Income Statement Highlights
2014 Income Statement Highlights Solid profitability in a challenging market in millions, except per share data December 31, Y - OVER - Y Change 2014 2013 Gross Premiums Written $ 780 $ 568 +37% Net Investment Result $ 130 $ 137 - 5% Total Revenues $ 852 $ 740 +15% Total Expenses (Includes Loss Cost
Slide 6: 2014 Balance Sheet Highlights
2014 Balance Sheet Highlights Split adjusted, in billions, except Book Value per share Shareholders’ Equity $ 2.2 $ 2.4 - 10 % Total Investments 4.0 3.9 + 2 % Total Assets 5.2 5.2 ̶ Policy Liabilities 2.4 2.4 + 2 % 2014 2013 CHANGE $1.15 $1.42 $1.70 $ 1.86 $2.16 $ 2.27 $ 2.39 $2.16 2007 2008 2009 20
Slide 7: Capital Discussion
Capital Discussion We focus on the creation of meaningful shareholder value through a disciplined approach to capital management
Slide 8: Demonstrated Commitment to Capital Management
Demonstrated Commitment to Capital Management Capital return at historic levels – $ 443 million in 2014 Dividends:$ 220.5 mln declared in 2014 Quarterly dividend increased to $ 0.31 /share on December 3 , 2014 Yield: Approximately 2.6 % Buyback: $ 222.4 mln in 2014 4.9 mln shares repurchased $ 149 m
Slide 9: Capital Growth and Total Capital Return
Capital Growth and Total Capital Return 11 An unmatched track record under the current senior management team ( Q 2 2007 to Q 4 2014 ) Shareholders Equity grown from $ 1.15 billion to $ 2.16 billion ( 87 %) Additionally, $ 1.1 billion returned to shareholders in the form of share repurchase and divi
Slide 10: Strong Capital Position and Minimal Debt
Strong Capital Position and Minimal Debt Committed to enhancing shareholder value through effective capital management R etaining capital needed for the market turn and M&A 12 % 10% 6 % 2% 3% 3% 2 % 13% 16 % 22% 25 % 19% 14% 20% $- $0.5 $1.0 $1.5 $2.0 $2.5 2014 2013 2012 2011 2010 2009 2008 2007 200
Slide 11: The Payoff: Consistent Book Value Growth
$2.62 $ 3.85 $ 4.77 $6.24 $11.60 $15.75 $ 10.09 $8.34 $10.50 $ 16.08 $ 19.56 $24.32 $24.96 $27.46 $ 26.39 $30.30 $39.91 $ 42.19 $ 48.48 $44.99 91 93 95 97 99 01 03 05 07 09 11 13 YTD 15 $1.84 $3.14 $ 4.28 $5.79 $6.96 $ 8.01 $ 9.39 $10.46 $12.30 $16.81 $ 19.35 $21.35 $26.30 $ 30.17 $ 35.67 $40.23 $43
Slide 12: Focused on Shareholder Value
Focused on Shareholder Value Maintaining profitability and bottom line focus Continuing to grow book value per share Producing sustainable shareholder value 0.0 0.5 1.0 1.5 2.0 2.5 $- $10.00 $20.00 $30.00 $40.00 $50.00 Sep-91 May-93 Jan-95 Sep-96 May-98 Jan-00 Sep-01 May-03 Jan-05 Sep-06 May-08 Jan-
Slide 13: Consolidated Operational Highlights
Consolidated Operational Highlights Our commentary on YTD 2014 results and updates on recent transactions and strategy
Slide 14: 2014 Acquisitions and Integration
2014 Corporate Update 16 Acquired Eastern Insurance effective 1 / 1 / 14 Integration into ProAssurance well underway Significant contributions to Q 1 results Lloyd’s Syndicate 1729 began operations on 1 / 1 / 14 Business on the books as planned All senior staffing arrangement complete Medmarc and IN
Slide 15: Strong Operational Results in 2014
Strong Operational Results in 2014 Combined Ratio: 82.1 % (Avg Since 2009 : 66.6 %) Operating Ratio: 64.2 % (Avg Since 2009 : 41.5 %) 69.1% 68.0 % 52.5% 57.3% 70.6% 82.1 % 38.8% 39.8 % 27.6% 32.6 % 46.1% 64.2% 2009 2010 2011 2012 2013 2014 Combined Ratio and Operating Ratio History Combined Ratio Op
Slide 16: Operational Results vs Top P&C Writers
Operational Results vs Top 100 P&C Writers Consistently achieving superior results 69.1% 68.0% 52.5% 57.3 % 70.6% 82.1 % 99.5% 99.4 % 106.8% 102.0% 97.1% 2009 PRA Rank: 2 2010 PRA Rank: 4 2011 PRA Rank: 1 2012 PRA Rank: 1 2013 PRA Rank: 1 YTD 2014 PRA Top 100 P&C AVERAGE 18 PRA Data: As reported Ind
Slide 17: Operational Results vs Top P&C Writers (Q3)
Operational Results vs Top 100 P&C Writers (Q3) Consistently achieving superior results 38.8% 39.8 % 27.6% 32.6 % 46.1% 64.2 % 88.2% 89.8% 97.4% 93.4 % 89.1% 2009 PRA Rank: 1 2010 PRA Rank: 3 2011 PRA Rank: 1 2012 PRA Rank: 1 2013 PRA Rank: 1 YTD 2014 PRA Top 100 P&C AVERAGE 19 PRA Data: As reported
Slide 18: Consistent Approach to Reserves
Consistent Approach to Reserves Recognizing loss trends as they appear No change in reserving philosophy or process Reserve Development History by Quarter by Year $ 16 $20 $ 19 $25 $ 40 $47 $53 $48 $ 20 $31 $ 37 $38 $ 50 $60 $39 $43 $ 25 $30 $ 43 $33 $ 52 $50 $49 $42 $ 44 $104 $ 109 $138 $ 184 $115
Slide 19: 2014 Premiums, Policyholder & Distribution
1 2 Physician & Dental 51.2% Ancillary Healthcare 3.4% Life Sciences & Med Tech 4.5 % Hospitals & Facilities 4.4% Attorneys 3.6 % Workers' Comp 28.5% Lloyd's 4.3% Other 0.2 % Specialty P&C 2014 Policyholders: ~80,000 Physicians & Dentists 58.3 % Ancillary Healthcare 11.5% Life Sciences & Med Tech 1.
Slide 20: Eastern Insurance Transaction Update
Eastern Insurance Transaction Update Significant contributor to top line growth and bottom line profitability Expected cross selling opportunities are emerging Continues building the platform to serve the needs of larger integrated health systems and healthcare delivery organizations Workers’ compen
Slide 21: Lloyd's Syndicate Update
Lloyd’s Syndicate Update First policies underwritten January 1, 2014 $32 mln in net premium written reported at 12/31/14 (reporting on a one - quarter lag) ProAssurance is providing 58% of underwriting capital Remaining capital from other corporates and private names ProAssurance has committed $78 m
Slide 22: Opportunities and Strategies
Opportunities and Strategies ProAssurance is Evolving to Anticipate the Risks Facing an Increasingly Complex healthcare Delivery System
Slide 23: Healthcare Realities
Healthcare Realities American healthcare is wrestling with the question of cost vs. care — we can deliver more care than we can afford Restructuring is producing profound changes in healthcare Healthcare delivery is being pushed down to lower cost providers The Affordable Care Act (ACA) is creating
Slide 24: Insurance Marketplace Realities
Insurance Marketplace Realities 26 Insurance companies are awash in capital Pressure is mounting to “do something” with it M&A — the hunter vs. the hunted Chase market share with low prices but disastrous long - term consequences Appease investors with unwise capital - return strategies
Slide 25: The ProAssurance Response
The ProAssurance Response 27 Our long - term focus on financial strength is central to our overall strategy and success ProAssurance has always evolved ahead of the curve We have proven our ability to thrive across insurance cycles We have an unmatched combination of financial strength and deep expe
Slide 26: Positioned to Succeed
Positioned to Succeed 28 ProAssurance has the right combination of geographic scope, broad experience, and financial strength for success in the new world of healthcare liability Medical Protective National Recent Hospital Experience $780 Doctors Co National Limited Hospital Experience $ 736 MLMIC N
Slide 27: Continuing Emphasis on Strategic M&A
Continuing Emphasis on Strategic M&A 29 Well known, seasoned acquirer with a successful track record 1. Purchased Company 2. Demutualization Original Companies OHIC HOSPITALS ONLY 2 1 1 1 1 1 1 1 1 1 1 3 4 4 1 4 3. Renewal Rights 4. Assumed Business 2 2 † 2 3 1 3 3 1 SERTA 2 PROFESSIONAL PROTECTIVE
Slide 28: Strategic Successes
Strategic Successes Leveraging our reach, expertise and financial strength $26 mln in annualized premium in the Certitude tm program in partnership with Ascension Health Insuring Ascension - affiliated physicians through coordinated, jointly insured programs Adding Ascension - employed physicians an
Slide 29: Strategic Opportunities
Strategic Opportunities 31 Alternative risk and self - insurance opportunities Captive insurance programs allow large, sophisticated healthcare and workers’ compensation customers to control their own insurance programs Eastern Re brings proven experience and expertise in establishing and operating
Slide 30: Strategic Opportunities: ProAssurance Risk Solutions
Strategic Opportunities 32 ProAssurance Risk Solutions sm Newly formed unit brings proven expertise to address complex risk financing challenges in both healthcare and workers’ compensation Run - off liabilities in M&A transactions Assumption of existing reserve liabilities for large organizations s
Slide 31: Strategic Opportunities Through Lloyd's Syndicate 1729
Strategic Opportunities Through Lloyd’s Syndicate 1729 is an investment opportunity with significant insurance benefits Potentially provides access to international medical professional liability opportunities Leverage Medmarc’s expertise to underwrite international medical technology and life scien
Slide 32: Strategic Opportunities Through Medmarc
Strategic Opportunities Through Medmarc Medmarc is a market - leader in medical products and life sciences liability Increasing presence in device and drug development by larger healthcare organizations Increasing globalization of testing and development efforts are a natural fit with Lloyd’s Syndic
Slide 33: Strategic Opportunities Through Mid-Continent
Strategic Opportunities Through Mid - Continent ProAssurance Mid - Continent Underwriters addresses the needs of ancillary healthcare providers This market is increasing rapidly as the push to reduce healthcare costs drives care through lower cost providers who are an important part of the healthcar
Slide 34: Key Investor Points
Key Investor Points 36 ProAssurance has always evolved ahead of the curve in our industry — we continue that trend We have proven our ability to thrive across insurance cycles and produce significant returns for long - term shareholders Our long - term focus on financial strength and sustained value
Slide 35: Segment Highlights
Segment Highlights We report results in three operational segments Specialty Property Casualty Insurance Workers’ Compensation Insurance Lloyd’s Syndicate 1729
Slide 36: 2014 Specialty P&C Financial Highlights
December 31, Y - OVER - Y Change 2014 2013 Gross Premiums Written $ 533 $ 568 - 6% Net Premiums Earned $ 493 $ 528 - 7% Total Revenues $ 499 $ 534 - 7% Net Losses & Loss Adjustment Expenses $ 228 $ 224 +2% Underwriting & Operating Expenses $ 133 $ 132 +1% Operating Result $ 137 $ 177 - 23% 2014 Spec
Slide 37: 2014 Specialty P&C Gross Written Premium
2014 Specialty P&C Gross Written Premium 39 Total Gross Written Premiums decreased $34.9M (6.2%) from $567.5M to $532.6M Physician new business: $16.2M Facilities new business: $ 4.5M Lawyers increased due to both new business of $4.2M and higher pricing on renewals Medical & life sciences products
Slide 38: Strong Retention Despite Competition
Strong Retention Despite Competition Retention remains in line with recent quarters Continued underwriting vigilance is being used today to ensure future success Market share is important, but NOT as important as profitability 84 % 85 % 87% 90% 90% 89 % 90% 88% 89 % 2006 2007 2008 2009 2010 2011 201
Slide 39: No Overall Change in HCPL Loss Trends
No Overall Change in HCPL Loss Trends Current accident year loss ratio adjustments have been minor — in either direction Minimal changes on renewed business 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Annual 23% 28% 28% 19% 11% 3% -2% -6% -4% -2% -2% 0% -1% 0% Cumulative 23
Slide 40: The Bottom Line Benefits of Strong Defense
The Bottom Line Benefits of Strong Defense Our ability and willingness to defend claims allows us to achieve better results 21% 32% 48 % 42% 44% 18 % 45 % 28% 79% 68% 52 % 58% 56% 82 % 55 % 72% 2006 2007 2008 2009 2010 2011 2012 2013 PRA Industry 63% 42% 37 % 58% Source: Statutory Basis, A.M. Best A
Slide 41: ProAssurance Outperforms in HCPL
ProAssurance Outperforms in HCPL ProAssurance consistently outperforms in a volatile line of business 40% 60% 80% 100% 120% 140% 160% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Calendar Year Combined Ratio 1991 - 2013 ProAssurance MPL Source: 1991 - 2012 A.M. Best Aggregates and Ave
Slide 42: Segment Highlights
Segment Highlights We repo rt results in three operational segments Specialty Property Casualty Insurance Workers’ Compensation In surance Lloyd’s Syndicate 1729
Slide 43: 2014 Workers' Compensation Highlights
December 31, Y - OVER - Y Change 2014 2013 Gross Premiums Written $ 225 ‒ - 7% Net Premiums Earned $ 195 ‒ - 6% Total Revenues $ 195 ‒ - 6% Net Losses & Loss Adjustment Expenses $ 126 Underwriting & Operating Expenses $ 60 ‒ +4% Segregated Portfolio Cell Dividend Expense $ 2 ‒ Operating Results $ 7
Slide 44: Consistent Profitability in Workers' Comp
Consistent Profitability in Workers' Comp 46 Historical Combined Ratio ( 1 ) excluding fair value adjustment and intangible asset amortization, transaction - related and other one - time charges (1) 79.1% 65.6% 80.2 % 87.7% 96.0% 89.7 % 91.8 % 93.0% 96.0% 91.8% 2006 2007 2008 2009 2010 2011 2012 201
Slide 45: How Eastern Differentiates
How Eastern Differentiates 47 Disciplined individual account underwriting with focus on rate adequacy in rural territories Dedicated to effective claims management and returning injured workers to wellness Understands market dynamics and regulatory concerns Use of local knowledge that has always dif
Slide 46: Eastern Business Profile
Eastern Business Profile 48 Offices Licensed and actively seeking business Licensed, accepting “border” business Eastern Re (Cayman) Licensed in 30 state Avoiding high - hazard states within the Eastern footprint
Slide 47: Workers' Compensation Risk Diversification
Workers' Compensation Risk Diversification Wide diversification by class code and market segment 7 , 058 active policies in Traditional Programs Over 600 class c odes a ctively written 49 Retirement / Life Care Community 2.3% Physician / Dentists 9.3 % Nursing Homes Skilled 2.6 % Hospital 6.8% Cleri
Slide 48: Workers' Compensation Risk Diversification
Workers' Compensation Risk Diversification Wide diversification by class code and market segment 2,187 active policies in Alternative Markets Over 4 00 class c odes a ctively written 50 Physician / Dentists 6.4% Nursing Homes Skilled 3.3 % Residential Elderly - Non - Medical 2.1% Social Rehab Facili
Slide 49: Broad Product Spectrum
Broad Product Spectrum 51 Guaranteed Cost 55.0 % INOVA (Alternative Markets) 26.3 % Policyholder Dividend 8.2% Deductible Plans 3.5% Retrospective Rating 3.6% Residual market 3.4 % Guaranteed Cost Policies Loss - Sensitive Dividend Plans Deductible Plans Retrospective Rating Plans Alternative Market
Slide 50: How Eastern Differentiates
How Eastern Differentiates Extensive medical cost containment strategies Average five - year medical cost inflation of 0.6 % Proactive claims management Use of Compromise & Release where permitted by law Strategic use of return - to - wellness initiatives Use of a proactive, unique claims approach t
Slide 51: Workers' Comp Claim Closing Pattern: Traditional
Workers’ Comp Claim Closing Pattern: Traditional 53 Few claims remain open from older accident years Eastern is recognized as a short - tail writer of workers’ compensation insurance 63 201 364 535 590 570 687 591 717 775 887 950 1,069 1 , 176 1 , 187 1,067 469 1 3 0 2 2 4 6 11 15 44 97 258 724 0 20
Slide 52: Workers' Comp Claim Closing Pattern: Alternative
Workers’ Comp Claim Closing Pattern: Alternative 54 Few claims remain open from older accident years Eastern is recognized as a short - tail writer of workers’ compensation insurance 35 66 103 175 267 407 423 310 324 334 383 401 493 474 478 250 1 2 2 3 6 8 27 104 324 0 100 200 300 400 500 600 1999 2
Slide 53: How Eastern Differentiates
How Eastern Differentiates Captive insurance solutions provided through Eastern Re Segregated cell company based in Cayman Opens additional business opportunities for healthcare professional liability business Strategic partnerships with select independent agencies that share philosophies on control
Slide 54: Segment Highlights
Segment Highlights We repo rt results in three operational segments Specialty Property Casualty Insurance Workers’ Compensation Insurance Lloyd’s Syndicate 1729
Slide 55: 2014 Lloyd's Segment Highlights
As reported 12/31/14 September 30, Y - OVER - Y Change 2014 2013 Gross Premiums Written $ 32 ‒ - 7% Net Premiums Earned $ 12 ‒ - 6% Total Revenues $ 13 ‒ - 6% Net Losses & Loss Adjustment Expenses $ 8 Underwriting & Operating Expenses $ 10 ‒ +4% Operating Results $ - 5 ‒ - 27% 2014 Lloyd’s Segment H
Slide 56: Lloyd's Syndicate 1729: Business Detail
Lloyd’s Syndicate 1729: Business Detail Broad spread of risk Casualty includes $ 14.8 million ceded by PRA/PICA (Podiatry) Property is primarily US 58 YTD 9 / 30 / 14 As Reported at 12 / 31 / 14 $ in millions Casualty $ 21.7 64 % Catastrophe Reinsurance $5.9 18% Property Insurance $4.5 13% Property
Slide 57: Segment Highlights: Corporate
Segment Highlights Corporate U.S. investing activities Non - premium revenues Corporate expenses U. S. taxes
Slide 58: 2014 Corporate Segment Highlights
December 31, Y - OVER - Y Change 2014 2013 Investment income $ 125.1 $ 129.3 - 3% Equity in earnings (loss) of unconsolidated subsidiaries 4.0 7.5 - 47% Net realized investment gains (losses) 14.6 67.9 - 78% Other income 2.4 1.9 +21% Operating expenses 8.8 15.7 - 44% Interest expense 14.1 2.8 >100%
Slide 59: Corporate Segment Financial Highlights
Corporate Segment Financial Highlights Overall investment result decreased 6% $3.6 million Y - O - Y decrease in Equity in Unconsolidated Subsidiaries $4.1 million reduction in investment income, primarily due to lower average balances on fixed income investments Net realized investment gains decrea
Slide 60: Additional Financial Detail
Additional Financial Detail
Slide 61: Capital Growth: 2008-2014
Capital Growth: 2008 ‒ 2014 2008 2009 2010 2011 2012 2013 2014 Dividends (15,269) (192,466) (64,777) (220,464) Earnings 177,725 222,026 231,598 287,096 275,470 297,523 196,565 Employee Stock Transactions 11,673 7,205 6,147 6,855 7,780 9,261 11,246 Stock Issued 112,478 - - - - - - Treasury Stock (87,
Slide 62: Inside ProAssurance's Balance Sheet
Inside ProAssurance’s Balance Sheet Cash & Investments: 81.4% Insurance Receivables 9.3% Goodwill & Intangible Assets: 6.0 % Other Assets: 3.3% Retained Earnings: 38.5% Other Equity: 3.2 % Reinsurance Payable & Other Liabilities: 11.8% Unearned Premiums: 6.7 % Loss Reserves: 39.8% Assets: $5.2 bln L
Slide 63: Inside ProAssurance's Income Statement - YTD
Inside ProAssurance’s Income Statement - YTD 65 Net Premiums Earned: 82.1 % Net Realized Investment Gains: 1.7% Net Investment Income: 15.2% Other: 1.0% Net Income: 23.1% Provision for Income Taxes: 7.7 % Underwriting, Policy Acquisitions, Operating and Interest Expenses: 26.6% Net Losses and Loss A
Slide 64: Book Value per Share History
Book Value per Share History 66 $21.35 $26.30 $30.17 $ 35.42 $ 36.85 $39.13 38.17 $ 20.26 $24.04 $26.58 $31.93 $ 33.34 $ 35.64 32.66 $20.80 $ 23.13 $25.29 $29.80 $30.98 $ 34.67 31.63 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/2014 Book Value per Share Tangible Book Value per Share T
Slide 65: Book Value per Share Components
Book Value per Share 67 Components December 31 2014 2013 Change Total Book Value $ 38.17 $ 39.13 $ (0.96) Less: Goodwill & Intangible Assets 5.51 3.49 2.02 Tangible Book Value $ 32.66 $ 35.64 $ (2.98) Less: Unrealized Gain / Loss 1.03 0.97 0.06 Tangible Book Value excl Unreal G/L $ 31.63 $ 34.67 $ (
Slide 66: Components of Return on Equity
Components of Return on Equity 68 Long - term ROE target: 12% - 14% 6.2 % 5.7% 0.7 % - 2.9% - 1.1% Pre-Tax Underwriting Profit $142 Pre-Tax Investment Income $130 Non-Operating Gains $15 Taxes $(65) Interest & Intangibles, SPC Dividend $(27) 2014 Return on Equity: 8.6% YTD ($ in millions) 2013 Retur
Slide 67: Investment Portfolio Detail
Investment Portfolio Detail ProAssurance remains conservatively invested to ensure our ability to keep our long - term promise of insurance protection
Slide 68: 2014 Investment Developments
2014 Investment Developments Maintaining duration of approximately four years Book yield has stabilized Tax effective book yield: 4.2 % Overall credit quality is stable at A+ 70 2015 Investment Strategy & Outlook Diversification and non - correlation of returns Managing duration
Slide 69: ProAssurance Investment Profile
ProAssurance: Q 3 2014 Investment Profile Fixed Income 78% Short Term (incl cash) 3 % Equities & Equity Substitutes 18% BOLI 1% $4.0 Billion Overall Portfolio State & Muni 34 % Corporate 45% Asset Backed 15 % Govt & Agency 6% $ 3.1 Billion Fixed Income Portfolio Average duration: 3.6 years, down sli
Slide 70: Portfolio Detail: Asset Backed
Other 14% Auto 11% Non Agency MBS 2 % Agency MBS/CMBS 62% Non Agency CMBS 11 % ProAssurance Portfolio Detail: Asset Backed 12 / 31 / 14 Subject to Rounding Asset Backed: $459 Million Weighted Average Rating: “ AAA” 72
Slide 71: Portfolio Detail: Corporate
Financials 30 % Industrials 28% Utilities/ Energy 19 % Other 2% Consumer Oriented 21 % ProAssurance Portfolio Detail: Corporate Corporates: $ 1.4 Billion Weighted Average Rating: A - Top 20 Banks/Financials: $ 216 million in millions JPM Chase $25 Citi $10 GECC $17 Simon Property $9 Goldman Sachs $1
Slide 72: Portfolio Detail: Municipals
General Obligation 23 % Special Revenue 60% Prerefunded 17 % ProAssurance Portfolio Detail: Municipals Municipals: $ 1.1 Billion Investment policy has always required investment grade rating prior to applying the effect of insurance Top 10 Municipal Holdings in millions State of Texas $15 Por t Auth
Slide 73: Portfolio: Equities & Other
Equities 38% Alternative Equity & Debt 12 % Real Estate LP 3% Private Equity 14% Convertible Bonds 5% Investment Grade Bond Fund 8 % Tax Credits 20% ProAssurance Portfolio: Equities & Other 12/31/14 Equities & Other: $ 667 Million 5.5% TE Book Yield 13% TE IRR 75
Slide 74: Portfolio Detail: Various
ProAssurance Portfolio Detail: Various Govt MMF 86% Lloyd's 6% Prime MMF (Bermuda) 7 % Other 1% Best Rating: A 8 % Best Rating: A+ 57% Best Rating: A++ 35 % Rated A1/P1 or better Money Markets: Moody’s: Aaa S&P: AAA Weighted average rating Moody’s: AA3 S&P: AA - A. M. Best: A+ Treasuries 42% TIPS 38
Slide 75: Additional Details
Additional Details PROASSURANCE.
Slide 76: Now Reporting in Four Segments
Now Reporting in Four Segments 78 • Healthcare Professional Liability • Products Liability • Lawyers’ Professional Liability Specialty P&C • Traditional • Captive Market Facility Workers’ Compensation • Syndicate 1729 (58%) (including investments & taxes) Lloyd’s • PRA Corp – parent company • Intern
Slide 77: Q4 2014 Condensed Results by Segment
Q4 2014 Condensed Results by Segment 79 Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Q4 2014 Consol. Q4 2013 Gross premiums written $ 102,878 $ 44,233 $ 6,919 $ — $ (6,431 ) $ 147,599 $ 115,728 Net premiums written 87,618 37,713 7,945 — — 133,276 107,369 Net premiums e
Slide 78: Nine-Month 2014 Condensed Results by Segment
Nine - Month 2014 Condensed Results by Segment 80 Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination 2014 Consol. 2013 Gross premiums written $ 532,608 $ 225,363 $ 33,731 $ — $ (12,093 ) $ 779,609 $ 567,547 Net premiums written 467,046 202,697 32,106 — — 701,849 525,182 Net
Slide 79: Capital Management Priorities
Capital Management Priorities 81 The manner in which capital is used has an effect on financial ratings Conceptual Model of Projected A. M. Best BCAR Scores if Premiums Increase Surplus is Reduced Excess Capital vs. Excess Capacity “A+” Rating Threshold
Slide 80: ProAssurance Outperforms in Insurance
ProAssurance Outperforms in Insurance Source: A.M . Best Aggregates and Averages for Each Lines of Business and Period Selected 104.5% 100.2 % 102.1% 107.1% 89.7% 86.6 % 88.5 % 72.8% 57.6% 89.2 % 74.8% 61.5% 1991-2013 10-Year 5-Year Average Combined Ratio Overall P&C MPL PRA - MPL Only PRA - All Lin
Slide 81: Differentiate Through Claims Defense
Differentiate Through Claims Defense 83 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 lawsuits Increasingly impo
Slide 82: The Ohio Example: 2006-2012 Data
The Ohio Example: 2006 – 2012 Data Comprehensive, reliable data provided by the Ohio Department of Insurance Broad range of competitors and business approaches www.insurance.ohio.gov/Legal/Reports/Documents/Ohio2012MedicalProfessionalLiabilityClosedClaimReport.pdf 92% 75 % 8 % 25% ProAssurance All O
ProAssurance — Raymond James 36th Annual Institutional Investors Conference (March 2015) on 6ix