Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (February 2009)
55 slides from Proassurance's investor presentation, Feb 9, 2009
Slide 1: Forward Looking Statements and Non-GAAP Measures
Non-GAAP Measures Forward Looking Statements 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 proj
Slide 2: ProAssurance: Quick Facts
ProAssurance: Quick Facts Market Cap: $1.8 Billion / Equity: $1.3 Billion Fifth largest writer of medical liability Writing business in 30 jurisdictions Approximately 39,000 policyholders 33,000 physicians & dentists 5,400 attorneys Majority in small or solo practice Highly rated by A. M. Best and F
Slide 3: ProAssurance: Long-Term Success
ProAssurance: Long-Term Success Our Balance Sheet remains strong Conservative investments Little debt Low leverage Solid stock performance over time Growing organically and through M & A Adding over $100 million to our top line in 2009 through M & A Diversifying our risk profile
Slide 4: Stock Price Performance
Stock Price Performance Cumulative CAGR 10 year 249% 10% 5 year 135% 6% 1 year -5% -5% NYSE Closing Price at Each year-End ProAssurance: Long-Term Success
Slide 5: Book Value Growth
Book Value Growth Cumulative CAGR 10 year 185% 11% 5 year 90% 14% 1 year 3% 3% ProAssurance: Long-Term Success
Slide 6: Growth: We've Succeeded Consistently in Hard AND Soft Markets
Growth: We’ve Succeeded Consistently in Hard AND Soft Markets Growth: We’ve Succeeded Consistently in Hard AND Soft Markets
Slide 7: Growth Opportunities in 2009
Growth Opportunities in 2009 We have announced three transactions that diversify and add significant premium We are incrementally expanding our footprint Wyoming and South Carolina Taking advantage of improving conditions in selected markets within our footprint
Slide 8: New Transactions to Strengthen Us: The PICA Group
New Transactions to Strengthen Us The PICA Group Leading insurer of podiatric physicians nationwide National market share: approximately 70% Premiums: $99 million Profitable Well managed Low integration risk Joining PRA through a sponsored demutualization
Slide 9: PICA's Business Profile
9,800 DPMs 6,800 other providers 93% Direct Largest States: CA, FL, NY, IL, TX 11% 7% 9% 7% 8% PICA’s Business Profile PICA’s Business Profile Adding the PICA Group Expands our footprint nationwide Adds ~$99 mln premium and 16,600 insureds
Slide 10: New Transactions: Georgia Lawyers Insurance Company
New Transactions to Strengthen Us Georgia Lawyers Insurance Company A leading insurer of Georgia attorneys Premiums: $5.5 million Solidifies our presence in the legal professional liability market
Slide 11: Adding Georgia Lawyers Insurance
GLIC: 2,700 lawyers Mostly small and mid-size firms Existing legal book is 5,400 attorneys in 2,800 law firms Premium: $10.4 million Adding Georgia Lawyers Insurance
Slide 12: Adding Dedicated Agents for Lawyers
Greyhawk (Phoenix) AZ, CA, CO, NV, WA ProLawyer (Philadelphia) DE, DC, MD, NJ, PA, VA Adding Dedicated Agents for Lawyers
Slide 13: Acquisition of Mid-Continent General Agency
New Transactions to Strengthen Us Acquisition of Mid-Continent General Agency Expands our presence in the growing market for ancillary healthcare professional liability $25 million of premium plus growth potential Also writing other specialty lines Miscellaneous professional liability General liabil
Slide 14: Discipline: We've Maintained It Consistently in Hard AND Soft Markets
Discipline: We’ve Maintained It Consistently in Hard AND Soft Markets Discipline: We’ve Maintained It Consistently in Hard AND Soft Markets
Slide 15: Operational Discipline: Strategy
We have an unmatched spread of risk through geographical diversification We retain the benefits of our M & A transactions through long-term customer relationships Claims / Underwriting Offices Claims / Underwriting Offices Operational Discipline: Strategy Local knowledge remains the key to profitabl
Slide 16: Operational Discipline: Claims
Operation Discipline: Claims We use our balance sheet strength and deep expertise to ensure our insureds have the option of an uncompromising defense of their claim We represent our insureds at trial more often than other company in our line Provides a long-term financial and marketing advantage A k
Slide 17: Operational Discipline: Underwriting
Operational Discipline: Underwriting Charge an adequate premium for every risk Loss-trends drive rates Maintain conservative reserving practices Be prepared when the cycle turns
Slide 18: Operational Discipline: Actuarial
Hard Market Strict Underwriting NCRIC Insureds PIC Wisconsin Insureds Softening Market Operational Discipline: Actuarial
Slide 19: Successfully Balancing Risk vs. Return
Successfully Balancing Risk vs. Return Successfully Balancing Risk vs. Return
Slide 20: Emphasizing an Appropriate Balance of Risk vs. Return
All $ amounts in billions AT 9/30/2008 Emphasizing an appropriate balance of risk vs. return Committed to enduring balance sheet strength Responding to low interest rates
Slide 21: The Low Interest Rate Environment
Loss in value assuming a 100 basis point shift in the yield curve Yields based on Single A composite corporate debt The Low Interest Rate Environment The choice: Chase yield or extend duration We are maintaining duration, looking for opportunities
Slide 22: The Low Interest Rate Environment: Loss Ratio
Loss ratio required to generate a 13% after-tax ROE Assumes a 1 to 1 premium to surplus ratio for physicians professional liability claims- made coverages The Low Interest Rate Environment
Slide 23: Balancing Risk vs. Return: $3.5 Billion Portfolio
$3.5 Billion Portfolio Fixed Income: 86% Short Term: 9% Equity and Other Investments: 3% BOLI: 2% $3.5 Billion Portfolio Fixed Income: 86% Short Term: 9% Equity and Other Investments: 3% BOLI: 2% AT 9/30/2008 Balancing Risk vs. Return Our conservative investment philosophy balances risk and return W
Slide 24: Fixed Income: $3.1 Billion
Asset Backed: 28% State/Muni: 44% Corporate: 19% BOLI: 2% Govt/Agency:7% AT 9/30/2008 Fixed Income: $3.1 Billion Allows broad diversification across sectors Moderate duration (4.4 years) helps mute the volatility of the marketplace AA weighted average rating 97.6% investment grade
Slide 25: Little Dependence on Debt
Stockholder’s Equity 96% AT 9/30/2008 Stockholder’s Equity 96% Other Debt 4% Balancing Risk vs. Return Little Dependence on Debt Low Debt to Cap Ratio Little strain on cash flow Repurchased additional $22 million of debt in Q4
Slide 26: Our Strong Capital/Low Leverage Position
( in millions) 0.9:1 Premiums to Surplus 1:1 0.7:1 0.3:1 Prepared for an improving market Prudent capital management 0.9:1 Our Strong Capital/Low Leverage Position
Slide 27: Summary: Successfully Executing a Proven, Disciplined Strategy
Summary: Successfully Executing a Proven, Disciplined Strategy Summary: Successfully Executing a Proven, Disciplined Strategy
Slide 28: ProAssurance: Concentrating on Shareholder Value
ProAssurance Concentrating on shareholder value Growing Book Value per Share Focused on the long-term Maintaining leading market position Protecting the balance sheet Building strength for the next cycle turn Evaluating all M & A opportunities
Slide 29: ProAssurance: Proven Success Throughout the Cycles
ProAssurance Proven success throughout the cycles Disciplined pricing and underwriting Consistent reserving policy Proven claims strategy Balance sheet strength Significant share ownership throughout the company Demonstrated commitment to a long-term view of a complicated business
Slide 30: The Promise of Treat Fairly
The Promise of Treat Fairly Treated Fairly is our brand enhancement initiative Affirms our existing, enduring commitment to every stakeholder Insureds Agents Investors The public We run our business as owners who are rewarded for long-term success
Slide 31: Appendix: Claims Data
Appendix: Claims Data Appendix: Claims Data
Slide 32: Claims Trends Remain Favorable
ProAssurance Claims Tried Claims Trends Remain Favorable Frequency trends are stable after declining since 2005/2006 The decline is now showing up in the courtroom Severity trends also stable
Slide 33: Why Claims Strategy Matters: Favorable Outcomes
Favorable Outcomes: 83% Favorable Outcomes: 74% Favorable Outcomes: 83% Favorable Outcomes: 74% ProAssurance Industry Data Source: The PIAA Five Year Average 2003 - 2007 Why Claims Strategy Matters
Slide 34: Why Claims Strategy Matters: Statutory Loss Ratio
Average Statutory Loss Ratio 2003-2007 Industry 85.9% Legal Payments Loss Payments PRA: 81.8% 81.4% ProAssurance Stand Alone - - 2007 76.0% *Source: A. M. Best Aggregates & Averages, Medical Malpractice Predominating 64.3% Why Claims Strategy Matters Our ability and willingness to defend claims allo
Slide 35: Appendix: Investments
Appendix: Investments Appendix: Investments
Slide 36: Equities and Alternative Investments
AT 9/30/2008 Equities and Alternative Investments
Slide 37: Equities & Other Investments: Performance by Quarter
$ in 000’s Performance by Quarter Q1, 2005 - Q3, 2008 AT 9/30/2008 Equities & Other Investments
Slide 38: Portfolio: Municipals
AT 9/30/2008 Portfolio: Municipals $1.4B Current investment policy requires investment grade rating prior to apply the effect of insurance
Slide 39: Whole Loan LTV
Whole Loan LTV: 59% Alt-A LTV: 63% Further Details Provided on Sub-Prime and CMBS on slides 41 & 42 AT 9/30/2008
Slide 40: Portfolio Overview: Sub-Prime
At 9/30/08 Type Quality $8.7Mln Mortgage-Backed AA+ avg - LTV 73% $6.1Mln Home Equity AA avg At 09/30/08 Vintage $7.2 Mln 2004 & Prior $4.4 Mln 2005 $2.6 Mln 2006 $0.6 Mln 2007 Portfolio Overview: Sub-Prime $13.4 million market value in AFS portfolio $1.4 million market value in high-yield LP
Slide 41: Portfolio Overview: CMBS
At 9/30/08 Quality $191 Mln AAA $2 Mln AA At 9/30/08 Wtd Avg LTV 85% <70% 15% <72% At 9/30/08 Credit Support 80% >20% 5% 15% - 20% 13% 10% - 15% 2% Less than 10% At 9/30/08 Deal Cumulative Delinquencies 45% None 27% 0% - 0.5% 20% 0.5% - 1.0% 7% 1.0% - 2.0% 1% 2.0% - 2.2% At 9/30/08 Debt Service Cove
Slide 42: Portfolio: Corporate
AT 9/30/2008 Further Details on Financials provided on slide Portfolio: Corporate
Slide 43: Portfolio: Corporate-Financials
Tax Notes are private placements guaranteed by banks & secured by Sec 42 tax credits AT 9/30/2008 Further Details on Financials provided on slide Portfolio: Corporate-Financials
Slide 44: Top 20 Largest Banks & Financials
BofA/ML $25 NRUC $6 Wells/Wach $19 Depfa ACS $5 Morgan Stanley $16 DeutscheBk $5 Citigroup $14 BONY $5 GECC $13 Unilever Cap $4 American Exp $11 Deere Cap $4 JP Morgan $9 FMCC $3 Goldman $8 Boeing Cap $3 Hypotheken Essn $8 Met Life $3 Credit Suisse $7 Blackrock $3 AT 9/30/2008 Portfolio: Corporate-F
Slide 45: Portfolio: Treasury/GSE
AT 9/30/2008 Portfolio: Treasury/GSE
Slide 46: Portfolio: FRE and FNM
$524 million Average Rating: AAA AT 9/30/2008 Portfolio: FRE and FNM
Slide 47: Portfolio Overview: Short Term
AT 9/30/2008 Portfolio Overview: Short Term
Slide 48: Portfolio Overview: BOLI
AT 9/30/2008 Portfolio Overview: BOLI
Slide 49: Appendix: Industry History
Appendix: Industry History Appendix: Industry History
Slide 50: Will History Repeat Itself—Again?
Source: A. M. Best Aggregates and Averages 1976 - 2001 Medical Malpractice Industry, Net Basis Occurrence and Claims-Made Combined Will History Repeat Itself—Again ?
Slide 51: Appendix: M & A History
Appendix: M & A History Appendix: M & A History
Slide 52: Profitable Growth Through M & A
ProAssurance was formed by the combination of two successful companies with a history of M & A Profitable Growth Through M & A ProAssurance has been built through M & A
Slide 53: Profitable Growth Through M & A
Each company brought multiple transactions into ProAssurance at our founding in 2001 Profitable Growth Through M & A ProAssurance has been built through M & A
Slide 54: Profitable Growth Through M & A
We have continued to grow through M & A NCRIC in the mid- Atlantic PIC-Wisconsin in the upper Midwest Profitable Growth Through M & A ProAssurance has been built through M & A
Slide 55: Denovo Growth Also Plays a Role
We carefully evaluate the medical and legal climate of each state before entering We are the market leaders in AL, DE, DC, OH, & WI Denovo Growth Also Plays a Role We have added states as opportunities arose