Proassurance Corporation · NYSE:PRA
Proassurance — Q3 2019 Earnings Presentation
101 slides from Proassurance's earnings presentation, Nov 13, 2019
Slide 1: Q3 2019 Investor Update
November 2019 Q3 2019 Investor Update
Slide 2: Table of Contents
Table of Contents The Latest News Appendix PRA Overview 3‐10 Investment Strategy 89 Capital Management 11‐16 Q3 2019 Net Investment Result 90 Financial / Operating Performance 17‐22 PRA Performance vs. Benchmark 91 Shareholder Return 23‐28 Detailed Breakout of Investments 92‐97 Operating & Financial
Slide 3: ProAssurance Overview
ProAssurance Overview November 2019
Slide 4: Mission, Vision, & Values
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 professionals. Through an integrated family of compa
Slide 5: ProAssurance Corporate Profile
ProAssurance Corporate Profile Principal Business Unit Employees Lines of Business • Healthcare-centric specialty insurance writer Offices Healthcare Professional ◦ Specialty Property & Casualty HCPL 17 439 Liability ▪ Healthcare Professional Liability (HCPL) Corporate functions ▪ Life Sciences and
Slide 6: ProAssurance Brand Profile
ProAssurance Brand Profile Specialty P&C Workers’ Comp Healthcare Professional Liability Medical Technology & Life Legal Professional Liability Sciences Products Liability Alternative Risk Transfer ProAssurance Investor Briefing | November 2019 6
Slide 7: ProAssurance Executive Leadership
ProAssurance Executive Leadership Ned Rand - President & Chief Operating 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, and Senior Vice President of Finance since
Slide 8: Premiums, Policyholders & Distribution for 2019
Premiums, Policyholders & Distribution for 2019 Our Distribution Sources HCPL LPL Life Sciences Workers’ Comp Agent/Broker 77% 100% 100% 100% Direct 23% -- -- -- All Data as of 9/30/19, subject to rounding ProAssurance Investor Briefing | November 2019 8
Slide 9: The Current State of the Markets We Serve
The Current State of the Markets We Serve • Healthcare Professional Liability (HCPL) ◦ Broader market is catching up to our perception of severity trends ▪ Travelers, RLI, and W.R. Berkley all reference social inflation and worsening severity in their earnings remarks ◦ Signs of developing severity
Slide 10: Return on Equity & Future Goals
Return on Equity & Future Goals YTD 2018 Return on Equity: 6.0% YTD 2019 Return on Equity: 5.2% ROE target is seven points above the ten-year Treasury rate (risk-free rate) • Ten year treasury rate was 1.7% at 10/31/19*, implying a revised ROE Target of approximately 8.7% • Prior long-term return ta
Slide 11: Topics of Importance and Key Themes
Topics of Importance and Key Themes November 2019
Slide 12: Key Update: Positives in Q3 2019
Key Update: Positives in Q3 2019 • Increased Top Line Revenue ◦ Gross Premiums Written of $265.5 million ▪ Workers' Compensation Insurance: $70.1 million (+6.6%) • Renewal Pricing Momentum Continues in Specialty P&C Despite Competition… ◦ Facilities up 12%, Physicians up 8% ◦ Other Healthcare provid
Slide 13: Key Update: Responding to Perceived Severity Trends
Key Update: Responding to Perceived Severity Trends • Net Favorable Development of $15.9 million ◦ Down from $21.5 million in 2018 (-26.0%) ◦ Reserve development continues to be affected by our perception of loss trends in the broader healthcare professional liability industry • Operating Profit for
Slide 14: Confronting the Challenges Ahead
Confronting the Challenges Ahead • Maintaining caution as loss trends develop in HCPL ◦ Our caution is prompted by the general industry outlook ◦ Increasing current accident year loss picks to protect insureds, investors, and our balance sheet for the long-term • Profitable growth ◦ Increasing marke
Slide 15: Key Themes
Key Themes Long • Consistent & disciplined focus on profitability • Firm commitment to disciplined underwriting Term • Demonstrated track record of value creation for Success shareholders • World class knowledge & expertise Proven • Superior brand identity and reputation in the market • Broad range
Slide 16: Changes in Leadership
Changes in Leadership* • Ned Rand became CEO effective July 1, 2019 ◦ Stan Starnes became Executive Chairman of the Board • Mike Boguski became President of ProAssurance Specialty P&C ◦ Includes all professional and product liability operations • Kevin Shook became President of Eastern Alliance • Ho
Slide 17: Capital Management
Capital Management November 2019
Slide 18: Superb Track Record of Capital Management
Superb Track Record of Capital Management A look at the last ten years… At 9/30/2019 | $ in 000’s • Successfully expanded PRA to meet new Dividends Declared Share Strategic Year Total challenges of an evolving insurance Special Regular Repurchase Acquisitions market 2009 $— $— $52,045 $137,800 $189,
Slide 19: Capital and Liquidity Decisions
Capital and Liquidity Decisions Starting Point Capital Liquidity Required capital for & Accepted operating operating expenses subsidiaries • All decisions must recognize that we hold significant capital at the subsidiary level to maintain operating company ratings and satisfy regulatory requirements
Slide 20: Dividends and Capital Management
Dividends and Capital Management • Balancing our proven dedication to effective capital management with the desire to retain capital to pursue business opportunities and potential transactions that may emerge Special dividend of $0.50/per common share paid on January 9, 2019 Special dividend of $4.6
Slide 21: Key Source of Capital: Subsidiary Dividends to Corporate
Key Source of Capital: Subsidiary Dividends to Corporate Subsidiary dividends are our 2019 ORDINARY Dividend primary source of liquidity Capacity$128 million Subsidiary capital requirements play a major Subsidiary Dividend History (in millions) role Ordinary dividends are permitted without regulator
Slide 22: Capital Management Priorities
Capital Management Priorities The manner in which capital is used has an effect on financial ratings Excess Capital vs. Excess Capacity “A+” Rating Threshold ProAssurance Investor Briefing | November 2019 22
Slide 23: Financial / Operating Performance
Financial / Operating Performance November 2019
Slide 24: Operational Results / Long-Term Profitability
Operational Results / Long-Term Profitability • Combined ratio average 2009 – Q3 2019: 80.5% • Operating ratio average 2009 – Q3 2019: 60.9% Combined Ratio and Operating Ratio History *Operating Ratio not reported in 2001 or 2002 ProAssurance Investor Briefing | November 2019 24
Slide 25: Income Statement Highlights (9/30/19)
Income Statement Highlights (9/30/19) Strong results from a focused strategy Three Months Ended Nine Months Ended September 30 2019 2018 2019 2018 Gross Premiums Written $ 265.5 $ 259.7 $ 766.7 $ 745.6 Net Premiums Earned $ 215.8 $ 206.1 $ 633.1 $ 616.8 Net Investment Result $ 22.4 $ 28.5 $ 62.8 $ 7
Slide 26: Corporate Segment Financial Highlights (9/30/19)
Corporate Segment Financial Highlights (9/30/19) Three Months Ended Nine Months Ended September 30 2019 2018 2019 2018 Net investment income $ 22.2 $ 22.1 $ 65.5 $ 64.2 Equity in earnings (loss) of unconsolidated subsidiaries $ (1.3) $5.2$ (7.2) $ 12.2 Net realized investment gains (losses) $ 0.9 $
Slide 27: Disciplined Approach to Reserves
Disciplined Approach to Reserves •Recognizing loss trends as they appear •No change in reserving philosophy or process 15-Year Reserve Development History by Quarter by Year HCPL Predominating 2004 — Q3 2019 $ in millions *Subject to rounding ProAssurance Investor Briefing | November 2019 27
Slide 28: Balance Sheet Highlights
Balance Sheet Highlights Maintaining the financial strength required to keep our insurance promise and creating value for our shareholders 9/30/2019 2018 2017 2016 2015 2014 Shareholders’ Equity $1.6 $1.5 $1.6 $1.8 $2.0 $2.2 Total Investments $3.5 $3.3 $3.7 $3.9 $3.7 $4.0 Total Assets $4.8 $4.6 $4.9
Slide 29: Shareholder Return
Shareholder Return November 2019
Slide 30: Book Value per Share History to September 30, 2019
Book Value per Share History to September 30, 2019 Growth in Book Value + Dividends Since Inception (Sep 1991) Cumulative: 2,868% / CAGR: 12.5% ProAssurance Investor Briefing | November 2019 30
Slide 31: ProAssurance Leverage Update
ProAssurance Leverage Update Financial Leverage Operating Leverage Ten-Year Debt to Capital Ten-Year Premiums to Equity • $288 million debt at 9/30/19 • $250 million 10-year notes due 11/15/2023 • Moving closer to our minimum target of 0.75:1 ◦ 5.30% Coupon • Committed to enhancing shareholder value
Slide 32: Total Return & Stock Price
Total Return & Stock Price Reflects all stock splits and includes all dividends in the year declared. Source: SNL ProAssurance Investor Briefing | November 2019 32
Slide 33: Segment Highlights: Specialty P&C
Segment Highlights Specialty P&C, November 2019
Slide 34: Specialty P&C Financial Highlights (9/30/19)
Specialty P&C Financial Highlights (9/30/19) Three Months Ended Nine Months Ended September 30 2019 2018 2019 2018 Gross Premiums Written $ 165.0 $ 167.6 $ 459.3 $ 456.1 Net Premiums Earned $ 125.2 $ 120.8 $ 375.3 $ 378.4 Total Revenues $ 127.1 $ 122.2 $ 379.9 $ 382.3 Net Losses & Loss Adjustment Ex
Slide 35: Q3 2019 Specialty P&C Gross Written Premium
Q3 2019 Specialty P&C Gross Written Premium $ in millions • Total Gross Written Premiums decreased $2.6M (1.6%) from $167.6M to $165.0M ◦ Physicians decrease was driven by the pending renewal of a $3.6 million policy. Excluding the effect of this timing difference, twelve month policies were relativ
Slide 36: YTD 2019 Specialty P&C Gross Written Premium
YTD 2019 Specialty P&C Gross Written Premium $ in millions • Total Gross Written Premiums increased $3.2M (0.7%) from $456.1M to $459.3M ◦ Physician twelve month term policies increase is due to timing differences of $4.0M, primarily related to a few policies that shifted their 2018 renewal dates in
Slide 37: Strong Retention Despite Competition
Strong Retention Despite Competition • Retention gains are holding • Continued underwriting vigilance is being used today to ensure future success ◦ Market share is important, but NOT as important as profitability ◦ We emphasize adequate pricing over retention Year-over-Year Premium Retention – Phys
Slide 38: Physician Liability Pricing Trend
Physician Liability Pricing Trend • Accelerating price changes on renewed business MD/DO Charged Rate History Annual 23% 28% 28% 19% 11% 3% (2%) (6%) (4%) (2%) (2%) —% (1%) —% —% —% 1% 3% 4% Cumulative 23% 57% 101% 139% 165% 173% 168% 152% 142% 137% 132% 132% 130% 131% 131% 131% 132% 135% 139% PICA
Slide 39: Metro Area Rate Comparison
Metro Area Rate Comparison Annual Premium for a $1M / $3M Policy Filed or Approved at 9/30/19 ProAssurance Investor Briefing | November 2019 39
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 ProAssurance Stand Alone ProAssurance vs. Industry Five-Year Average Loss Ratio (2014-2018 / Calendar Year) Five-Year Average Loss Ratio (2014-2018) subject to rounding On aver
Slide 41: ProAssurance Outperforms in Insurance
ProAssurance Outperforms in Insurance Average Combined Ratio Source: A.M. Best Aggregates and Averages for Each Line of Business (1991-2018) ProAssurance Investor Briefing | November 2019 41
Slide 42: ProAssurance Outperforms in HCPL
ProAssurance Outperforms in HCPL ProAssurance consistently outperforms in a volatile line of business Calendar Year Combined Ratio 1991 - 2018 Source: 1991-2018 A.M. Best Aggregates and Averages, Medical Malpractice Lines of Business. Policyholder Dividends Included. ProAssurance Investor Briefing |
Slide 43: Segment Strategic Review: Specialty P&C
Segment Strategic Review Specialty P&C, November 2019
Slide 44: New Market Conditions Emerging in HCPL
New Market Conditions Emerging in HCPL • Greater uncertainty in the market creates an environment where ProAssurance outperforms long-term due to superior financial strength and operational expertise ◦ Perceived trends have led a handful of commercial carriers to exit all or part of their healthcare
Slide 45: How Healthcare Costs Will Force Changes in Our Market
How Healthcare Costs Will Force Changes in Our Market • The question is cost vs. care—we can deliver more care than we Healthcare can afford ◦ Restructuring is producing profound changes in healthcare Cost control remains the real driver of • The U.S. spends almost 18% of GDP on healthcare, and the
Slide 46: We Are Approaching a Tipping Point
We Are Approaching a Tipping Point Average Annual Healthcare Spending per Working Household Includes Out-of-Pocket Expenses and Insurance Premiums Median Compensation (Wages + Health Benefits) $68,600 $105,800 $149,000 Health Spending as a Percentage of Compensation 13.4% 24.4% 33.9% ProAssurance In
Slide 47: How Healthcare Costs Will Force Changes in Our Market
How Healthcare Costs Will Force Changes in Our Market • Greater reliance on a value-based payment system ◦ Providers shouldering more of the risk of costs ▪ Drives the need for efficiency in order to optimize limited resources ◦ Changing models of reimbursement OVERARCHING TRENDS Larger groups/syste
Slide 48: Strategy Update: Traditional Practices are Fading
Strategy Update: Traditional Practices are Fading • More physicians than ever are employees The HCPL Industry • The fork in the road for traditional HCPL companies ◦ Their core markets are disappearing and they do not have the Traditional practices are fading financial size and capability to insure
Slide 49: Driving Forces Behind HCPL Severity Trends: Before a Lawsuit
Driving Forces Behind HCPL Severity Trends: Before a Lawsuit • 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 unexpec
Slide 50: Driving Forces Behind HCPL Severity Trends: After a Lawsuit
Driving Forces Behind HCPL Severity Trends: After a Lawsuit •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-earnin
Slide 51: Large HCPL Verdicts at Record Highs in 2018
Large HCPL Verdicts at Record Highs in 2018 • Unmistakable trend to higher severity evident in the broader industry ◦ Not significantly evident in ProAssurance paid losses ◦ Prompting greater caution in ProAssurance reserves on larger risks where deeper pockets may have been created by consolidation
Slide 52: ProAssurance is Positioned to Succeed in HCPL
ProAssurance is Positioned to Succeed in HCPL Our long-term focus on financial strength and protecting the integrity of our balance sheet 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 •
Slide 53: ProAssurance is Positioned to Succeed in HCPL
ProAssurance is Positioned to Succeed in HCPL Emerging Issues in Challenges for HCPL ProAssurance Responds Healthcare Insurers with Strategies & Solutions • Consolidation of providers into • Broker-driven purchasing requires • Broker outreach and National larger groups or within new approaches to th
Slide 54: ProAssurance is Positioned to Succeed in HCPL
ProAssurance is Positioned to Succeed in HCPL • ProAssurance has the right combination of geographic scope, broad experience, and financial strength for success in the new world of healthcare liability Size & Scope of Top HCPL Writers SNL 2017 Statutory Data, >50% HCPL, Direct Written Premiums >$80
Slide 55: Strategy Update: Successes in the Evolving Market
Strategy Update: Successes in the Evolving Market • 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 participation by Ascension’s captive on first $1 mln ◦ $24.5 mln Certitu
Slide 56: Addressing a Wide Spectrum of Risk Appetites
Addressing a Wide Spectrum of Risk Appetites Traditional Policies Transitional Alternative Risk • Primarily agent-sold or direct • Risk sharing/high deductible • Captive insurance programs allow programs control cost and build large, sophisticated healthcare and • Remains the majority of our “sticky
Slide 57: Leveraging Existing Expertise in New Ways
Leveraging Existing Expertise in New Ways Syndicate 1729 at Lloyds Medmarc • Our 61% participation provides potential access • Larger healthcare organizations present greater to international medical professional liability opportunities to insure activities focused on opportunities device and drug d
Slide 58: Segment Highlights: Workers' Compensation Insurance
Segment Highlights Workers’ Compensation Insurance, November 2019
Slide 59: Workers' Compensation Insurance Financial Highlights (9/30/19)
Workers’ Compensation Insurance Financial Highlights (9/30/19) Three Months Ended Nine Months Ended September 30 2019 2018 2019 2018 Gross Premiums Written $ 70.1 $ 65.7 $ 223.6 $ 228.3 Net Premiums Earned $ 49.5 $ 47.3 $ 142.0 $ 135.2 Total Revenues $ 50.0 $ 47.7 $ 143.9 $ 137.1 Net Losses & Loss A
Slide 60: Workers' Compensation Business Profile & Overview
Workers’ Compensation Business Profile & Overview • Eastern Alliance Insurance Group • Best-in-Class Claims, Risk Management and Underwriting Business Model • Broad Product Spectrum • 43 State/DC Licenses – Core Operations in 19 States • Select Agency Partnerships ◦ 387 Contracts / 942 Locations New
Slide 61: Broad Workers' Compensation Product Spectrum
Broad Workers’ Compensation Product Spectrum Traditional Business Only Traditional Markets $156.6 mln Gross Premiums Written Premium in 2019 • Guaranteed Cost Policies • Loss-Sensitive Dividend Plans • Deductible Plans • Retrospective Rating Plans • ParallelPay–“Pay as you Go” • Specialty Risk (high
Slide 62: Diversified Book of Business – Traditional Markets
Diversified Book of Business – Traditional Markets • Wide diversification by class code and market segment ◦ 11,195 active policies in Traditional Programs ▪ Over 600 class codes actively written Top 10 Classes of Business by Payroll Exposure as of September 30, 2019 Non-Healthcare Healthcare Relate
Slide 63: Significant Healthcare Profile – Traditional Markets
Significant Healthcare Profile – Traditional Markets Healthcare as a Percentage of Traditional Workers’ Compensation Writings Gross Premiums Written YTD at 9/30/19 $ = DPW in millions YTD 2019 Healthcare premiums grew 9.9% vs. YTD 2018 ProAssurance Investor Briefing | November 2019 63
Slide 64: Consistent Profitability in Workers' Compensation
Consistent Profitability in Workers' Compensation Historical Combined Ratio Average 89.4% 2006 – Q3 2019 *2018 and 2019 ratios include Workers’ Compensation Insurance segment only. ProAssurance Investor Briefing | November 2019 64
Slide 65: Workers' Comp Claim Closing Pattern: Traditional
Workers’ Comp Claim Closing Pattern: Traditional • Eastern’s proactive claim-closing strategies are key to being recognized as a short-tail writer of workers’ compensation • No claims open from 2004 and earlier ◦ 45 net claims open from 2014 and prior 9/30/19 ProAssurance Investor Briefing | Novembe
Slide 66: Segment Strategic Review: Workers' Compensation Insurance
Segment Strategic Review Workers’ Compensation Insurance, November 2019
Slide 67: Eastern Outperforms in Workers' Compensation
Eastern Outperforms in Workers’ Compensation Eastern consistently outperforms in a volatile line of business Source: 1996-2018 A.M. Best Aggregates and Averages, Workers’ Compensation. Policyholder Dividends Included. Data is inclusive of Segregated Portfolio Cell Reinsurance results as of 12/31/201
Slide 68: Opportunities in Workers' Compensation Insurance
Opportunities in Workers’ Compensation Insurance • $11.3 million in new business written in Q3 2019 ◦ Traditional: $10.5 million ◦ Alternative Market: $0.8 million • Launched Eastern Specialty Risk in 2017 ◦ High Hazard product offering ▪ Construction, Forestry, and Transportation markets ◦ $5.9 mil
Slide 69: Strategy Update: How Eastern Differentiates
Strategy Update: How Eastern Differentiates • Disciplined individual account • Dedicated to effective claims • Understands market underwriting with focus on management and returning dynamics and regulatory rate adequacy in rural injured workers to wellness concerns territories ◦ Use of local knowled
Slide 70: Specialty Risk: Higher Risk But NOT High Risk
Specialty Risk: Higher Risk But NOT High Risk • 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 ▪ $2.5 million in direct premiums in Q3 2019, $5.9 million YTD 2019 ◦ $8.2 mill
Slide 71: Segment Highlights: Segregated Portfolio Cell Reinsurance
Segment Highlights Segregated Portfolio Cell Reinsurance, November 2019
Slide 72: Segregated Portfolio Cell Program Structure
Segregated Portfolio Cell Program Structure Fronting Arrangement Underwriting Claims Administration Risk Management Agency group or Reinsurance Association Services Tax establishes/funds a Audit Cell Asset Management Fee Income to ProAssurance Services + Cell Rental Expenses + Participates in profit
Slide 73: Segregated Portfolio Cell Reinsurance Financial Highlights (9/30/19)
Segregated Portfolio Cell Reinsurance Financial Highlights (9/30/19) Three Months Ended Nine Months Ended September 30 2019 2018 2019 2018 Gross Premiums Written $ 17.3 $ 16.8 $ 70.6 $ 68.3 Net Premiums Earned $ 19.8 $ 19.0 $ 58.6 $ 54.2 Net Investment Income $0.4$0.4$1.3$1.1 Net Realized Gains (Los
Slide 74: Workers' Compensation Insurance – Alternative Market Written Premium Trends
Workers’ Compensation Insurance – Alternative Market Written Premium Trends • 20 year track record of growth and profitability • $16.7 million in alternative markets GPW during Q3 2019 • 2018 YTD GPW = $67.5 million ◦ Flat year-over-year Alternative Markets business only, GPW in 000’s ProAssurance I
Slide 75: Diversified Book of Business - Segregated Portfolio Cell Programs
Diversified Book of Business - Segregated Portfolio Cell Programs • Wide diversification by class code and market segment ◦ 2,589 active policies in Segregated Portfolio Cell Market programs ▪ Over 400 actively written class codes in Segregated Portfolio Cell programs Top 10 Classes of Business by P
Slide 76: Claim Closing Pattern – Segregated Portfolio Cell Programs
Claim Closing Pattern – Segregated Portfolio Cell Programs • 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 ◦ 46 net claims open from 2016 and prior 9/30/19 ProAssurance Investor Briefing
Slide 77: Segment Strategic Review: Segregated Portfolio Cell Reinsurance
Segment Strategic Review Segregated Portfolio Cell Reinsurance, November 2019
Slide 78: How The SPC Segment Differentiates
How The SPC Segment Differentiates Captive insurance solutions provided through Inova Re • Segregated cell • Successfully driving •Strategic • Value-added risk company based in new business partnerships with management services Cayman opportunities for select independent and healthcare agencies that
Slide 79: How Segregated Portfolio Cells Benefit ProAssurance
How Segregated Portfolio Cells Benefit ProAssurance • 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-bas
Slide 80: How Segregated Portfolio Cells Benefit Insureds
How Segregated Portfolio Cells Benefit Insureds • Highly Rated Paper •“Turn-key” Operation • Stable Off-Shore Facility ◦ Provides simple and easy transition from ◦ Over 30 years in operation (since 1987) start to finish ◦ Cayman Islands Monetary Authority ◦ Minimal start-up capitalization regulation
Slide 81: Advantages of the Cayman Islands Domicile
Advantages of the Cayman Islands Domicile • Second largest captive domicile in the world ◦ Largest healthcare captive domicile in the world ◦ 90% of business from North America • Healthcare captives represent 33.2% of all captives • Medical professional liability is the largest primary line followed
Slide 82: Segment Highlights: Lloyd's of London
Segment Highlights Lloyd’s of London, November 2019
Slide 83: Lloyd's Segment Financial Highlights (9/30/19)
Lloyd’s Segment Financial Highlights (9/30/19) Three Months Ended Nine Months Ended September 30 2019 2018 2019 2018 Gross Premiums Written $ 30.4 $ 26.4 $ 83.2 $ 62.9 Net Premiums Earned $ 21.3 $ 19.0 $ 57.2 $ 49.0 Total Revenues $ 22.5 $ 20.1 $ 60.9 $ 51.2 Net Losses & Loss Adjustment Expenses $ (
Slide 84: Lloyd's Syndicates Business Detail YTD
Lloyd’s Syndicates Business Detail YTD* • Broad spread of risk • Syndicate 1729 2019 maximum underwriting capacity: $157.3 million • ProAssurance’s 61%† share is $95.9 million • Syndicate 6131 2019 underwriting capacity: $14.7 million • ProAssurance is the 100% capital provider • Property is primari
Slide 85: Segment Investment Thesis & Strategic Review: Lloyd's of London
Segment Investment Thesis & Strategic Review Lloyd’s of London, November 2019
Slide 86: Why Lloyd's? Our Investment Thesis
Why Lloyd’s? Our Investment Thesis Westernization of international healthcare professional liability • Many countries are moving towards a contingency fee tort system • ProAssurance’s expertise is adaptable Universal distribution & licensure • Particularly appealing to Medmarc as Medical Technology
Slide 87: The Future of Our Lloyd's Investment
The Future of Our Lloyd’s Investment • Review of strategic options is ongoing ◦ Expect to reduce exposure by 50% • The Syndicate is developing its proposed business plan for 2020 ◦ Will then allow for completion of a more fulsome review of future options ◦ Improve profitability ◦ Assess capital use
Slide 88: Appendix
Appendix
Slide 89: Investment Strategy and 2019 Outlook
Investment Strategy and 2019 Outlook • Effective stewardship of capital ensures a position of financial strength through turbulent market cycles • Optimizing our allocations for better risk-adjusted returns ◦ Ensures non-correlation of returns • Duration management remains paramount ◦ We will not ex
Slide 90: YTD 2019 Net Investment Result
YTD 2019 Net Investment Result 9/30/2019 9/30/2018 Change Net Investment Income $ in thousands Fixed maturities $ 54,154 $ 51,814 $ 2,340 Equities 13,755 15,553 (1,798) Short-term investments including Other 5,466 3,968 1,498 BOLI 1,557 1,525 32 Investment fees and expenses (4,894) (5,183) 289 Net i
Slide 91: ProAssurance Recent Investment Performance
ProAssurance Recent Investment Performance ProAssurance Investor Briefing | November 2019 91
Slide 92: ProAssurance Investment Profile
ProAssurance Investment Profile • Average duration: 2.95 years • Average tax-equivalent income yield: 3.4% • Investment grade: 94% • Weighted average: A+ 9/30/19 Subject to Rounding Full portfolio disclosure on our website: investor.proassurance.com/CustomPage/Index?KeyGenPage=305596 ProAssurance In
Slide 93: ProAssurance Portfolio Detail: Corporate
ProAssurance Portfolio Detail: Corporate Corporate: $1.3 Billion (57% of Fixed Assets / 39% of Invested Assets) Top 20 Banks/Financials: $248 million in millions Bank of America $24 HSBC $9 Citi $21 Simon Property $9 J.P. Morgan $20 Schwab $8 GS $20 Huntington Bank $8 Wells Fargo $19 MUFG $8 Morgan
Slide 94: ProAssurance Portfolio Detail: Asset Backed
ProAssurance Portfolio Detail: Asset Backed Asset-Backed Securities: $516 Million (22% of Fixed Income / 15% of Invested Assets) 9/30/19 Subject to rounding Weighted Average Rating: “AAA” ProAssurance Investor Briefing | November 2019 94
Slide 95: ProAssurance Portfolio Detail: Fixed-Trading
ProAssurance Portfolio Detail: Fixed-Trading Fixed Maturities: $45 Million (2% of Fixed Income / 1% of Invested Assets) All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 9/30/19 Subject to rounding Weighted Average Rating: “AA” ProAssurance Investor Briefing | November 2019 95
Slide 96: ProAssurance Portfolio Detail: Municipals
ProAssurance Portfolio Detail: Municipals Municipals: $293 Million (13% of Fixed Income / 8% Top 10 Municipal Holdings Invested Assets) in millions New York, NY $10 NY St Urban Dev $8 Houston TX Utility Sys Rev $8 Connecticut St Hsg Fin Authority $7 OR St $7 UT St $7 Omaha NE Pub Pwr $7 NY City Tran
Slide 97: ProAssurance Portfolio: Equities & Other
ProAssurance Portfolio: Equities & Other Equities & Other: $813 Million (23% of Invested Assets) 9/30/19 Subject to Rounding ProAssurance Investor Briefing | November 2019 97
Slide 98: Combined Tax Credits Portfolio Detail & Projections
Combined Tax Credits Portfolio Detail & Projections GAAP Income/(Loss) Capital from Operations, Tax Provision Impact on Year Total Credits Contributions Disposition after Impairment Earnings & Impairment 2019 $ 150,596 (21,120,408) (18,537,352) (22,972,638) 1,852,230 2020 $ 136,251 (20,769,996) (17,
Slide 99: Change in Capital: 2009 – Q3 2019
Change in Capital: 2009 ‒ Q3 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD 2019 Beginning $1,424 $1,705 $1,856 $2,164 $2,271 $2,394 $2,158 $1,958 $1,799 $1,595 $1,523 Equity* Cumulative-effect — — — — — — — — 149 8,334 (444) adjustments Stock Issued—————————— — Employee Stock 7,205 6,14
Slide 100: Ceded Premiums Written (9/30/19)
Ceded Premiums Written (9/30/19) Specialty P&C HCPL Workers’ Segregated including Compensation Portfolio Cell Podiatry(2) Products Lawyers Insurance (1) Reinsurance Lloyd’s (3) 9/30/19 9/30/18 9/30/19 9/30/18 9/30/19 9/30/18 9/30/19 9/30/18 9/30/19 9/30/18 9/30/19 9/30/18 Gross premiums written $ 41
Slide 101: Important Safe Harbor & Non-GAAP Notices
IMPORTANT SAFE HARBOR & NON-GAAP NOTICES Forward Looking Statements Non-GAAP Measures This presentation contains Forward Looking This presentation contains Non-GAAP Statements and other information designed measures, and we may reference Non-GAAP to convey our projections and expectations measures i