Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (June 2019)
111 slides from Proassurance's investor presentation, Jun 11, 2019
Slide 1: Table of Contents
Table of Contents The Latest News Investments Key Themes & Topics (w/ Capital Management) 2-8 Investment Strategy 93 Management Changes 9-11 Q1 2019 Net Investment Result 94 Corporate Update / Overview 12-15 PRA Performance vs. Benchmark 95 Capital Management (Expanded) 16-21 Detailed Breakout of In
Slide 2: Topics of Importance and Key Themes June 2019
Topics of Importance and Key Themes June 2019
Slide 3: Key Update: Dividends and Capital Management
Key Update: Dividends and Capital Management Special dividend of $0.50/share paid on January 9, 2019 Special dividend of $4.69/per common share paid in 2018 and 2017 Regular quarterly dividends of $0.31/per common share Dividends declared in 2018 and 2017 returned $317 million of capital to sharehol
Slide 4: Key Update: Positives in Q1 2019
Key Update: Positives in Q1 2019 *Some InovaRe business included in HCPL †Includes alternative markets Continued Top Line Growth Gross Premiums Written of $279.8 million Increase of 15.1% from Q1 2018. 3rd of previous 4 quarters to top 10% growth Q-o-Q Renewal Pricing Momentum Continues in Specialty
Slide 5: Key Update: Major Topics for Q1 2019
Key Update: Major Topics for Q1 2019 Combined Ratio of 106.3% Consolidated Net Loss Ratio: 76.8% (+7.5%) Consolidated Underwriting Expense Ratio: 29.5% (-1.1%) Operating Profit for the Quarter Non-GAAP Operating Income: $4.16 million, $0.08 per share (-80.0% Q-o-Q) Net Favorable Development of $10.3
Slide 6: Key Update: Confronting the Challenges Ahead
Key Update: Confronting the Challenges Ahead Continued review of our Lloyd’s Investment Increase profitability Reduce volatility Assess our degree of participation Profitable growth Increasing market discipline allows us to add new HCPL business at higher rates Specialization in profitable markets a
Slide 7: Key Update: The Current State of the Markets We Serve
Key Update: The Current State of the Markets We Serve Healthcare Professional Liability Signs of increasing severity and greater scrutiny from regulators and rating agencies should bring rationality back to the market Likely to provide new growth opportunities as weakness among smaller, less capable
Slide 8: Key Themes
Key Themes Long Term Success Consistent & disciplined focus on profitability Demonstrated track record of value creation for shareholders Proven Strategy World class knowledge & expertise Superior brand identity and reputation in the market Broad range of coverages address every significant need in
Slide 9: Management Changes June 2019
Management Changes June 2019
Slide 10: Changes in Leadership
Changes in Leadership* *All except CEO change were effective May 13th Ned Rand will become CEO effective July 1, 2019 Stan Starnes to become Executive Chairman of the Board Howard Friedman has retired from his role as President of Healthcare Professional Liability Will remain with ProAssurance focus
Slide 11: Corporate Leadership Structure as of May 13th
Corporate Leadership Structure as of May 13th
Slide 12: Corporate Leadership Structure as of May 13th
Corporate Leadership Structure as of May 13th AD PROASSURANCE,
Slide 13: ProAssurance Corporate Profile
ProAssurance Corporate Profile Healthcare-centric specialty insurance writer Healthcare Professional Liability (HCPL) Largest public company writing predominantly HCPL Life sciences and medical device liability Workers' compensation Legal professional liability Alternative risk transfer (ART) Market
Slide 14: Premiums, Policyholders & Distribution for Q1 2019
All Data as of 3/31/2019, subject to rounding Premiums, Policyholders & Distribution for Q1 2019 YTD Policyholder Count: 79,347 YTD 2019 Gross Premium: $279.8 mln Premium Allocated by Line Does Not Reflect Inter-Segment Eliminations Subject to Rounding Our Distribution Sources HCPL LPL Life Sciences
Slide 15: ProAssurance Brand Profile
ProAssurance Brand Profile Specialty P&C Healthcare Professional Liability Workers’ Comp Alternative Risk Transfer Medical Technology & Life Sciences Products Liability Legal Professional Liability
Slide 16: Additional Capital Management Discussion Points June 2019
Additional Capital Management Discussion Points June 2019
Slide 17: Superb Track Record of Capital Management
Superb Track Record of Capital Management A look at the last ten years At 5/31/19 $ in 000’s Year Dividends Declared† Share Repurchase Strategic Acquisitions Total Special Regular 2009 ̶ ̶ 52,045 $ 137,800 189,845 2010 ̶ ̶ 106,347 233,000 339,347 2011 ̶ $ 15,269 21,013 ̶ 36,282 2012 $ 154,055 38,411
Slide 18: Capital and Liquidity Decisions
Capital and Liquidity Decisions All decisions must recognize that we hold significant capital at the subsidiary level to maintain operating company ratings and satisfy regulatory requirements. Dividends from subsidiaries to the holding company are our primary source of liquidity and are paid as allo
Slide 19: Key Source of Capital: Subsidiary Dividends to Corporate
Key Source of Capital: Subsidiary Dividends to Corporate Subsidiary Dividend History (in Millions) 2019 ORDINARY Dividend Capacity $128 Million Ordinary dividends are permitted without regulatory pre-approval Amounts and criteria vary by domiciliary state Extraordinary dividends require regulatory a
Slide 20: Capital Management Priorities
Capital Management Priorities “A+” Rating Threshold The manner in which capital is used has an effect on financial ratings Excess Capital vs. Excess Capacity Conceptual Model of Projected A. M. Best BCAR Scores if Increase Premium Reduce Surplus
Slide 21: Capital Growth: 2009 – Q1 2019
* Equity shown in millions; all other data shown in thousands Capital Growth: 2009 – Q1 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Beginning Equity* $ 1,424 $ 1,705 $ 1,856 $ 2,164 $ 2,271 $ 2,394 $ 2,158 $ 1,958 $ 1,799 $ 1,595 $ 1,523 Cumulative-effect adjustments ̶ ̶ ̶ ̶ ̶ ̶ ̶
Slide 22: Financial / Operating Performance June 2019
June 2019 Financial / Operating Performance
Slide 23: Income Statement Highlights (3/31/19)
Income Statement Highlights (3/31/19) Strong results from a focused strategy Three Months Ended Twelve Months Ended March 31 2019 2018 2018 2017 Gross Premiums Written $ 279.8 $ 243.0 $ 957.3 $ 874.9 Net Premiums Earned $ 208.1 $ 187.2 Net Investment Result $ 22.0 $ 23.7 $ 100.8 $ 103.7 Net Realized
Slide 24: Corporate Segment Financial Highlights (3/31/19)
Corporate Segment Financial Highlights (3/31/19) Three Months Ended Twelve Months Ended March 31 2019 2018 2018 2017 Net investment income $ 21.4 $ 20.9 $ 87.0 $ 92.9 Equity in earnings (loss) of unconsolidated subsidiaries $ (0.8) $ 1.6 $ 8.9 $ 8.0 Net realized investment gains (losses) $ 34.3 $ (1
Slide 25: Operational Results / Long-Term Profitability
Operational Results / Long-Term Profitability Combined ratio average 2009 – Q1 2019: 80.5% Operating ratio average 2009 – Q1 2019: 60.9% Combined Ratio and Operating Ratio History 69.1% 68.0% 52.5% 57.3% 70.6% 82.1% 90.5% 91.4% 95.4% 101.5% 106.3% 38.8% 39.8% 27.6% 32.6% 46.1% 64.2% 74.8% 77.8% 82.4
Slide 26: Disciplined Approach to Reserves
Disciplined Approach to Reserves Recognizing loss trends as they appear No change in reserving philosophy or process $ in millions *Subject to rounding 15-Year Reserve Development History by Quarter by Year HCPL Predominating 2004 — Q1 2019 $20 $19 $25 $40 $48 $53 $48 $34 $29 $29 $23 $31 $37 $38 $50
Slide 27: Inside ProAssurance's Income Statement (3/31/19)
3/31/19 Subject to Rounding Inside ProAssurance’s Income Statement (3/31/19) Net Premiums Earned 77.4% Net Investment Income 8.5% Net Realized Investment Gains (Losses) 13.6% Other 0.5% Net Losses and Loss Adjustment Expenses 59.4% Underwriting, Policy Acquisitions, Operating, SPC Dividend, and Inte
Slide 28: Ceded Premiums Written (3/31/19)
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) All other reinsurance arrangements includes a
Slide 29: Balance Sheet Highlights
Balance Sheet Highlights Maintaining the financial strength required to keep our insurance promise and creating value for our shareholders Mar 31, 2019 2018 2017 2016 2015 2014 Shareholders’ Equity $1.6 $1.5 $1.6 $1.8 $2.0 $2.2 Total Investments $3.4 $3.3 $3.7 $3.9 $3.7 $4.0 Total Assets $4.7 $4.6 $
Slide 30: Inside ProAssurance's Balance Sheet (3/31/2019)
Inside ProAssurance’s Balance Sheet (3/31/2019) Cash & Investments 73.9% Insurance Receivables 15.1% Goodwill & Intangible Assets 6.1% Other Assets 4.9% Loss Reserves 45.8% Reinsurance Payable & Other Liabilities 11.4% Unearned Premiums 9.7% Other Equity - 0.5% Retained Earnings 33.6% Assets: $4.7 b
Slide 31: Shareholder Return & ROE June 2019
Shareholder Return & ROE June 2019
Slide 32: Book Value per Share History to March 31, 2019
Book Value per Share History to March 31, 2019 Growth in Book Value + Dividends Since Inception (Sep 1991) Cumulative: 2,808% / CAGR: 13% Initial dividend declared in Q4 2011 $1.84 $3.14 $4.28 $5.79 $6.96 $8.01 $9.39 $12.30 $19.35 $26.30 $35.67 $43.56 $47.41 Q1, 2019 $ 53.50 $36.85 $38.17 $33.78 Q1,
Slide 33: ProAssurance Leverage Update
$289 million debt at 3/31/19 $250.0 million 10-year notes due 11/15/2023 5.30% Coupon $39 million in office building mortgages $250 million revolving credit facility No outstanding borrowings ProAssurance Leverage Update Ten-Year Premiums to Equity Ten-Year Debt to Capital Moving closer to our minim
Slide 34: Return on Equity & Future Goals
*https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield Return on Equity & Future Goals ROE target is seven points above the ten-year Treasury rate (risk-free rate) Ten year treasury rate was 2.14% at 5/31/2019*, implying a revised ROE Target of appr
Slide 35: Total Return & Stock Price
Total Return & Stock Price Reflects all stock splits and includes all dividends in the year declared. Source: SNL Scorecard at 5/31/2019 Total Return CAGR Since Inception (Sep 1991) 2229% 12% Ten Year (5/31/09 – 5/31/19) 169% 10% Five Year (5/31/14 – 5/31/19) 21% 4% YTD 2019 -5% Stock Price Total Re
Slide 36: Segment Highlights Specialty P&C, June 2019
Segment Highlights Specialty P&C, June 2019
Slide 37: Specialty P&C Financial Highlights (3/31/19)
Current Accident Year Net Loss Ratio 93.1% 90.6% 93.8% 89.9% Effect of Prior Accident Year Reserve Development (6.3%) (17.9%) (15.6%) (26.5%) Net Loss Ratio 86.8% 72.7% 78.2% 63.4% Underwriting Expense Ratio 23.9% 24.3% 22.9% 24.0% Combined Ratio 110.7% 97.0% 101.1% 87.4% Specialty P&C Financial Hig
Slide 38: Q1 2019 Specialty P&C Gross Written Premium
Q1 2019 Specialty P&C Gross Written Premium Total Gross Written Premiums increased $25.9M (18.4%) from $140.5M to $166.4M Physician increase is due to new business of $14.4M, timing differences and, to a lesser extent, an increase in assumed business, partially offset by retention losses (91%) Facil
Slide 39: 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 – Physicians T
Slide 40: Physician Liability Pricing Trend
Physician Liability Pricing Trend PICA excluded to facilitate accurate comparisons over time March 31, 2019 Accelerating changes on renewed business MD/DO Charged Rate History 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Annual 23% 28% 28% 19% 11%
Slide 41: State Rate Comparison
Annual Premium for a $1M / $3M Policy Filed or Approved at 3/31/19 Key State Rate Comparison Birmingham Indianapolis Denver Dallas St Louis Atlanta Cleveland Detroit New York, NY Miami Washington Chicago Family Practice (No Surgery) $7,484 $9,351 $11,100 $11,345 $17,960 $19,320 $20,593 $28,263 $23,2
Slide 42: The Bottom Line Benefits of Strong Defense
Source: 2013-2017, Statutory Basis, A.M. Best Aggregates & Averages The Bottom Line Benefits of Strong Defense Our ability and willingness to defend claims allows us to achieve better results ProAssurance Stand Alone Five-Year Average Loss Ratio (2013-2017 / Calendar Year) ProAssurance vs. Industry
Slide 43: ProAssurance Outperforms in Insurance
Source: A.M. Best Aggregates and Averages for Each Line of Business (1991-2017) ProAssurance Outperforms in Insurance Average Combined Ratio 103.8% 101.4% 99.2% 106.5% 92.4% 100.6% 87.2% 67.4% 76.6% 88.3% 70.7% 80.0% 1991-2017 10-Year 2008-2017 5-Year 2013-2017 Overall P&C Overall HCPL PRA - MPL Onl
Slide 44: ProAssurance Outperforms in HCPL
Source: 1991-2016 A.M. Best Aggregates and Averages, Medical Malpractice Lines of Business. Policyholder Dividends Included. ProAssurance Outperforms in HCPL ProAssurance consistently outperforms in a volatile line of business Calendar Year Combined Ratio 1991 - 2017 Avg Since Inception 1991-2017 10
Slide 45: Segment Strategic Review Specialty P&C, June 2019
Segment Strategic Review Specialty P&C, June 2019
Slide 46: New Market Conditions Emerging
New Market Conditions Emerging Greater uncertainty in the market creates an environment where ProAssurance outperforms due to superior financial strength and operational expertise Perceived trends have led two commercial carriers to exit all or part of their healthcare professional liability busines
Slide 47: New Market Conditions Emerging: Verdict Severity
New Market Conditions Emerging Data Source: TransRe Unmistakable trend to higher severity evident in the broader industry Not evident in ProAssurance paid losses Prompting greater conservatism in ProAssurance reserves on larger risks where deeper pockets may have been created by consolidation Greate
Slide 48: Mega Verdicts at Record Highs in 2018
Mega Verdicts at Record Highs in 2018 Data Source: TransRe 0 5 10 15 20 25 30 35 40 45 50 02 04 06 08 10 12 14 16 18 $ Millions Year Largest (10 th /25 th /50 th ) Verdicts, 2001 - 2018 10th 25th 50th
Slide 49: 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 can afford Restructuring is producing profound changes in healthcare The U.S. spends a almost 18% of GDP on healthcare and the percentage is increasing Healthcare Cost control remains
Slide 50: 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% $9,200 $ 25,800
Slide 51: How Healthcare Costs Will Force Changes in Our Market
How Healthcare Costs Will Force Changes in Our Market Adapted from HBR: The Strategy that Will Fix Healthcare 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 reim
Slide 52: Strategy Update: Traditional Practices are Fading
Strategy Update: Traditional Practices are Fading More physicians than ever are employees The fork in the road for traditional HCPL companies Their core markets are disappearing and they do not have the financial size and capability to insure large, more complex risks Source: 2018 Physicians Foundat
Slide 53: Emerging Issues in Healthcare
Emerging Issues in Healthcare Consolidation of providers into larger groups or within facilities/systems Evolution of new delivery systems to address cost pressures Multi-state expansion to achieve scale Challenges for HCPL Insurers Broker-driven purchasing requires new approaches to the market Larg
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 mi
Slide 55: ProAssurance is Positioned to Succeed in HCPL
ProAssurance is Positioned to Succeed in HCPL Our long-term focus on financial strength and protecting our balance sheet is central to our overall strategy and success We have proven our ability to thrive across insurance cycles We have an unmatched combination of financial strength and deep experie
Slide 56: Strategy Update: Successes in the Evolving Market
Strategy Update: Successes in the Evolving Market *http://ascension.org/our-work/ascension-health/sites-of-care The Certitudetm program in partnership with Ascension Health Shared risk through quota share participation by Ascension’s captive on first $1M ~2,433 insured physicians ~$6.9 mln Certitude
Slide 57: Addressing a Wide Spectrum of Risk Appetites
Addressing a Wide Spectrum of Risk Appetites Traditional Policies Primarily agent-sold or direct Remains the majority of our business Proven performance supports discipline pricing Transitional Risk sharing/high deductible programs control cost and build “sticky” business Risk purchasing groups targ
Slide 58: Emerging Strategic Opportunities
Emerging Strategic Opportunities ProAssurance Risk Solutions sm 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 seeking to repurpose c
Slide 59: Leveraging Existing Expertise in New Ways
Leveraging Existing Expertise in New Ways Syndicate 1729 at Lloyds Our 61% participation provides potential access to international medical professional liability opportunities Increases flexibility for ProAssurance when working with complex risks Primary and excess business can be written We expect
Slide 60: Segment Highlights Workers' Compensation, June 2019
Segment Highlights Workers’ Compensation, June 2019
Slide 61: Workers' Compensation Insurance Financial Highlights (3/31/19)
Workers’ Compensation Insurance Financial Highlights (3/31/19) Three Months Ended Twelve Months Ended March 31 2019 2018 2018 2017 Gross Premiums Written $ 89.4 $ 91.7 $ 293.2 $ 264.0 Net Premiums Earned $ 45.9 $ 42.7 $ 186.1 $ 163.3 Total Revenues $ 46.7 $ 43.6 $ 188.5 $ 165.4 Net Losses & Loss Adj
Slide 62: Broad Workers' Compensation Product Spectrum
Broad Workers’ Compensation Product Spectrum Traditional Markets Guaranteed Cost Policies Loss-Sensitive Dividend Plans Deductible Plans Retrospective Rating Plans ParallelPay–“Pay as you Go” Eastern Specialty Risk (high hazard) TPA Services Claims Administration and Risk Management Traditional Busi
Slide 63: 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 378 Contracts / 915 Locations Southeast Regio
Slide 64: Opportunities in Workers' Compensation
Opportunities in Workers’ Compensation 3/31/19 Subject to Rounding $7.5 million in new business written in Q1 2019 Traditional: $6.4 million Alternative Market: $1.1 Launched Eastern Specialty Risk in 2017 High Hazard product offering Construction, Forestry, and Transportation markets $1.5 million w
Slide 65: Diversified Book of Business – Traditional Markets
Diversified Book of Business – Traditional Markets Top 10 Classes of Business by Payroll Exposure as of March 31, 2019 Healthcare Related Non-Healthcare Wide diversification by class code and market segment 11,077 active policies in Traditional Programs Over 600 class codes actively written Physicia
Slide 66: Healthcare as a Percentage of Traditional Workers' Compensation Writings
Healthcare as a Percentage of Traditional Workers’ Compensation Writings Gross Premiums Written YTD at 3/31/19 Significant Healthcare Profile – Traditional Markets 2018 Healthcare premiums decreased 3% vs. 2018 $ = DPW in millions Non - Healthcare 74% Healthcare 26% $14.2 $14.6 2019 2018 Healthcare
Slide 67: Consistent Profitability in Workers' Comp
*2018 ratios include Workers’ Compensation Insurance segment only. Consistent Profitability in Workers' Comp Historical Combined Ratio Average 89.5% 2006 – Q1 2019 79.1% 65.6% 80.2% 87.7% 96.0% 89.7% 91.8% 93.0% 96.0% 95.9% 95.5% 91.1% 93.6% 97.2% 92.7% 94.3% 93.7% 89.1% 93.1% 96.7% 2006 2007 2008 2
Slide 68: Eastern Outperforms in Workers' Compensation
Source: 1996-2017 A.M. Best Aggregates and Averages, Workers’ Compensation. Policyholder Dividends Included. Data is inclusive of Segregated Portfolio Cell Reinsurance results as of 12/31/2017. Eastern Outperforms in Workers’ Compensation Eastern consistently outperforms in a volatile line of busine
Slide 69: Workers' Comp Claim Closing Pattern: Traditional
Workers’ Comp Claim Closing Pattern: Traditional 3/31/2019 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 55 net claims open from 2014 and prior 687 590 717 778 890 957 1,078 1,189 1,261 1,
Slide 70: Segment Strategic Review Workers' Compensation, June 2019
Segment Strategic Review Workers’ Compensation, June 2019
Slide 71: Strategy Update: How Eastern Differentiates
Strategy Update: How Eastern Differentiates Understands market dynamics and regulatory concerns Use of local knowledge that has always differentiated ProAssurance Disciplined individual account underwriting with focus on rate adequacy in rural territories Dedicated to effective claims management and
Slide 72: Eastern Specialty Risk: Higher Risk But NOT High Risk
Eastern 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 $1.5 million in direct premiums in Q1 2019 $8.2 million in direct premiums in
Slide 73: Segment Highlights Segregated Portfolio Cell Reinsurance, June 2019
Segment Highlights Segregated Portfolio Cell Reinsurance, June 2019
Slide 74: Segregated Portfolio Cell Program Structure
Segregated Portfolio Cell Program Structure Inova Re Underwriting Claims Administration Risk Management Reinsurance Tax Audit Asset Management Services + Cell Rental Expenses + Participates in profits/losses of carefully selected cells Fee Income to ProAssurance ProAssurance/Eastern participates in
Slide 75: Segregated Portfolio Cell Reinsurance Financial Highlights (3/31/19)
Segregated Portfolio Cell Reinsurance Financial Highlights (3/31/19) Three Months Ended Twelve Months Ended March 31 2019 2018 2018 2017 Gross Premiums Written $ 36.4 $ 32.3 $ 85.1 $ 77.7 Net Premiums Earned $ 19.5 $ 17.0 $ 73.9 $ 68.2 Net Investment Income $ 0.4 $ 0.4 $ 1.6 $ 1.1 Net Realized Gains
Slide 76: Segregated Portfolio Cell Written Premium Trends
Segregated Portfolio Cell Written Premium Trends GPW in 000’s 20 year track record of growth and profitability $36.4 million in Q1 2019 vs $32.2 million in Q1 2018 2018 GWP = $84.4 million Year-over-year growth of 12.4%
Slide 77: Diversified Book of Business - Segregated Portfolio Cell Programs
Wide diversification by class code and market segment 2,617 active policies in Segregated Portfolio Cell Market programs Over 400 actively written class codes in Segregated Portfolio Cell programs Diversified Book of Business - Segregated Portfolio Cell Programs Top 10 Classes of Business by Payroll
Slide 78: Healthcare as a Percentage of SPCR Workers' Compensation Writings
Healthcare as a Percentage of SPCR Workers’ Compensation Writings Direct Written Premium YTD at 3/31/19 Significant Healthcare Profile – Segregated Portfolio Cell Programs 2019 Healthcare premiums grew 21.5% vs. 2018 $ = DPW in millions Non - Healthcare 54% Healthcare 46% $13.7 $10.6 2018 2017 Healt
Slide 79: Claim Closing Pattern – Segregated Portfolio Cell Programs
Claim Closing Pattern – Segregated Portfolio Cell Programs 3/31/2019 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 28 net claims open from 2015 and prior 407 422 310 326 336 385 405 503 50
Slide 80: Segment Strategic Review Segregated Portfolio Cell Reinsurance, June 2019
Segment Strategic Review Segregated Portfolio Cell Reinsurance, June 2019
Slide 81: Strategy Update: How The SPC Segment Differentiates
Strategy Update: How The SPC Segment Differentiates Captive insurance solutions provided through Inova Re Value-added risk management services and claims/underwriting expertise cements brand loyalty Strategic partnerships with select independent agencies that share philosophies on controlling worker
Slide 82: 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-based revenue
Slide 83: How Segregated Portfolio Cells Benefit Insureds
How Segregated Portfolio Cells Benefit Insureds Highly rated paper Stable Off-Shore Facility Over 30 years in operation (since 1987) Cayman Islands Monetary Authority regulation Segregated portfolio cells statutorily protected from each other Multi-State Coverage “Fully-Bundled” Approach No need for
Slide 84: Advantages of the Cayman Islands Domicile
Advantages of the Cayman Islands Domicile * 3/31/19. Cayman Islands Monetary Authority: https://www.cima.ky/upimages/commonfiles/StatsbyPrimaryClassofBusiness-website_1555092047.pdf Second Largest captive domicile in the world Largest healthcare captive domicile in the world 90% of business from Nor
Slide 85: Segment Highlights Lloyd's of London, June 2019
Segment Highlights Lloyd’s of London, June 2019
Slide 86: Lloyd's Segment Financial Highlights (3/31/19)
Lloyd’s Segment Financial Highlights (3/31/19) Three Months Ended Twelve Months Ended March 31 2019 2018 2018 2017 Gross Premiums Written $ 23.6 $ 12.4 $ 88.7 $ 70.2 Net Premiums Earned $ 18.6 $ 12.5 $ 67.0 $ 57.2 Total Revenues $ 19.7 $ 13.5 $ 70.3 $ 57.6 Net Losses & Loss Adjustment Expenses $ 10.
Slide 87: Lloyd's Syndicates Business Detail
Lloyd’s Syndicates Business Detail* *$ in millions and based on exchange rates at 3/31/2019 †Participation in operating results of Syndicate 1729 slightly decreased for 2019 underwriting year from 62% to 61%. Will be reflected in Lloyd's Syndicates segment results in Q2 2019 due to one quarter lag.
Slide 88: Segment Investment Thesis & Strategic Review Lloyd's of London, June 2019
Segment Investment Thesis & Strategic Review Lloyd’s of London, June 2019
Slide 89: Why Lloyd's? Our Investment Thesis
Why Lloyd’s? Our Investment Thesis Universal distribution & licensure Particularly appealing to Medmarc with Medical Technology & Life Sciences developing and testing expands globally Westernization of international healthcare professional liability Many countries are moving towards a contingency fe
Slide 90: The Future of Our Lloyd's Investment
The Future of Our Lloyd’s Investment Review of strategic options is ongoing Immediate goal: reduce volatility in 2019 through reinsurance Likely through the use of reinsurance of our corporate member Will then allow for completion of a more fulsome review of future options Improve profitability Asse
Slide 91: Investment Strategy & Detailed Holdings June 2019
Investment Strategy & Detailed Holdings June 2019
Slide 92: Investment Strategy and 2019 Outlook
Investment Strategy and 2019 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 stewardship of capital ensures a position of financial streng
Slide 93: Q1 2019 Net Investment Result
$ in thousands Q1 2019 Net Investment Result 3/31/2019 3/31/2018 Change Net Investment Income Fixed maturities $ 16,151 $ 15,981 $ 170 Equities 4,823 17,198 (44 ) Short-term investments including Other 1,667 1,209 458 BOLI 453 449 4 Investment fees and expenses (1,730 ) (1,586 ) (144 ) Net investmen
Slide 94: ProAssurance Recent Investment Performance
ProAssurance Recent Investment Performance As of March 31, 2019. Management reporting item which is ‘tax equivalent,’ unaudited, and non GIPS, may not equal 100% due to rounding Contribution to Returns 2014-2018 / PRA vs Benchmarks 2018 2017 2016 2015 2014 % of Assets PRA Benchmark % of Assets PRA B
Slide 95: ProAssurance Investment Profile
3/31/19 Full portfolio disclosure on our website: investor.proassurance.com/CustomPage/Index?KeyGenPage=305596 ProAssurance Investment Profile $2.2 Billion Fixed Income Portfolio (66% of Invested Assets) $3.3 Billion Overall Portfolio Sources of Liquidity Average duration: 3.0 years Average tax-equi
Slide 96: Portfolio Detail: Corporate
3/31/19 ProAssurance Portfolio Detail: Corporate Corporates: $1.3 Billion (56% of Fixed Assets / 37% of Invested Assets) Top 20 Banks/Financials: $235 million in millions Citi $21 HSBC $9 Bank of America $19 Huntington Bank $9 Goldman Sachs $19 MUFG $8 J.P. Morgan $18 Key Banc $8 Wells Fargo $17 Sim
Slide 97: Portfolio Detail: Asset Backed
3/31/19 ProAssurance Portfolio Detail: Asset Backed Weighted Average Rating: “AAA” $479 Million (21% of Fixed Income / 14% of Invested Assets) RMBS 40% Corp Pass Thrus 3% Student Loans , 2% Auto , 20% Credit Cards , 10% CLOs , 4% Other , 12% CMBS , 9%
Slide 98: Portfolio Detail: Fixed-Trading
3/31/19 ProAssurance Portfolio Detail: Fixed-Trading Weighted Average Rating: “AA” $43 Million (2% of Fixed Income / 1% of Invested Assets) All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 ABS & Other 2% Consumer Oriented 14% Financial 18% Government 57% Industrial 4% Technology 2% U
Slide 99: Portfolio Detail: Municipals
3/31/19 ProAssurance Portfolio Detail: Municipals Municipals: $298 Million (14% of Fixed Income / 9% Invested Assets) Weighted Average Rating: AA Top 10 Municipal Holdings in millions New York, NY $10 North Carolina State Capital Improvement $10 New York State Urban Development $8 Connecticut State
Slide 100: Portfolio: Equities & Other
3/31/19 Subject to Rounding ProAssurance Portfolio: Equities & Other Equities & Other: $903 Million (26% of Invested Assets) Common Equities 24% Private Equity 13% Hedge Funds 8% BDC Stocks 4% Private Credit/Structured Credit 9% Real Estate LP 5% MLPs 4% Convertible Bonds 3% Bond Funds 15% Inflation
Slide 101: Combined Tax Credits Portfolio Detail & Projections
Combined Tax Credits Portfolio Detail & Projections Year Capital Contributions GAAP Income/(Loss) from Operations, Disposition & Impairment Total Credits (Source IRR Schedule) Tax Provision after Impairment Impact on Earnings 2016 $ 8,701,852 $ (24,817,214) $ 27,549,158 $ (36,235,182) $ 11,417,968 2
Slide 102: Forward Looking Statements Non-GAAP Measures
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 actual results to vary materially from those proj
Slide 103: Additional Historical Information
Additional Historical Information
Slide 104: Income Statement Highlights (12/31/18)
Income Statement Highlights (12/31/18) Strong results from a focused strategy Three Months Ended Twelve Months Ended December 31 2018 2017 2018 2017 Gross Premiums Written $ 211.7 $ 191.7 $ 957.3 $ 874.9 Net Investment Result $ 20.9 $ 25.6 $ 100.8 $ 103.7 Total Revenues $ 179.5 $ 209.1 $ 886.0 $ 866
Slide 105: Corporate Segment Financial Highlights (12/31/18)
Corporate Segment Financial Highlights (12/31/18) Three Months Ended Twelve Months Ended December 31 2018 2017 2018 2017 Net investment income $ 22.8 $ 25.2 $ 87.0 $ 92.9 Equity in earnings (loss) of unconsolidated subsidiaries $ (3.3) $ (0.5) $ 8.9 $ 8.0 Net realized investment gains (losses) $ (42
Slide 106: Specialty P&C Financial Highlights (12/31/18)
Current Accident Year Net Loss Ratio 100.3% 93.4% 93.8% 89.9% Effect of Prior Accident Year Reserve Development (19.5%) (33.2%) (15.6%) (26.5%) Net Loss Ratio 80.8% 60.2% 78.2% 63.4% Underwriting Expense Ratio 25.2% 26.1% 22.9% 24.0% Combined Ratio 106.0% 86.3% 101.1% 87.4% Specialty P&C Financial H
Slide 107: Workers' Compensation Financial Highlights (12/31/18)
Workers’ Compensation Financial Highlights (12/31/18) Three Months Ended Twelve Months Ended December 31 2018 2017 2018 2017 Gross Premiums Written $ 65.0 $ 60.3 $ 293.2 $ 264.0 Net Premiums Earned $ 50.8 $ 41.1 $ 186.1 $ 163.3 Total Revenues $ 51.4 $ 41.4 $ 188.5 $ 165.4 Net Losses & Loss Adjustmen
Slide 108: Segregated Portfolio Cell Reinsurance Financial Highlights (12/31/18)
Segregated Portfolio Cell Reinsurance Financial Highlights (12/31/18) Three Months Ended Twelve Months Ended December 31 2018 2017 2018 2017 Gross Premiums Written $ 16.8 $ 16.2 $ 85.1 $ 77.7 Net Premiums Earned $ 19.7 $ 17.5 $ 73.9 $ 68.2 Net Investment Income $ 0.5 $ 0.3 $ 1.6 $ 1.1 Net Realized G
Slide 109: Lloyd's Segment Financial Highlights (12/31/18)
Lloyd’s Segment Financial Highlights (12/31/18) Three Months Ended Twelve Months Ended December 31 2018 2017 2018 2017 Gross Premiums Written $ 25.8 $ 13.2 $ 88.7 $ 70.2 Net Premiums Earned $ 18.1 $ 11.8 $ 67.0 $ 57.2 Total Revenues $ 19.1 $ 12.5 $ 70.3 $ 57.6 Net Losses & Loss Adjustment Expenses $
Slide 110: 2018 Net Investment Result (12/31/18)
$ in thousands 2018 Net Investment Result (12/31/18) 12/31/2018 12/31/2017 Change Net Investment Income Fixed maturities $ 64,523 $ 72,665 $ (8,142 ) Equities 21,418 17,198 4,220 Short-term investments including Other 5,351 7,643 (2,292) BOLI 1,983 1,979 4 Investment fees and expenses (6,315 ) (6,61
Slide 111: 2018 Net Investment Result (12/31/18)
2018 Net Investment Result (12/31/18) Net Investment Income $i doucands Fixed maturities a OC) Equities anais 17,198 4220 ‘Short-term investments including Other 5,351 7.643, (2,292) Bou 1,983 1979 4 Investment fees and expenses (6,315) (6.618) 303 Net investment income $ 86960 ¢ 92,887 -§ (5,907) E