Proassurance Corporation · NYSE:PRA
Proassurance — Morgan Keegan 2007 Equity Conference
24 slides from Proassurance's conference presentation, Sep 6, 2007
Slide 1: Morgan Keegan 2007 Equity Conference
September 6, 2007 Morgan Keegan 2007 Equity Conference W. Stancil Starnes Chief Executive Officer
Slide 2: Caution Regarding Forward Looking Statements
Caution Regarding Forward Looking Statements This presentation communicates historical information as well as forward-looking statements that are based upon our estimates and anticipation of future events; any items in this presentation that are not historical information are specifically identified
Slide 3: Overview
Pro\ssurance’ OS Overview LISTED NYSE
Slide 4: ProAssurance: Executive Transition
ProAssurance: Executive Transition Stan Starnes becomes CEO on July 1, 2007 29 year association with ProAssurance and predecessors Co-architect of ProAssurance’s defense strategy Noted medical liability defense attorney Additional major litigation clients KKR GE Capital Citigroup UBS The University
Slide 5: ProAssurance: The Basics
ProAssurance: The Basics Market Cap: $1.7 Billion Equity: $1.2 Billion Fourth largest writer of medical liability Over 40,000 policyholders Almost 35,000 physicians & dentists Majority in small or solo practice Writing business in 28 jurisdictions Highly rated by Best and Fitch All Data as of June 3
Slide 6: National Scale…Local Focus
National Scale…Local Focus Built through careful expansion and opportunistic M&A Corporate strategy applied locally to underwriting & claims Local knowledge crucial to understanding legal environment Local presence enhances longterm customer relationships Efficiencies gained from consolidated “back-
Slide 7: ProAssurance: Return to Shareholders
ProAssurance: Return to Shareholders $17.58 $21.19 $23.20 $13.22 $7.43 $4.12 $55.67 $49.92 $48.64 $39.11 $32.15 $21.00 $3.67 $6.27 $8.56 $11.57 $13.92 $16.02 $17.49 $18.77 $20.92 $24.59 $33.61 $34.91 1991 1993 1995 1997 1999 2001 2002 2003 2004 2005 2006 1905 Share Price Book Value $17.58 $21.19 $23
Slide 8: Balance Sheet Progression
Balance Sheet Progression 4.4 3.6 3.0 1.2 3.0 1.1 3.9 2.6 2.6 0.8 3.5 4.3 Total Assets Total Investments Total Policy Liabilities Stockholders’ Equity YTD 2007 2006 2005 All $ amounts in billions 11% 34% 15% 12%
Slide 9: Portfolio Overview
Portfolio Overview Conservative portfolio offsets liability risk Equities & Equity Substitutes 3% Fixed Income 89% Short Term & Cash 8% $3.6 Billion Portfolio $3.6 Billion Portfolio AT 6/30/2007 See Supplemental Data on pages 19-23 for further portfolio detail
Slide 10: Q2 2007 Income Statement Highlights
Q2 2007 Income Statement Highlights in millions, except per share data Gross Premiums Written $ 106 $ 107 - 1% Net Investment Income 45 35 29% Total Revenue 180 174 3% Total Expenses 127 132 - 4% Net Income $ 38 $ 30 27% Net Income/Diluted Share $ 1.06 $0.90 18% Operating Cash Flow $ 8 $ -74 111% CO
Slide 11: Y-T-D 2007 Income Statement Highlights
Y-T-D 2007 Income Statement Highlights in millions, except per share data Gross Premiums Written $ 291 $ 289 1% Net Investment Income 87 68 28% Total Revenue 359 352 2% Total Expenses 256 272 - 6% Net Income $ 74 $ 58 28% Net Income/Diluted Share $ 2.08 $ 1.74 20% Operating Cash Flow $ 95 $ 42 126%
Slide 12: Translating Past Success into Future Excellence
Translating Past Success into Future Excellence
Slide 13: Our Heritage
Our Heritage Our predecessor companies challenged the status quo in the mid-seventies The cost of settling claims vs. the benefit of winning lawsuits From lifeboats to ocean liners Merely surviving wasn’t good enough Leaders with vision emerged
Slide 14: Our Core Assumptions
Our Core Assumptions Our business demands a long-range view Our shareholders and customers benefit from our balance sheet strength Computers are important, but our people will make the difference We’re building from a position of leadership
Slide 15: Our Internal Expectations
Our Internal Expectations We will protect our markets and differentiate our product Performance and service do make a difference even in the age of WalMart We will innovate our business process in ways that benefit the customer Insureds Agents We will not change for the sake of change
Slide 16: Our External Expectations
Our External Expectations Our market is cyclical We are in the soft-portion of the cycle This cycle will likely be shorter and less severe The soft market creates challenges AND opportunities for careful expansion and intelligent M&A We will maintain balance sheet strength Allows us to keep our insu
Slide 17: ProAssurance: Return to Shareholders
ProAssurance: Return to Shareholders $17.58 $21.19 $23.20 $13.22 $7.43 $4.12 $55.67 $49.92 $48.64 $39.11 $32.15 $21.00 $3.67 $6.27 $8.56 $11.57 $13.92 $16.02 $17.49 $18.77 $20.92 $24.59 $33.61 $34.91 1991 1993 1995 1997 1999 2001 2002 2003 2004 2005 2006 1905 Share Price Book Value $17.58 $21.19 $23
Slide 18: Morgan Keegan 2007 Equity Conference
September 6, Morgan Keegan 2007 Equity Conference W. Stancil Starnes Chief Executive Officer
Slide 19: Supplemental Data: Portfolio Detail
Supplemental Data: Portfolio Detail
Slide 20: Portfolio Overview: Fixed Income
Portfolio Overview: Fixed Income $3.1 Billion is Fixed Income Average fixed maturity duration: 4.2 years Average tax-equivalent yield: 5.4% 99.5% investment grade Weighted average: AA+ Corporate 20% Asset Backed 29% State/Muni 39% Govt/Agcy 8% Trading 2% BOLI 2% AT 6/30/2007
Slide 21: Portfolio Overview: Asset Backed
Portfolio Overview: Asset Backed $919.6 million Asset Backed Securities Weighted Average Rating: AAA Alt-A: 2% Agency MBS: 56% CMBS: 25% Credit Card: 4% Auto: 2% Sub-Prime: 3% Other: 1% Whole Loans: 7% AT 6/30/2007 (Bloomberg Data) Alt-A LTV: 78% Whole Loan LTV: 60% See page 21 for Sub-Prime Detail
Slide 22: Portfolio Overview: Sub-Prime
Portfolio Overview: Sub-Prime $30 million in available-for-sale portfolio All performing / No downgrades $6 million in a separate high-yield fund 69% pre-2005, no 2006 LTV on MBS portion is 75% Wtd Avg FICO: 635 Home Equity $12 Mln Wtd Avg FICO: 675 LTV 78% Mortgage-Backed $18 Mln Quality Type At 6/
Slide 23: Portfolio Overview: CMBS
Portfolio Overview: CMBS $226 million in non-agency CMBS 7% of fixed income AA $ 3 Mln A $ 1 Mln AAA $222 Mln Quality At 6/30/07 No data 4% 75% 96% Wtd Avg LTV At 6/30/07 10% - 15% 9% 15% - 20% 4% No data 28% 20% 58% Credit Support At 6/30/07 1.0% - 2.0% 1% 0.5% - 1.0% 18% 0% - 0.5% 18% No data 2% N
Slide 24: Portfolio Overview: Equities
Portfolio Overview: Equities $99 million in Equities & Equity Substitutes FHLB Stock: 5% Equities 16% Long/Short Equity LP 19% Distressed Debt LP 25% High Yield Asset Backed 31% Private Equity: 2% Misc Other: 2% AT 6/30/2007