Proassurance Corporation · NYSE:PRA
Proassurance — Non-Deal Roadshow (February 2022)
52 slides from Proassurance's roadshow presentation, Feb 25, 2022
Slide 1: Fourth Quarter and FY 2021 March
Fourth Quarter and FY 2021 March
Slide 2: ProAssurance Overview
ProAssurance Overview
Slide 3: Mission, Vision, & Values
ProAssurance Investor Briefing | March 2022 3 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 profes
Slide 4: At a Glance
ProAssurance Investor Briefing | March 2022 4 At a Glance All employee and financial data as of 12/31/21. Office locations and employee counts include NORCAL. Business Unit Principal Offices Employees Lines of Business HCPL 6 512 Healthcare Professional Liability Medmarc 1 29 Medical Technology Liab
Slide 5: ProAssurance Executive Leadership
ProAssurance Investor Briefing | March 2022 5 ProAssurance Executive Leadership Ned Rand - President & Chief Executive 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 Presiden
Slide 6: ProAssurance Board of Directors
ProAssurance Investor Briefing | March 2022 6 ProAssurance Board of Directors Director bios available on our website at Investor.ProAssurance.com/OD Maye Head Frei C M. James Gorrie N/C Ziad R. Haydar, MD C Edward L. Rand, Jr E Frank A. Spinosa, DPM N/C Katisha T. Vance, MD N/C A ‐ Audit Committee C
Slide 7: ProAssurance Brand Profile
ProAssurance Investor Briefing | March 2022 7 ProAssurance Brand Profile Specialty P&C Healthcare Professional Liability Workers’ Comp Alternative Risk Transfer Medical Technology & Life Sciences Products Liability Legal Professional Liability
Slide 8: ProAssurance Specialty Property & Casualty
ProAssurance Investor Briefing | March 2022 8 ProAssurance Specialty Property & Casualty • Healthcare Professional Liability (HCPL) insures healthcare providers and facilities, including E&S coverages • Innovative Specialty Team (IST) insures podiatrists, chiropractors, dentists, and lawyers • Medma
Slide 9: ProAssurance Specialty Property & Casualty
ProAssurance Investor Briefing | March 2022 9 ProAssurance Specialty Property & Casualty Specialty Healthcare Life SciencesInnovative Specialty Team Standard Physicians Healthcare Professional Liability Insurance $209.9M $111.7M $41.0M$103.1M$142.0M $26.3M Each block represents $5 million of premium
Slide 10: Workers' Compensation Insurance
ProAssurance Investor Briefing | March 2022 10 Disciplined individual account underwriting with focus on rate adequacy in rural territories • Guaranteed Cost Policies • Loss-Sensitive Dividend Plans • Deductible Plans • Retrospective Rating Plans • ParallelPay–“Pay as you Go” • Specialty Risk (high
Slide 11: Segregated Portfolio Cell Reinsurance
ProAssurance Investor Briefing | March 2022 11 Segregated Portfolio Cell Reinsurance ProAssurance Fronting Arrangement Agency Group or Association establishes/funds a cell Underwriting Claims Administration Risk Management Reinsurance Audit Asset Management Services + Cell Rental Fees + Participatio
Slide 12: Lloyd's of London Syndicates
ProAssurance Investor Briefing | March 2022 12 Lloyd’s of London Syndicates ProAssurance Funds at Lloyd’s (FAL) $37.8 Million 1 Property Insurance (All Other - Mainly US) 29% Casualty (Mainly US) 25% Catastrophe Reinsurance (Excess of Loss) 13% Specialty 13% Facility (US) 7% General Liability (US) 4
Slide 13: Consolidated Premiums, Policyholders & Distribution for 2021
ProAssurance Investor Briefing | March 2022 13 Specialty P&C 66% Workers' Comp 30% Standard Physicians 31% ($321.6M) Specialty 16% ($168.3M) Small Business Unit 10% ($103.1M) Tail Coverages + Other 5% ($47.5M) Medical Technology Liability 4% ($41.0M) Segregated Portfolio Cell Reinsurance 7% ($71.8M)
Slide 14: Financial Ratings & Balance Sheet Highlights
ProAssurance Investor Briefing | March 2022 14 • ProAssurance is recognized for our financial strength by top rating agencies • We maintain a balance sheet that ensures stability and security for our customers • Our conservative reserving philosophy enables success over the insurance cycles Financia
Slide 15: ProAssurance Leverage Update
ProAssurance Investor Briefing | March 2022 15 • $425 million debt at 12/31/2021 o Includes $176 million of Contribution Certificates related to NORCAL acquisition o $250 million 10-year notes due 11/15/2023 5.30% Coupon • $250 million revolving credit facility, $50 million "accordion" option o At
Slide 16: Investment Philosophy & Portfolio
ProAssurance Investor Briefing | March 2022 16 Corporate 49% Asset Backed 30% State & Muni 13% Govt & Agency 7% Fixed Trading 1% • We maintain a conservative, highly-liquid investment philosophy • Effective stewardship of capital ensures a position of financial strength through turbulent market cycl
Slide 17: COVID-19 and the Markets We Serve
ProAssurance Investor Briefing | March 2022 17 COVID-19 and the Markets We Serve • Healthcare Professional Liability (HCPL) ◦ Primary exposures in broader markets: misdiagnoses, complications from delayed elective procedures, and failure to prevent infection in Senior Care settings May be mitigate
Slide 18: Success in Competitive Markets
Success in Competitive Markets
Slide 19: A Foundation in Excellence
ProAssurance Investor Briefing | March 2022 19 A Foundation in Excellence “From our earliest days, we have operated with a strategy both responsive to near‐term challenges and proactive to long‐term opportunity.” ‐Ned Rand President & CEO Superior brand identity and reputation in the market Speciali
Slide 20: In 2020, We… Focused on Underwriting
ProAssurance Investor Briefing | March 2022 20 In 2020, We… Fo cu se d on U nd er w rit in g • Specialty Property & Casualty: o Completed the initial re‐underwriting of our HCPL Specialty book of business o Enhanced organizational structure and leadership Added new Senior Executive underwriting an
Slide 21: In 2020, We… Achieved Strong Rate Gains
ProAssurance Investor Briefing | March 2022 21 In 2020, We… • Specialty Property & Casualty o Achieved renewal rate gains outpacing severity o Improved product structure, terms, and conditions for complex risks o Secured average renewal pricing increases of: +10% in Specialty in 4Q, +15% full year
Slide 22: In 2020, We… Implemented adjustments to our business model
ProAssurance Investor Briefing | March 2022 22 In 2020, We… • Implemented adjustments to our business model, including regional operating structure and staffing assignments o Streamlined organizational structure by reducing number of field offices by 50% in Specialty P&C (since July 2019) Executed
Slide 23: In 2021… We continue to execute our comprehensive strategy
ProAssurance Investor Briefing | March 2022 23 In 2021… W e co nt in ue to e xe cu te o ur co m pr eh en siv e st ra te gy We seek constantly to be more efficient and effective as an organization Here’s how we’re doing it *NAIC Data †NAIC before purchase accounting All data as of 12/31/2021 • Specia
Slide 24: Cyclicality in Insurance
ProAssurance Investor Briefing | March 2022 24 Cyclicality in Insurance Loss Trends Decelerate Market Softens Loss Trends Accelerate Market Hardens CatalystAvailability crisis Mergers & acquisitions Tort reform Competitors withdraw Underwriting criteria tightens Prices increase Pricing outpaces loss
Slide 25: Strategic Update
Strategic Update @ PROASSURANCE + NORCAL ‘) GROUP
Slide 26: Acquisition Created the #3 HCPL Insurer in the U.S.
ProAssurance Investor Briefing | March 2022 26 Physicians $647.3M Other HCP $98.3M Hospitals $46.2M Facilities $4.3M Physicians $299.5M Other HCP $89.4M Hospitals $45.8M Facilities $1.5M Physicians $347.8M Other HCP $8.9M Hospitals $0.4M Facilities $2.8M Source: 2020 NAIC filings for all MPL lines,
Slide 27: ProAssurance + NORCAL Competitive Position
ProAssurance Investor Briefing | March 2022 27 MPL Market Position Ranked in Top 3 (17 States, 7 new) Alabama Alaska Arizona California Delaware Illinois Indiana Kentucky Maryland Michigan Nevada Pennsylvania Tennessee Texas West Virginia Wisconsin Washington DC Ranked in Top Ten (29 states) Arkansa
Slide 28: Overview of NORCAL Insurance Company
ProAssurance Investor Briefing | March 2022 28 Overview of NORCAL Insurance Company NORCAL Overview NORCAL Brands • NORCAL is one of the leading providers of medical professional insurance companies in the country with ~33,000 insured physicians • Created during California’s medical malpractice cris
Slide 29: Enhanced Scale and Capabilities
ProAssurance Investor Briefing | March 2022 29 Enhanced Scale and Capabilities1 • Positions company as #3 writer of MPL insurance in the industry • Enhances ProAssurance’s HCPL business: adds additional scale, capabilities and strong California presence • Ability to underwrite larger risks from inte
Slide 30: Integration Goals & Objectives
ProAssurance Investor Briefing | March 2022 30 • Build a true national platform and enhance state market leadership • Provide best in class service • Improve overall business quality and profitability • Improve bench strength by retaining the best talent • Establish an effective regional/field opera
Slide 31: HCPL Regional Structure
ProAssurance Investor Briefing | March 2022 31 HCPL Regional Structure Note: Overland Park, KS is PPM Office Regional Office Satellite Office Five Regions Northeast Mechanicsburg, PA (Hub) Midwest Greenwood, IN (Hub) Okemos, MI Madison, WI Southeast Birmingham, AL (Hub) Jacksonville, FL Mobile, AL S
Slide 32: ProAssurance's Proven History of Successful Acquisitions
ProAssurance Investor Briefing | March 2022 32 ProAssurance’s Proven History of Successful Acquisitions & 1995 Acquisition 1996 Acquisition OHiC 1994 Acquisition 1998 Demutualization/Merger Forms ProNational 1995 Acquisitions 1996 Acquisition 1999 Acquisition 2004 Hospital Renewal Rights Purchase 20
Slide 33: Appendix
Appendix
Slide 34: Income Statement Highlights (12/31/21)
ProAssurance Investor Briefing | March 2022 34 Income Statement Highlights (12/31/21) Three Months Ended Year Ended December 31 2021 2020 2021 2020 Gross Premiums Written $ 218.1 $ 161.8 $ 960.0 $ 854.4 Net Premiums Earned $ 273.1 $ 187.0 $ 971.7 $ 792.7 Net Investment Result $ 33.8 $ 26.3 $ 119.5 $
Slide 35: Corporate Segment Financial Highlights (12/31/21)
ProAssurance Investor Briefing | March 2022 35 Corporate Segment Financial Highlights (12/31/21) Three Months Ended Year Ended December 31 2021 2020 2021 2020 Net investment income $ 18.3 $ 15.0 $ 67.7 $ 66.8 Equity in earnings (loss) of unconsolidated subsidiaries $ 15.0 $ 10.1 $ 49.0 $ (11.9) Net
Slide 36: Specialty P&C Financial Highlights (12/31/21)
ProAssurance Investor Briefing | March 2022 36 Current Accident Year Net Loss Ratio 82.2 % 92.3 % 87.5 % 104.2 % Effect of Prior Accident Year Reserve Development (6.2%) (6.1%) (4.7%) (5.7%) Net Loss Ratio 76.0 % 86.2 % 82.8 % 98.5 % Underwriting Expense Ratio 17.6 % 23.8 % 18.4 % 23.0 % Combined Ra
Slide 37: Workers' Compensation Insurance Financial Highlights (12/31/21)
ProAssurance Investor Briefing | March 2022 37 Workers’ Compensation Insurance Financial Highlights (12/31/21) Three Months Ended Year Ended December 31 2021 2020 2021 2020 Gross Premiums Written $ 45.8 $ 47.3 $ 240.5 $ 246.8 Net Premiums Earned $ 41.7 $ 42.3 $ 164.6 $ 171.8 Total Revenues $ 42.2 $
Slide 38: Segregated Portfolio Cell Reinsurance Financial Highlights (12/31/21)
ProAssurance Investor Briefing | March 2022 38 Segregated Portfolio Cell Reinsurance Financial Highlights (12/31/21) Three Months Ended Year Ended December 31 2021 2020 2021 2020 Gross Premiums Written $ 15,395 $ 14,775 $ 71,850 $ 72,843 Net Premiums Earned $ 16,188 $ 16,572 $ 63,688 $ 66,352 Net In
Slide 39: Lloyd's Segment Financial Highlights (12/31/21)
ProAssurance Investor Briefing | March 2022 39 Lloyd’s Segment Financial Highlights (12/31/21) Three Months Ended Year Ended December 31 2021 2020 2021 2020 Gross Premiums Written $ 6.3 $ 12.3 $ 38.0 $ 84.7 Net Premiums Earned $ 8.1 $ 16.0 $ 48.4 $ 77.2 Total Revenues $ 8.7 $ 16.7 $ 51.5 $ 82.4 Net
Slide 40: Subject to rounding (1) All other reinsurance arrangements primarily represent alternative market business ceded
ProAssurance Investor Briefing | March 2022 40 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
Slide 41: Investment Strategy and 2022 Outlook
ProAssurance Investor Briefing | March 2022 41 Investment Strategy and 2022 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 stew
Slide 42: Net Investment Income
ProAssurance Investor Briefing | March 2022 42 ($ in millions) 12/31/2021 12/31/2020 Change Net Investment Income Fixed maturities $ 74,437 $ 69,308 $ 5,129 Equities 2,539 4,369 (1,830) Short-term investments including Other 1,969 2,683 (714) BOLI 2,698 2,023 675 Investment fees and expenses (11,121
Slide 43: ProAssurance Recent Investment Performance
ProAssurance Investor Briefing | March 2022 43 ProAssurance Recent Investment Performance Contribution to Returns 2017-2021 / PRA vs Benchmarks 2021 2020 2019 2018 2017 % of Assets PRA Benchmark % of Assets PRA Benchmark % of Assets PRA Benchmark % of Assets PRA Benchmark % of Assets PRA Benchmark C
Slide 44: Change in Capital: 2011 - 2021
ProAssurance Investor Briefing | March 2022 44 * Equity shown in millions; all other data shown in thousands Change in Capital: 2011 ‒ 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Beginning Equity* $1,705 $1,856 $2,164 $2,271 $2,394 $2,158 $1,958 $1,799 $1,595 $1,523 $1,349 Cumulative
Slide 45: ProAssurance Portfolio Detail: Corporate
ProAssurance Investor Briefing | March 2022 45 Utilities /Energy 10% Non US Sovrgn & Gov't 2% Basic Materials 3% Other 4% Technology 5% Communications 7% Consumer Oriented 23% Financials 40% Industrials 8% ProAssurance Portfolio Detail Corporate: $1.9 Billion (49% of Fixed Assets / 39% of Invested A
Slide 46: ProAssurance Portfolio Detail: Asset Backed
ProAssurance Investor Briefing | March 2022 46 12/31/2021 Subject to rounding ProAssurance Portfolio Detail: Asset Backed Weighted Average Rating: “AA” Asset-Backed Securities: $1.2 Billion (30% of Fixed Income / 24% of Invested Assets) RMBS 38% Student Loans 1% Auto 9% Credit Cards 2% CLOs 3% Other
Slide 47: ProAssurance Portfolio Detail: Fixed-Trading
ProAssurance Investor Briefing | March 2022 47 12/31/2021 Subject to rounding ProAssurance Portfolio Detail: Fixed-Trading Weighted Average Rating: “AA” Fixed Maturities: $44 Million (1% of Fixed Income / 1% of Invested Assets) All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 ABS & O
Slide 48: ProAssurance Portfolio Detail: Municipals
ProAssurance Investor Briefing | March 2022 48 General Obligation 16% Pre-refunded 5% Special Revenue 78% 12/31/2021 Subject to rounding ProAssurance Portfolio Detail: Municipals Municipals: $519 Million (13% of Fixed Income / 11% Invested Assets) Weighted Average Rating: AA Top 10 Municipal Holding
Slide 49: ProAssurance Portfolio: Equities & Other
ProAssurance Investor Briefing | March 2022 49 12/31/2021 Subject to rounding ProAssurance Portfolio: Equities & Other Common Equities 3% Private Equity 27% Private Credit 15% Real Estate LP 8% Other <1% Bond Funds 31% Convertible Bonds 14% Tax Credits 2% Equities & Other: $652 Million (14% of Inves
Slide 50: Combined Tax Credits Portfolio Detail & Projections
ProAssurance Investor Briefing | March 2022 50 Combined Tax Credits Portfolio Detail & Projections Year Capital Contributions GAAP Income/(Loss) from Operations, Disposition & Impairment Total Credits Tax Provision after Operating Losses/Impairments and Tax Credits Impact on Earnings 2021 $ 120,245
Slide 51: Forward Looking Statements; Non-GAAP Measures
ProAssurance Investor Briefing | March 2022 51 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 ac
Slide 52: Contact
© ProAssurance Corporation. All rights reserved. MAILING ADDRESS: ProAssurance Corporation 100 Brookwood Place Birmingham, AL 35209 CONTACT: Jason Gingerich VP of Investor Relations 512.879.5101 JasonGingerich@ProAssurance.com