Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (October 2017)
100 slides from Proassurance's investor presentation, Oct 12, 2017
Slide 1: October 2017 Investor Update
October, 2017 Investor Update
Slide 2: Forward Looking Statements and Non-GAAP Measures
1 ProAssurance Investor Briefing, October 12 - 13, 2017 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 c
Slide 3: Key Topics for Investors
2 ProAssurance Investor Briefing, October 12 - 13, 2017 Key Topics for Investorrs Long Term Success Demonstrated track record of value creation for shareholders Consistent & disciplined focus on profitability Proven Strategy World class knowledge & expertise Superior brand identity and reputation in
Slide 4: Corporate Financial Updates
Corporate Financial Updates October 2017
Slide 5: Q2 2017 Recap: Looking Beyond the Noise
4 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Recap: Looking Beyond the Noise PREMIUMS GREW 6% Overall Specialty P&C: +7.6% Workers’ Compensation +5.1% FAVORABLE DEVELOPMENT : $29 million Substantial PROFITABILITY Net Income: $19.5 Million or $0.36/share Operating Income : $21.4 Mi
Slide 6: Q2 2017 Recap: So What Was the Noise?
5 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Recap: So What Was the Noise? Analysts’ ESTIMATES vs. REPORTED Wall Street Consensus: $0.54/share ProAssurance Reported: $0.40/share Accounting CHARGE $5.2 million pre - tax charge to true - up accounting for a reinsurance facility in B
Slide 7: YTD 2017 Recap: Strong Fundamentals
6 ProAssurance Investor Briefing, October 12 - 13, 2017 YTD 2017 Recap: Strong Fundamentals PREMIUM GROWTH 5.3% Overall Specialty P&C: +2.9% Workers’ Compensation +6.7% Lloyd’s Syndicate: +12.9% FAVORABLE DEVELOPMENT : $58 million Sustained PROFITABILITY Net Income: $61.0 Million or $1.14/share Oper
Slide 8: Key Updates: Return on Equity & Future Goals
7 ProAssurance Investor Briefing, October 12 - 13, 2017 Key Updates : Return on Equity & Future Goals Revising ROE target to seven points above the ten - year Treasury rate (risk - free rate ) Prior long - term return target of 12% - 14% is unrealistic in the current interest rate environment Ten ye
Slide 9: Components of Return on Equity
8 ProAssurance Investor Briefing, October 12 - 13, 2017 Components of Return on Equity 11.5% 9.2% 2.4% 5.5% 1.1% 0.2% - 2.5% Pre-Tax Underwriting Profit $22 Pre-Tax Investment Result $50 Non-Operating Gains $10 Taxes $2 Interest, SPC Dividend, & Intangibles $(23) Q2 2017 YTD Return on Equity: 6.7% 3
Slide 10: Subsidiary Dividend History
9 ProAssurance Investor Briefing, October 12 - 13, 2017 $76 $144 $149 $229 $99 $150 $162 $56 $175 $294 $311 $285 YTD 17 2016 2015 2014 Ordinary Extraordinary Subsidiary Dividends to Corporate Subsidiary Dividend History (in Millions) 2017 ORDINARY Dividend Capacity is $174 Million Ordinary dividends
Slide 11: Capital and Liquidity Decisions
10 ProAssurance Investor Briefing, October 12 - 13, 2017 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
Slide 12: Key Updates: Capital Management
11 ProAssurance Investor Briefing, October 12 - 13, 2017 Key Updates: Capital Management Regular quarterly dividends of $0.31/per common share Special dividend of $4.69/per common share paid on January 9, 2017 Dividends declared through June 30, 2017 have returned $33 million of capital to sharehold
Slide 13: Superb Track Record of Capital Management
12 ProAssurance Investor Briefing, October 12 - 13, 2017 Superb Track Record of Capital Management Current Management Team’s Tenure Began Q2 2007 At 10/10/17 | $ in 000’s Year Dividends Declared* Share Repurchase Strategic Acquisitions Total* Special Regular 2007 ࡳ ࡳ $54,201 ࡳ $54,201 2008 ࡳ ࡳ 87,56
Slide 14: Capital Growth: 2008-Q2 2017
13 ProAssurance Investor Briefing, October 12 - 13, 2017 Capital Growth: 2008‒Q2 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 Beginning Equity* $ 1,255 $ 1,424 $ 1,705 $ 1,856 $ 2,164 $ 2,271 $ 2,394 $ 2,158 $ 1,958 $ 1,799 Cumulative - effect adjustment: ASU 2016 - 09 adoptio n - - - -
Slide 15: Strong Capital Position and Minimal Debt
14 ProAssurance Investor Briefing, October 12 - 13, 2017 $407 million debt at 8/31/17 $250 million 10 - year notes due 11/15/2023 @ 5.30% Coupon $157 million drawn on revolver (Fully Collateralized) Strong Capital Position and Minimal Debt Ten - Year Premiums to Equity Ten - Year Debt to Capital 2%
Slide 16: Capital Management Priorities
15 ProAssurance Investor Briefing, October 12 - 13, 2017 Capital Management Priorities Conceptual Model of Projected A. M. Best BCAR Scores if Increase Premium Reduce Surplus “A+” Rating Threshold The manner in which capital is used has an effect on financial ratings Excess Capital vs. Excess Capaci
Slide 17: Consistent Value Creation
16 ProAssurance Investor Briefing, October 12 - 13, 2017 Consistent Value Creation Reflects all stock splits and includes all dividends in the year declared. Source: SNL 52% 88% 160% 521% 229% 534% 862% 983% 959% 1484% 2012% 2987% 2861% 1991 1996 2001 2006 2011 2016 Scorecard at 9/30/17 Total Return
Slide 18: Consolidated Financial & Operational Highlights
Consolidated Financial & Operational Highlights
Slide 19: Q2 2017 Income Statement Highlights
18 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Income Statement Highlights Strong results from a focused strategy Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $206.2 $195.0 $437.6 $415.5 Net Investment Result $25.2 $25.0 $50.2 $46.8
Slide 20: Balance Sheet Highlights
19 ProAssurance Investor Briefing, October 12 - 13, 2017 $1.26 $1.42 $1.70 $1.86 $2.16 $2.27 $2.39 $2.16 $1.96 $1.80 $1.84 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 Balance Sheet Highlights Maintaining the financial strength required to keep our insurance promise while continuing to
Slide 21: Book Value per Share History
20 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 $21.35 $26.30 $30.17 $35.42 $36.85 $39.13 $38.17 $36.88 $33.78 $34.41 $20.80 $23.13 $25.29 $29.80 $30.98 $34.67 $31.63 $30.72 $27.91 $28.45 $20.26 $24.04 $26.58 $31.93 $33.34 $35.64 $32.66 $31.17 $28.24 $28.94 12/31/08 12/31/09 12/31/1
Slide 22: Book Value per Share History Components
21 ProAssurance Investor Briefing, October 12 - 13, 2017 Book Value per Share History Components 6/30/17 12/31/16 Change Total Book Value $34.41 $33.78 $(0.63) Less: Goodwill & Intangible Assets 5.47 5.54 ( 0.07) Tangible Book Value $28.94 $28.24 $(0.70) Less: Unrealized Gain / Loss 0.49 0.33 $(0.16
Slide 23: Strong Operational Results / Consistent Profitability
22 ProAssurance Investor Briefing, October 12 - 13, 2017 Combined ratio average 2009 - 2016: 72.7% Operating ratio average 2009 - 2016: 50.2% Strong Operational Results / Consistent Profitability Combined Ratio and Operating Ratio History 69.1% 68.0% 52.5% 57.3% 70.6% 82.1% 90.5% 91.4% 96.3% 38.8% 3
Slide 24: Disciplined Approach to Reserves
23 ProAssurance Investor Briefing, October 12 - 13, 2017 $16 $20 $19 $25 $40 $48 $53 $48 $34 $29 $29 $20 $31 $37 $38 $50 $60 $39 $42 $35 $37 $29 $25 $30 $43 $33 $52 $50 $49 $43 $36 $29 $44 $104 $108 $138 $184 $114 $82 $49 $56 $49 $11 $17 $23 $36 $105 $185 $207 $234 $326 $272 $223 $182 $161 $144 $58
Slide 25: Reinsurance Programs
24 ProAssurance Investor Briefing, October 12 - 13, 2017 Reinsurance Programs Professional Liability Medical Technology & Life Sciences Workers' Compensation Retention Reinsured Coverage Offered up to $25 million -------- 5% to 12.5% retained based on layer Coverage Offered up to $9 million --------
Slide 26: Segment Financial Highlights: Specialty P&C
Segment Financial Highlights Specialty P & C
Slide 27: Q2 2017 Specialty P&C Financial Highlights
26 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Specialty P&C Financial Highlights Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $124.9 $116.1 $261.7 $254.4 Net Premiums Earned $109.0 $108.1 $222.1 $218.9 Total Revenues $110.5 $109.9
Slide 28: Q2 2017 Specialty P&C Gross Written Premium
27 ProAssurance Investor Briefing, October 12 - 13, 2017 Total Gross Written Premiums were $124.9 mil — increase of 7.6% Q - o - Q Physician increase is due to normal cycle of 24 - month policy renewals. Retention: 90% Physician new business: $4.5 mil Facilities decrease is due to renewal timing. Re
Slide 29: Q2 2017 YTD Specialty P&C Gross Written Premium
28 ProAssurance Investor Briefing, October 12 - 13, 2017 Total Gross Written Premiums were $261.7 mil — increase of 2.9% Y - o - Y Physician increase is due to normal cycle of 24 - month policy renewals. Retention: 90%. Physician new business: $10.9 mil Facilities decrease is due to renewal timing.
Slide 30: Retention Remains Strong
29 ProAssurance Investor Briefing, October 12 - 13, 2017 Retention remains strong Continued underwriting vigilance is being used today to ensure future success Market share is important, but NOT as important as profitability Strong Retention Despite Competition Year - over - Year Premium Retention –
Slide 31: No Overall Change in HCPL Loss Trends
30 ProAssurance Investor Briefing, October 12 - 13, 2017 No Overall Change in HCPL Loss Trends PICA excluded to facilitate accurate comparisons over time Current accident year loss ratio adjustments have been minor — in either direction Minimal changes on renewed business MD/DO Charged Rate History
Slide 32: State Rate Comparison
31 ProAssurance Investor Briefing, October 12 - 13, 2017 Annual Premium for a $1M / $3M Policy Filed or Approved at 1/01/17 Key State Rate Comparison Birmingham Indianapolis Denver Louisville Dallas St Louis Cleveland New York, NY Washington Miami Detroit Chicago Family Practice (No Surgery) $7,484
Slide 33: Thorough Claims Defense Remains Important
32 ProAssurance Investor Briefing, October 12 - 13, 2017 Strong defense still matters to individual physicians, even if they are in a hospital - owned practice or in a large group — it’s their reputation on the line We leverage our financial strength to give our insureds the opportunity for an uncom
Slide 34: The Ohio Example: Claims Outcomes
33 ProAssurance Investor Briefing, October 12 - 13, 2017 Comprehensive, reliable data provided by the Ohio Department of Insurance Broad range of competitors and business approaches The Ohio Example: 2005 – 2014 Data www.insurance.ohio.gov/Legal/Reports/Documents/Ohio2013MedicalProfessionalLiability
Slide 35: Benefits of Strong Defense
34 ProAssurance Investor Briefing, October 12 - 13, 2017 Source: 2012 - 2016, 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
Slide 36: ProAssurance Outperforms in Insurance
35 ProAssurance Investor Briefing, October 12 - 13, 2017 Source: A.M. Best Aggregates and Averages for Each Line of Business ( 1991 - 2016) ProAssurance Outperforms in Insurance Average Combined Ratio 103.8% 100.6% 99.1% 106.7% 90.7% 98.8% 87.2% 67.0% 69.9% 88.3% 70.5% 74.4% 1991-2016 10-Year 2007-2
Slide 37: ProAssurance Outperforms in HCPL
36 ProAssurance Investor Briefing, October 12 - 13, 2017 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
Slide 38: Segment Strategic Review: Specialty P&C
Segment Strategic Review Specialty P & C
Slide 39: Healthcare Costs are the Real Issue
38 ProAssurance Investor Briefing, October 12 - 13, 2017 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 greater proportion of GDP on healthcare and the percentage is increasing Strategy Update: H
Slide 40: The Future of Healthcare Costs
39 ProAssurance Investor Briefing, October 12 - 13, 2017 The Future of Healthcare Costs 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 lim
Slide 41: Traditional Practices are Fading
40 ProAssurance Investor Briefing, October 12 - 13, 2017 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 Strategy Update: Traditional Practices are Fading Source: 2016 P
Slide 42: ProAssurance Can Meet the Challenges
41 ProAssurance Investor Briefing, October 12 - 13, 2017 The HCPL Industry Traditional practices are fading Excess capital is being used to try to maintain market share at the expense of a sustainable future Capital & geographic constraints challenge many small insurers Few companies are able to res
Slide 43: Emerging Issues in Healthcare
42 ProAssurance Investor Briefing, October 12 - 13, 2017 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 -
Slide 44: ProAssurance is Positioned to Succeed in HCPL
43 ProAssurance Investor Briefing, October 12 - 13, 2017 Berkshire Hathaway Specialty MPL Carriers Only $865 Doctor’s Company $673 ProAssurance Size, Scope & Experience $453 MLMIC NY Only $392 Coverys $390 NORCAL $330 MCIC $288 PRI NY Only Negative Surplus $288 MAG Mutual $288 Hospitals Insurance $1
Slide 45: ProAssurance is Positioned to Succeed in HCPL
44 ProAssurance Investor Briefing, October 12 - 13, 2017 ProAssurance is Positioned to Succeed in HCPL Our long - term focus on financial strength 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
Slide 46: Broad Experience Across the Healthcare Market
45 ProAssurance Investor Briefing, October 12 - 13, 2017 More than 30 year of experience insuring hospitals and other healthcare facilities Experience ranges from community - based hospitals to major medical centers Enhanced coverages (ProControl) and existing programs respond to today’s emerging tr
Slide 47: Certitude Program with Ascension Health
46 ProAssurance Investor Briefing, October 12 - 13, 2017 The Certitude tm program in partnership with Ascension Health Shared risk through quota share participation by Ascension’s captive on first $1M ~ 2,500 insured physicians ~$ 18.2 million inforce Certitude direct premium YTD Active in AL, CT, D
Slide 48: Addressing a Wide Spectrum of Risk Appetites
47 ProAssurance Investor Briefing, October 12 - 13, 2017 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 c
Slide 49: Emerging Strategic Opportunities
48 ProAssurance Investor Briefing, October 12 - 13, 2017 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
Slide 50: Leveraging Existing Expertise in New Ways
49 ProAssurance Investor Briefing, October 12 - 13, 2017 Leveraging Existing Expertise in New Ways Syndicate 1729 at Lloyds Our 58% participation provides potential access to international medical professional liability opportunities Increases flexibility for ProAssurance when working with complex r
Slide 51: Workers' Compensation Financial Highlights & Strategic Review
Segment Financial Highlights & Strategic Review Workers’ Compensation
Slide 52: Workers' Compensation Expansion
51 ProAssurance Investor Briefing, October 12 - 13, 2017 Workers’ Compensation Expansion Eastern Alliance Insurance Group has acquired the renewal rights to the workers’ compensation book of Great Falls Insurance Company Great Falls is headquartered in Auburn, Maine Transaction will add Maine and Ne
Slide 53: Eastern Specialty Risk: Higher Risk But NOT High Risk
52 ProAssurance Investor Briefing, October 12 - 13, 2017 Eastern Specialty Risk: Higher Risk But NOT High Risk Focusing on the next level of risk: higher hazard but not typical “high hazard” Some classes previous written by Eastern in High Modification programs $2.3 million in direct premiums throug
Slide 54: Q2 2017 Workers' Compensation Financial Highlights
53 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Workers’ Compensation Financial Highlights Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $59.3 $56.5 $143.6 $134.5 Net Premiums Earned $56.9 $55.1 $112.1 $109.5 Total Revenues $57.1 $55.
Slide 55: Consistent Profitability in Workers' Comp
54 ProAssurance Investor Briefing, October 12 - 13, 2017 79.1% 65.6% 80.2% 87.7% 96.0% 89.7% 91.8% 93.0% 96.0% 95.9% 95.5% 90.9% 92.7% 94.3% 93.7% 90.3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 17 GAAP GAAP (excluding fair value adjustments, intangible asset amortization, transacti
Slide 56: Eastern Outperforms in Workers' Compensation
55 ProAssurance Investor Briefing, October 12 - 13, 2017 Source: 1996 - 2016 A.M. Best Aggregates and Averages, Workers’ Compensation. Policyholder Dividends Included. Eastern Outperforms in Workers’ Compensation Eastern consistently outperforms in a volatile line of business Calendar Year Combined
Slide 57: How Eastern Differentiates
56 ProAssurance Investor Briefing, October 12 - 13, 2017 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
Slide 58: Eastern Alliance Insurance Group
57 ProAssurance Investor Briefing, October 12 - 13, 2017 Eastern Alliance Insurance Group Best - in - Class Claims, Risk Management and Underwriting Business Model Broad Product Spectrum 41 State Licenses – Core Operations in 16 States Select Agency Partnerships 231 Contracts / 669 Locations Workers
Slide 59: Broad Workers' Compensation Product Spectrum
58 ProAssurance Investor Briefing, October 12 - 13, 2017 Guaranteed Cost Policies Loss - Sensitive Dividend Plans Deductible Plans Retrospective Rating Plans Alternative Market Programs ParallelPay – “Pay as you Go” TPA Services Claims Administration and Risk Management Broad Workers’ Compensation P
Slide 60: Diversified Book of Business
59 ProAssurance Investor Briefing, October 12 - 13, 2017 Wide diversification by class code and market segment Over 600 class codes actively written Approximately 7,000 active policies in Traditional Programs Approximately 2,800 active policies in Alternative Market Programs Diversified Book of Busi
Slide 61: Significant Healthcare Profile
60 ProAssurance Investor Briefing, October 12 - 13, 2017 Healthcare as a Percentage of Overall Workers’ Compensation Writings Significant Healthcare Profile Non - Healthcare 79% Healthcare 21% $16.7 $16.9 $14.2 $11.2 2017 2016 Inova Traditional Healthcare premiums up 9.9% over YTD 2016 YTD 6/30/17 T
Slide 62: Workers' Comp Claim Closing Pattern: Traditional
61 ProAssurance Investor Briefing, October 12 - 13, 2017 No claims open from 2002 and earlier 31 net claims open 2011 and prior Recognized as a short - tail writer of workers’ compensation Workers’ Comp Claim Closing Pattern: Traditional 6/30/2017 364 536 590 570 687 590 717 778 890 954 1,076 1,185
Slide 63: Alternative Market Overview
62 ProAssurance Investor Briefing, October 12 - 13, 2017 Strategy Update: Alternative Market Overview Inova® is our alternative insurance brand Alternative insurance s tructure u tilizes a segregated p ortfolio c ompany (Eastern Re) with segregated p ortfolio c ells housing captives Alternative mark
Slide 64: How Eastern Re Differentiates
63 ProAssurance Investor Briefing, October 12 - 13, 2017 Strategy Update: How Eastern RE Differentiates Captive insurance solutions provided through Eastern Re Value - added risk management services cements brand loyalty Strategic partnerships with select independent agencies that share philosophies
Slide 65: How Inova Benefits Insureds
64 ProAssurance Investor Briefing, October 12 - 13, 2017 How Inova ® Benefits Insureds “A” Rated Paper – WC / “A+” Rated Paper – MPL / GL Stable Off - Shore Facility Eastern Re Ltd, S.P.C. established in 1987 Cayman Islands Monetary Authority regulation Segregated portfolio cells statutorily protect
Slide 66: Workers' Comp Claim Closing Pattern: Alternative
65 ProAssurance Investor Briefing, October 12 - 13, 2017 No claims open from 2006 and earlier Nine open claims from 2013 and prior Recognized as a short - tail writer of workers’ compensation Workers’ Comp Claim Closing Pattern: Alternative 6/30/2017 66 103 175 267 407 422 310 325 336 385 404 503 50
Slide 67: Inova: Direct Written Premium Trends
66 ProAssurance Investor Briefing, October 12 - 13, 2017 Inova: Direct Written Premium Trends DPW in 000’s 18 year track record of growth and profitability 2016 DWP = $75.9 million Year - over - year growth of 7.4% $847 $2,451 $5,082 $12,159 $17,257 $25,786 $28,512 $27,032 $26,912 $29,113 $28,790 $3
Slide 68: Inova Program Structure
67 ProAssurance Investor Briefing, October 12 - 13, 2017 PROASSURANCE EASTERN Re Ltd., S.P.C. Cayman Domicile Founded in 1987 Segregated Portfolio Cell (SPC) Segregated Portfolio Cell (SPC) Segregated Portfolio Cell (SPC) Individual Segregated Portfolio Cell Loss Fund * Commission Front (Underwritin
Slide 69: Lloyd's Financial Highlights & Strategic Review
Segment Financial Highlights & Strategic Review Lloyd’s
Slide 70: Q2 2017 Lloyd's Segment Financial Highlights
69 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Lloyd’s Segment Financial Highlights Three Months Ended Six Months Ended June 30 June 30 2017 2016 2017 2016 Gross Premiums Written $23.3 $25.0 $36.0 $31.9 Net Premiums Earned $14.5 $13.5 $29.1 $26.0 Total Revenues $14.8 $14.1 $30.2 $2
Slide 71: Lloyd's Strategy Review
70 ProAssurance Investor Briefing, October 12 - 13, 2017 Lloyd’s Strategy Review ProAssurance provides 58% of capital to Syndicate 1729 Small ownership interest in the underlying underwriting arm, Dale Underwriting Partners $200 million capital commitment is best viewed as an investment Early stage
Slide 72: Lloyd's Strategy Update
71 ProAssurance Investor Briefing, October 12 - 13, 2017 Lloyd’s Strategy Update Special Purpose Arrangement (SPA) within Syndicate 1729 will begin writing business in 2018 Four experienced underwriters with established books of business joining Planned premium is $22 million Business focus is conti
Slide 73: Lloyd's Syndicate 1729: Business Detail
72 ProAssurance Investor Briefing, October 12 - 13, 2017 Current Underwriting capacity: $130 million ProAssurance 57.6% share is $75.0 million 2016 Syndicate 1729 Gross Written Premium was $113.2 million ProAssurance 57.6% Share was $65.2 million Lloyd’s Syndicate 1729: Business Detail For the trail
Slide 74: Corporate & Investments Financial Highlights & Strategic Review
Segment Financial Highlights & Strategic Review Corporate & Investments
Slide 75: Q2 2017 Corporate Segment Financial Highlights
74 ProAssurance Investor Briefing, October 12 - 13, 2017 Segment operating results for Q2 2017 were lower than Q2 2016 due to net realized investment losses in Q2 2017 caused by mark - to - market adjustments Investment income continues to decline due to lower average balances and the low interest r
Slide 76: 2017 Investment Strategy
75 ProAssurance Investor Briefing, October 12 - 13, 2017 Seeking better risk - adjusted returns Remaining sensitive to potential changes in tax rates 2017 Investment Strategy Optimizing our allocation E nsures non - correlation of returns Continuing capital management activities reduced the size of
Slide 77: Q2 2017 Consolidated Net Investment Result
76 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Consolidated Net Investment Result 6/30/17 6/30/16 Change Net Investment Income Fixed maturities $ 18,427 $ 20 , 853 $ ( 2, 426 ) Equities 4 , 298 3, 561 737 Short - term and Other investments 958 673 285 BOLI 4 42 4 39 3 Investment fe
Slide 78: Q2 2017 YTD Consolidated Net Investment Result
77 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 YTD Consolidated Net Investment Result 6/30/17 6/30/16 Change Net Investment Income Fixed maturities $ 38,152 $ 43,099 $ ( 4,947 ) Equities 7,942 7,204 738 Short - term and Other investments 1,736 1,068 668 BOLI 897 899 (2 ) Investment
Slide 79: ProAssurance Investment Profile
78 ProAssurance Investor Briefing, October 12 - 13, 2017 06/30/17 Full portfolio disclosure on our website: investor.proassurance.com/CustomPage/Index?KeyGenPage=305596 ProAssurance Investment Profile $ 2.5 Billion Fixed Income Portfolio (69% of Invested Assets) $ 3.7 Billion Overall Portfolio Sourc
Slide 80: Recent Investment Performance
79 ProAssurance Investor Briefing, October 12 - 13, 2017 ProAssurance Recent Investment Performance Management reporting item which is ‘tax equivalent,’ unaudited, and non GIPS Contribution to Returns 2013 - 2017 / PRA vs Benchmarks 2017 YTD 2016 2015 2014 2013 % of Assets PRA Benchmark % of Assets
Slide 81: Portfolio Detail: Asset Backed
80 ProAssurance Investor Briefing, October 12 - 13, 2017 06/30/17 Subject to Rounding ProAssurance Portfolio Detail: Asset Backed $348 Million ( 14% of Fixed Income/9% of Invested Assets) RMBS 59% Other (Primarily Auto & Credit Card) … CMBS 9% Weighted Average Rating: “AAA”
Slide 82: Portfolio Detail: Corporate
81 ProAssurance Investor Briefing, October 12 - 13, 2017 06/30/17 ProAssurance Portfolio Detail: Corporate Corporates: $1.3 Billion (52% of Fixed Assets/36% of Invested Assets) Top 20 Banks/Financials: $222 million in millions JPM $27 BBT $10 PNC $18 Simon Property $9 Goldman $17 Athene $9 Wells Far
Slide 83: Portfolio Detail: Municipals
82 ProAssurance Investor Briefing, October 12 - 13, 2017 06/30/17 ProAssurance Portfolio Detail: Municipals Municipals: $722 Million (28% of Fixed Income / 20% Invested Assets) General Obligation 19% Prerefunded 9% Special Revenue 72% Weighted Average Rating: AA Top 10 Municipal Holdings in millions
Slide 84: Portfolio: Equities & Other
83 ProAssurance Investor Briefing, October 12 - 13, 2017 06/30/17 ProAssurance Portfolio: Equities & Other Equities & Other: $822 Million ( 22% of Invested Assets) Equities 36% Alternative Equity & Debt 15% Real Estate LP 5% Private Equity 13% Convertible Bonds 4% Bond Funds 6% Inflation Focused Bon
Slide 85: Additional Financial Detail
Additional Financial Detail
Slide 86: Inside ProAssurance's Income Statement: YTD 2017
85 ProAssurance Investor Briefing, October 12 - 13, 2017 Inside ProAssurance’s Income Statement: YTD 2017 Net Premiums Earned 84.8% Net Investment Income 10.7% Net Realized Investment Gains (Losses) 2.6% Other: 1.9% Net Losses and Loss Adjustment Expenses 54.8% Underwriting, Policy Acquisitions, Ope
Slide 87: Inside ProAssurance's Balance Sheet: Q2 2017
86 ProAssurance Investor Briefing, October 12 - 13, 2017 Cash & Investments 78.4% Insurance Receivables 11.7% Goodwill & Intangible Assets 6.0% Other Assets 3.9% Retained Earnings 38.1% Loss Reserves 41.0% Reinsurance Payable & Other Liabilities 13.0% Unearned Premiums 8.2% Other Equity - 0.3% Asset
Slide 88: Tax Credit Impact on Operating Results
87 ProAssurance Investor Briefing, October 12 - 13, 2017 Tax Credit Impact on Operating Results Substantial tax benefits and amortization expenses - $0.8 - $5.6 - $6.2 - $10.0 - $10.7 - $10.3 - $24.8 - $23.1 - $20.0 - $21.3 - $21.1 - $15.7 - $7.3 - $3.2 - $1.3 $1.2 $7.7 $12.3 $20.8 $21.7 $26.0 $36.2
Slide 89: Combined Tax Credits Portfolio Detail & Projections
88 ProAssurance Investor Briefing, October 12 - 13, 2017 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
Slide 90: 2017 YTD Ceded Premiums Written
89 ProAssurance Investor Briefing, October 12 - 13, 2017 2017 YTD Ceded Premiums Written HCPL including Podiatry Products Lawyers Workers’ Compensation Lloyd’s Traditional Alternative Markets 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 6/30/17 6/30/16 Gross writte
Slide 91: Q2 2017 Condensed Results by Segment
90 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 Condensed Results by Segment Second Quarter 2017 Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Q2 201 7 Q2 201 6 Gross premiums written $ 124 , 887 $ 59 , 325 $ 2 3 , 311 $ — $ ( 1 , 283 ) $ 2 06 , 240 $ 1
Slide 92: Q2 2017 YTD Condensed Results by Segment
91 ProAssurance Investor Briefing, October 12 - 13, 2017 Q2 2017 YTD Condensed Results by Segment Second Quarter 2017 Year to Date Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Q2 201 7 Q2 201 6 Gross premiums written $ 261,748 $ 143,554 $ 36,023 $ — $ ( 3 , 740 ) $ 437
Slide 93: 2016 Condensed Results by Segment
92 ProAssurance Investor Briefing, October 12 - 13, 2017 2016 Condensed Results by Segment Year Ended 12/31/16 Specialty P&C Workers' Comp Lloyd's Syndicate Corporate / Other Elimination Total YTD 2016 Total YTD 2015 Gross premiums written $ 535,725 $ 247,940 $ 65,157 $ — $ (13,808 ) $ 835,014 $ 812
Slide 94: Corporate Profile
Corporate Profile
Slide 95: ProAssurance Corporate Profile
94 ProAssurance Investor Briefing, October 12 - 13, 2017 As of 6/30/17 , except Market Cap which is 9/30/2017 ProAssurance Corporate Profile Healthcare - centric specialty insurance writer Healthcare Professional Liability (HCPL) • Only public company writing predominantly HCPL Life sciences and med
Slide 96: YTD 2017 Premiums, Policyholders & Distribution
95 ProAssurance Investor Briefing, October 12 - 13, 2017 YTD 2017 Premiums, Policyholders & Distribution 6/30/17 YTD Policyholder Count: ~ 72,500 YTD 2017 Gross Premium: $ 438 mln Physicians & Dentists 44% Ancillary Healthcare 3% Life Sciences/ Medical Tech 4% Hospitals & Facilities 6% Attorneys 3%
Slide 97: Our Four Reporting Segments
96 ProAssurance Investor Briefing, October 12 - 13, 2017 Our Four Reporting Segments ProAssurance Consolidated Specialty P&C Workers’ Compensation Lloyd’s Corporate / Other Healthcare Professional Liability Products Liability Lawyers’ Professional Liability Traditional Captive Market Facility Syndic
Slide 98: ProAssurance Brand Profile
97 ProAssurance Investor Briefing, October 12 - 13, 2017 ProAssurance Brand Profile Specialty P&C Healthcare Professional Liability Workers’ Comp Alternative Risk Transfer Medical Technology & Life Sciences Products Liability Legal Professional Liability
Slide 99: ProAssurance's Path to Success
98 ProAssurance Investor Briefing, October 12 - 13, 2017 ProAssurance’s Path to Success 1976 - 1991 Building financial strength Establishing a brand reputation for superior service Demutualized in 2001 1991 - 2012 Scope & size addressed by expansion through careful M&A and de novo expansion in tradi
Slide 100: Management is Experienced & Invested
99 ProAssurance Investor Briefing, October 12 - 13, 2017 Management is Experienced & Invested Proven e xecutive management remains in place Officer/SVP: 16 years average tenure / 29 years average total industry experience VP level: 15 years average experience /28 years average total industry experie