Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (December 2018)
99 slides from Proassurance's investor presentation, Dec 6, 2018
Slide 1: Key Themes and Topics of Importance December 2018
Key Themes and Topics of Importance December 2018
Slide 2: Key Update: Dividends and Capital Management
Key Update: Dividends and Capital Management Special dividend of $0.50/share to be 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 will return $94 million of capital to investors
Slide 3: Key Update: Positives in Q3 2018
Key Update: Positives in Q3 2018 Continued Profitability Non-GAPP Operating Income: $22.4 million Non-GAPP Operating Earnings: $0.42 per share Premium Growth in all Operating Segments vs Q3 2017 Worker’s Compensation up 9.8% Segregated Portfolio Cell Reinsurance up 3.0% Specialty P&C segment up 0.8%
Slide 4: Key Update: Confronting the Challenges Ahead
Key Update: Confronting the Challenges Ahead Profitable growth Increasing market discipline allows us to add new HCPL business at higher rates Specialization is profitable markets and businesses provides an avenue for growth in Workers’ Compensation Maintaining caution as loss trends worsen in HCPL
Slide 5: 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 capabl
Slide 6: 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 7: Corporate Update December 2018
Corporate Update December 2018
Slide 8: ProAssurance Corporate Profile
ProAssurance Corporate Profile Healthcare-centric specialty insurance writer Healthcare Professional Liability (HCPL) Only public company writing predominantly HCPL Life sciences and medical device liability Workers' compensation Legal professional liability Alternative risk transfer (ART) Market Ca
Slide 9: Premiums, Policyholders & Distribution YTD 2018
Premiums, Policyholders & Distribution YTD 2018 All Data as of 9/30/2018 YTD Policyholder Count: ~75,428 YTD 2018 Gross Premium: $745.6 mln Premium Allocated by Line Does Not Reflect Inter-Segment Eliminations Subject to Rounding Our Distribution Sources HCPL LPL Life Sciences Workers’ Comp Agent/Br
Slide 10: 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 11: Additional Capital Management Discussion Points
Additional Capital Management Discussion Points December 2018
Slide 12: Superb Track Record of Capital Management
Superb Track Record of Capital Management Current Management Team’s Tenure Began Q2 2007 At 11/30/18 $ in 000’s Year Dividends Declared† Share Repurchase Strategic Acquisitions Total Special Regular 2007 ̶ ̶ $ 54,201 ̶ $ 54,201 2008 ̶ ̶ 87,561 ̶ 87,561 2009 ̶ ̶ 52,045 $ 137,800 189,845 2010 ̶ ̶ 106,
Slide 13: 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 14: Key Source of Capital: Subsidiary Dividends to Corporate
Key Source of Capital: Subsidiary Dividends to Corporate Subsidiary Dividend History (in Millions) 2018 ORDINARY Dividend Capacity $137 Million Ordinary dividends are permitted without regulatory approval Amounts and criteria vary by domiciliary state Extraordinary dividends require regulatory appro
Slide 15: 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 16: Capital Growth: 2009 Q3 2018
Capital Growth: 2009 Q3 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q3 2018 Beginning Equity* $ 1,424 $ 1,705 $ 1,856 $ 2,164 $ 2,271 $ 2,394 $ 2,158 $ 1,958 $ 1,799 $ 1,595 Cumulative-effect adjustments $ 149 $ 8,334 Stock Issued Employee Stock Transactions $ 7,205 $ 6,147 $ 6,167 $ 7,780 $ 9
Slide 17: Financial / Operating Performance December 2018
Financial / Operating Performance December 2018
Slide 18: Income Statement Highlights (9/30/18)
Income Statement Highlights (9/30/18) Strong results from a focused strategy Three Months Ended Nine Months Ended September 30 2018 2017 2018 2017 Gross Premiums Written $ 259.7 $ 245.5 $ 745.6 $ 683.1 Net Investment Result $ 28.5 $ 27.9 $ 79.9 $ 78.1 Total Revenues $ 249.3 $ 228.5 $ 706.5 $ 657.0 N
Slide 19: Corporate Segment Financial Highlights (9/30/18)
Corporate Segment Financial Highlights (9/30/18) Three Months Ended Nine Months Ended September 30 2018 2017 2018 2017 Net investment income $ 22.1 $ 23.0 $ 64.2 $ 67.7 Equity in earnings (loss) of unconsolidated subsidiaries $ 5.2 $ 4.2 $ 12.2 $ 8.5 Net realized investment gains (losses) $ 11.1 $ 6
Slide 20: Strong Operational Results / Long-Term Profitability
Strong Operational Results / Long-Term Profitability Combined ratio average 2009-2017: 75.2% Operating ratio average 2009-2017: 53.8% Combined Ratio and Operating Ratio History 69.1% 68.0% 52.5% 57.3% 70.6% 82.1% 90.5% 91.4% 95.4% 100.2% 38.8% 39.8% 27.6% 32.6% 46.1% 64.2% 74.8% 77.8% 82.4% 89.2% 20
Slide 21: Disciplined Approach to Reserves
Recognizing loss trends as they appear No change in reserving philosophy or process Disciplined Approach to Reserves $ in millions *Subject to rounding 15-Year Reserve Development History by Quarter by Year HCPL Predominating 2004—2018 $20 $19 $25 $40 $48 $53 $48 $34 $29 $29 $23 $31 $37 $38 $50 $60
Slide 22: Inside ProAssurance's Income Statement (9/30/18)
Inside ProAssurance’s Income Statement (9/30/18) 09/30/18 Subject to Rounding Net Premiums Earned 87.3% Net Investment Income 9.6% Net Realized Investment Gains 0.4% Other 2.7% Net Losses and Loss Adjustment Expenses 62.1% Underwriting, Policy Acquisitions, Operating, SPC Dividend, and Interest Expe
Slide 23: Ceded Premiums Written (YTD 9/30/18)
Ceded Premiums Written (YTD 9/30/18) Specialty P&C Workers’ Compensation Insurance (1) Segregated Portfolio Cell Reinsurance Lloyd’s (3) HCPL(2) including Podiatry Products Lawyers 9/30/18 9/30/17 9/30/18 9/30/17 9/30/18 9/30/17 9/30/18 9/30/17 9/30/18 9/30/17 9/30/18 9/30/17 Gross written premium $
Slide 24: Balance Sheet Highlights
Balance Sheet Highlights Maintaining the financial strength required to keep our insurance promise while continuing to create value for our shareholders Sept 30, 2018 2017 2016 2015 2014 Shareholders’ Equity $1.6 $1.6 $1.8 $2.0 $2.2 Total Investments $3.4 $3.7 $3.9 $3.7 $4.0 Total Assets $4.7 $4.9 $
Slide 25: Inside ProAssurance's Balance Sheet: (9/30/18)
Inside ProAssurance’s Balance Sheet: (9/30/18) Cash & Investments 74.6% Insurance Receivables 14.6% Goodwill & Intangible Assets 6.2% Other Assets 4.6% Retained Earnings 35.2% Loss Reserves 45.1% Reinsurance Payable & Other Liabilities 11.2% Unearned Premiums 9.6% Other Equity - 1.1% Assets: $4.7 bl
Slide 26: Shareholder Return & ROE December 2018
Shareholder Return & ROE December 2018
Slide 27: Book Value per Share History to September 30, 2018
Book Value per Share History to September 30, 2018 Growth in Book Value + Dividends Since Inception (Sep 1991) Cumulative: 2,776% / CAGR: 13.4% Initial dividend declared in Q4 2011 $51.67 $21.35 $26.30 $30.17 $35.42 $36.85 $39.13 $38.17 $36.88 $33.78 $29.37 $20.80 $23.13 $25.29 $29.80 $30.98 $34.67
Slide 28: ProAssurance Leverage Update
$289 million debt at 9/30/18 $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 current borrowings ProAssurance Leverage Update Ten-Year Premiums to Equity Ten-Year Debt to Capital Moving closer to our minimum t
Slide 29: Return on Equity & Future Goals
Return on Equity & Future Goals ROE target is seven points above the ten-year Treasury rate (risk-free rate) Ten year treasury rate was 3.15% at 10/30/18*, implying a revised ROE Target of approximately 10.0% Prior long-term return target of 12%-14% is unrealistic in the current interest rate enviro
Slide 30: Total Return and Stock Price
Total Return and Stock Price Reflects all stock splits and includes all dividends in the year declared. Source: SNL Scorecard at 11/30/18 Total Return CAGR Since Inception (Sep 1991) 2535% 13% Ten Year (11/30/08 – 11/30/18) 152% 10% Five Year (11/30/13 – 11/30/18) 31% 5% YTD 2018 -22% Stock Price To
Slide 31: Segment Highlights Specialty P&C, November 2018
Segment Highlights Specialty P & C, November 2018
Slide 32: Specialty P&C Financial Highlights (9/30/18)
Specialty P&C Financial Highlights (9/30/18) Three Months Ended Nine Months Ended September 30 2018 2017 2018 2017 Gross Premiums Written $ 167.6 $ 166.3 $ 456.1 $ 428.0 Net Premiums Earned $ 120.8 $ 117.3 $ 378.4 $ 337.3 Total Revenues $ 122.2 $ 118.6 $ 382.3 $ 341.2 Net Losses & Loss Adjustment Ex
Slide 33: 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 34: New Market Conditions Emerging
New Market Conditions Emerging Data Source: TransRe Unmistakable trend to higher severity evident in the broader industry Not evident in average ProAssurance paid losses Prompting greater conservatism in ProAssurance reserves on larger risks where deeper pockets may have been created by consolidatio
Slide 35: Total Gross Written Premiums increased 0.8% Q-o-Q
Total Gross Written Premiums increased $1.4 million (or 0.8%) Q-o-Q from $166.3M to $167.6M New business of $16.8 million. Physician new business: $6.2 million Facilities increased due to new business of $8.9 million and timing differences Overall pricing increased Q-o-Q. Within the third quarter of
Slide 36: Total Gross Written Premiums Increase 6.6% Y-o-Y
Total Gross Written Premiums were $456.1 mil increase of $28.1M (or 6.6%) Y-o-Y. Primarily driven by the Loss Portfolio Transfer (LPT) in Q2, 2018. Physician slight decrease is primarily due to decrease in twenty-four month policies. Retention: 90%. Physician new business: $14.9 million Facilities i
Slide 37: Retention gains are holding
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 Strong Retention Despite Competition Year-over-Year Premium Retention – Physicians Trailing Four Quarters’ Premium Retention – Ph
Slide 38: Physician Liability Pricing Trend
Physician Liability Pricing Trend PICA excluded to facilitate accurate comparisons over time September 30, 2018 Current accident year loss ratio adjustments typically have been minor—in either direction Minimal changes on renewed business MD/DO Charged Rate History 2001 2002 2003 2004 2005 2006 2007
Slide 39: Key State Rate Comparison
Annual Premium for a $1M / $3M Policy Filed or Approved at 9/30/18 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 40: Thorough Claims Defense Remains Important
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 uncompromising defense of each claim Differentiates our product Pr
Slide 41: 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 42: 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 43: 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 44: Segment Strategic Review Specialty P&C, November 2018
Segment Strategic Review Specialty P & C, November 2018
Slide 45: 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 How Healthcare Costs Will Force Changes in Our Market Healthcare Cost control remains
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% $9,200 $ 25,800
Slide 47: 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 48: 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 Strategy Update: Traditional Practices are Fading Source: 2018 Physicians Foundat
Slide 49: 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 50: 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 ProAssurance is Positioned to Succeed in HCPL Size & Scope of Top HCPL Writers SNL 2016 Statutory Data, >50% HCPL, Direct Written Premiums >$80 mi
Slide 51: ProAssurance is Positioned to Succeed in HCPL
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 strength and deep experience ProAssurance has always evolv
Slide 52: Strategy Update: Successes in the Evolving Market
The Certitudetm program in partnership with Ascension Health Shared risk through quota share participation by Ascension’s captive on first $1M ~2,600 insured physicians ~$27.5 mln inforce Certitude direct premium YTD (9/3/18) Active in AL, CT, D.C., FL, IL, IN, KS, MI, MO, NY, OK, PA, SC, TN, TX, WI
Slide 53: 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 54: 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 55: Leveraging Existing Expertise in New Ways
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 risks Primary and excess business can be written We expect
Slide 56: Segment Highlights Workers' Compensation, November 2018
Segment Highlights Workers’ Compensation, November 2018
Slide 57: Workers' Compensation Financial Highlights (9/30/18)
Workers’ Compensation Financial Highlights (9/30/18) Three Months Ended Nine Months Ended September 30 2018 2017 2018 2017 Gross Premiums Written $ 65.7 $ 59.8 $ 228.3 $ 203.7 Net Premiums Earned $ 47.3 $ 41.5 $ 135.2 $ 122.2 Total Revenues $ 47.7 $ 42.1 $ 137.1 $ 124.0 Net Losses & Loss Adjustment
Slide 58: Broad Workers' Compensation Product Spectrum
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 10,952 active policies as of 9/30/2018 Broad Workers’ Compensation Product Spectrum $160.1
Slide 59: Eastern Alliance Insurance Group
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 231 Contracts / 669 Locations Workers’ Compensation Business Profile & Overview 9/30/18 Subject
Slide 60: Wide diversification by class code and market segment
Wide diversification by class code and market segment 10,952 active policies in Traditional Programs Over 600 class codes actively written in Traditional business Diversified Book of Business Top 10 Classes of Business by Payroll Exposure as of September 30, 2018 Healthcare Related Non-Healthcare Ph
Slide 61: Healthcare as a Percentage of Traditional Workers' Compensation Writings
Healthcare as a Percentage of Traditional Workers’ Compensation Writings Direct Written Premium YTD at 9/30/18 Significant Healthcare Profile - Traditional YTD 2018 Healthcare premiums grew 6.7% vs. 9/30/2017 $ = DPW in millions Non - Healthcare 82% Healthcare 18% $29 $27 YTD 2018 2017 Healthcare Pr
Slide 62: Consistent Profitability in Workers' Comp
Consistent Profitability in Workers' Comp Historical Combined Ratio Average 89% 2006-Q3 2018 *2018 YTD ratios include Workers’ Compensation Insurance segment only. 79.1% 65.6% 80.2% 87.7% 96.0% 89.7% 91.8% 93.0% 96.0% 95.9% 95.5% 91.1% 95.6 %* 92.7% 94.3% 93.7% 89.1% 95.3%* 2006 2007 2008 2009 2010
Slide 63: 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 64: Eastern's proactive claim-closing strategies
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 70 net claims open from 2014 and prior Workers’ Comp Claim Closing Pattern: Traditional 9/30/2018 536 590 573 687 590 717 778 890 957 1,078 1,
Slide 65: Segment Strategic Review Workers' Compensation, November 8
Segment Strategic Review Workers’ Compensation, November 2018
Slide 66: 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 67: Opportunities Following Great Falls Transaction
Opportunities Following Great Falls Transaction Eastern Alliance Insurance Group acquired the renewal rights to the workers’ compensation book of Great Falls Insurance Company Great Falls is headquartered in Auburn, Maine Transaction adds Maine and New Hampshire to Eastern’s footprint Sets the stage
Slide 68: 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 $5.2 million in direct premiums in 2017—includes $4.6 million of new business
Slide 69: Segment Highlights Segregated Portfolio Cell Reinsurance, November 2018
Segment Highlights Segregated Portfolio Cell Reinsurance, November 2018
Slide 70: 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 71: Segregated Portfolio Cell Reinsurance Financial Highlights (9/30/18)
Segregated Portfolio Cell Reinsurance Financial Highlights (9/30/18) Three Months Ended Nine Months Ended September 30 2018 2017 2018 2017 Gross Premiums Written $ 16.8 $ 16.3 $ 68.3 $ 61.5 Net Premiums Earned $ 19.0 $ 17.2 $ 54.2 $ 50.7 Net Investment Income $ 0.4 $ 0.3 $ 1.1 $ 0.7 Net Realized Gai
Slide 72: Segregated Portfolio Cell Direct Written Premium Trends
Segregated Portfolio Cell Direct Written Premium Trends DPW in 000’s 19 year track record of growth and profitability 2017 DWP = $80.5 million Year-over-year growth of 6.1%
Slide 73: Wide diversification by class code and market segment
Wide diversification by class code and market segment 2,732 active policies in Segregated Portfolio Cell Market Programs Over 400 actively written in Segregated Portfolio Cell Programs Segregated Portfolio Cell Diversified Book of Business Top 10 Classes of Business by Payroll Exposure as of Septemb
Slide 74: Claim Closing Pattern: Segregated Portfolio Cells
Claim Closing Pattern: Segregated Portfolio Cells 9/30/2018 Eastern’s proactive claim-closing strategies are key to being recognized as a short-tail writer of workers’ compensation No claims open from 2008 and earlier 34 net claims open from 2015 and prior 103 175 267 407 422 310 326 336 385 405 503
Slide 75: Segment Strategic Review Segregated Portfolio Cell Reinsurance, November 2018
Segment Strategic Review Segregated Portfolio Cell Reinsurance, November 2018
Slide 76: 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 77: 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 78: How Inova Benefits Insureds
How Inova® Benefits 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 separate service a
Slide 79: Advantages of the Cayman
Advantages of the Cayman Cayman Domicile Second Largest captive domicile in the world Largest healthcare captive domicile in the world 90% of business from North America Healthcare captives represent 34 percent of all captives Medical professional liability is the largest primary line followed by wo
Slide 80: Segment Highlights Lloyds, November 2018
Segment Highlights Lloyds, November 2018
Slide 81: Lloyd's Segment Financial Highlights (9/30/18)
Lloyd’s Segment Financial Highlights (9/30/18) Three Months Ended Nine Months Ended September 30 2018 2017 2018 2017 Gross Premiums Written $ 26.4 $ 21.0 $ 62.9 $ 57.0 Net Premiums Earned $ 19.0 $ 16.3 $ 49.0 $ 45.4 Total Revenues $ 20.1 $ 14.9 $ 51.2 $ 45.0 Net Losses & Loss Adjustment Expenses $ 1
Slide 82: Syndicate 1729 and Syndicate 6131 Business Detail
Syndicate 1729 2018 Underwriting capacity: $172.0 million ProAssurance’s 62% share is $106.9 million Syndicate 6131 2018 underwriting capacity: $10.4 million ProAssurance is the 100% capital provider Lloyd’s Syndicates Business Detail† †For the trailing twelve months as of June 30, 2018 and reported
Slide 83: Segment Highlights & Strategic Review Lloyd's, November 2018
Segment Highlights & Strategic Review Lloyd’s, November 2018
Slide 84: Lloyd's Strategy Review
Lloyd’s Strategy Review ProAssurance now provides 62% of capital to Syndicate 1729 (increased from 58% at 1/1/18) Small ownership interest in the underlying underwriting arm, Dale Underwriting Partners $200 million capital commitment is best viewed as an investment Early stage costs elevated but in-
Slide 85: Key Lloyd's Opportunities
Key Lloyd’s Opportunities Special Purpose Arrangement (SPA) within Syndicate 1729 began writing business in 2018 Syndicate 6131 Four experienced underwriters with established books of business prior to joining Planned premium is $22 million Business focus is contingency & specialty property Continui
Slide 86: Syndicate 1729 Outlook for 2018
Syndicate 1729 Outlook for 2018 Little change in overall results expected for the next reported quarter Little or no exposure to Brexit and related issues Few UK risks written Improving market conditions Growth in a more profitable market More catastrophe risk, gross & net Addressed through addition
Slide 87: Investment Strategy and 2019 Outlook
Proactively managing allocations for better risk-adjusted returns Investment Strategy and 2019 Outlook Duration management remains paramount We will not extend duration in search of incremental yield Optimizing our allocation Ensures non-correlation of returns Effective stewardship of capital ensure
Slide 88: YTD Net Investment Result (9/30/18)
YTD Net Investment Result (9/30/18) 9/30/2018 9/30/2017 Change Net Investment Income Fixed maturities $ 48,244 $ 55,753 $ (7,509 ) Equities 15,553 12,437 3,116 Short-term investments including Other 3,795 2,856 939 BOLI 1,525 1,517 8 Investment fees and expenses (4,910 ) (4,907 ) (3) Net investment
Slide 89: ProAssurance Investment Profile
9/30/18 Full portfolio disclosure on our website: investor.proassurance.com/CustomPage/Index?KeyGenPage=305596 ProAssurance Investment Profile $2.2 Billion Fixed Income Portfolio (64% of Invested Assets) $3.4 Billion Overall Portfolio Sources of Liquidity Average duration: 3.2 years Average tax-equi
Slide 90: YTD 2018 Change in Reported Investment Carrying Value
9/30/2018 YTD 2018 Change in Reported Investment Carrying Value Asset Type Change in Estimated Value of Investments (millions) Short Term -$227.6 Investment Grade Bonds -$141.9 High Yield -$6.0 Bond Funds -$1.7 Fixed-Trading (Syndicate 1729) $32.7 Multi Asset/Equity $53.4 Real Estate -$4.6 Hedge Fun
Slide 91: ProAssurance Recent Investment Performance
ProAssurance Recent Investment Performance As of September 30, 2018 Management reporting item which is ‘tax equivalent,’ unaudited, and non GIPS, may not equal 100% due to rounding Contribution to Returns 2014-Q3 2018 / PRA vs Benchmarks 2018 2017 2016 2015 2014 % of Assets PRA Benchmark % of Assets
Slide 92: ProAssurance Portfolio Detail: Corporate
ProAssurance Portfolio Detail: Corporate Corporates: $1.2 Billion (58% of Fixed Assets / 37% of Invested Assets) Top 20 Banks/Financials: $207 million in millions J. P. Morgan $20 Simon Properties $8 Citi $20 American Express $7 Goldman Sachs $19 Barclays $7 Bank of America $16 Huntington Bank $7 We
Slide 93: ProAssurance Portfolio Detail: Asset Backed
9/30/18 ProAssurance Portfolio Detail: Asset Backed Weighted Average Rating: “AAA” $419 Million (19% of Fixed Income / 12% of Invested Assets) RMBS 50% Other (Primarily Auto & Credit Card) 40% CMBS , 10%
Slide 94: ProAssurance Portfolio Detail: Fixed-Trading
9/30/18 ProAssurance Portfolio Detail: Fixed-Trading Weighted Average Rating: “AA” $33 Million (1% of Fixed Income / 1% of Invested Assets) Represents securities held in Syndicate 1729 Asset Backed Securities 2% Consumer, Cyclical 8% Consumer, Non - cyclical , 2% Financial 30% Government 44% Industr
Slide 95: ProAssurance Portfolio Detail: Municipals
9/30/18 ProAssurance Portfolio Detail: Municipals Municipals: $310 Million (14% of Fixed Income / 9% Invested Assets) Weighted Average Rating: AA Top 10 Municipal Holdings in millions North Carolina State Capital Improvement $10 New York State Urban Development $10 New York, NY $9 Connecticut State
Slide 96: ProAssurance Portfolio: Equities & Other
9/30/18 Subject to Rounding ProAssurance Portfolio: Equities & Other Equities & Other: $950 Million (28% of Invested Assets) Common Equities 24% Private Equity 14% Hedge Funds 8% BDC Stocks 4% Multi Asset Class Fund 5% Private Credit/Structured Credit 8% Real Estate LP 4% MLPs 4% Convertible Bonds 4
Slide 97: 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 98: 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 99: Important Safe Harbor & Non-GAAP Notices
IMPORTANT SAFE HARBOR & NON-GAAP NOTICES Forward Looking Statements 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 mat