Proassurance Corporation · NYSE:PRA
Proassurance — New York Society of Security Analysts presentation (February 2007)
31 slides from Proassurance's conference presentation, Feb 12, 2007
Slide 1: New York Society of Security Analysts
Victor T. Adamo President & COO Edward L. Rand, Jr. Chief Financial Officer February 12, 2007 ProAssurance nyssa New York Society of Security Analysts
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: ProAssurance: The Basics
ProAssurance: The Basics ProAssurance: The Basics Nation’s fourth largest writer of medical liability Now insuring over 36,500 policyholders* More than 31,000 physicians PIC Wisconsin added 10,000 policyholders including 8,000 physicians* Writing business in 26 states Highly rated by Best, Fitch and
Slide 4: Starting at the End
Starting at the End Starting at the End A proven track record at all stages of the cycle A proven track record
Slide 5: Return to Shareholders Since Inception
Return to Shareholders Since Inception Return to Shareholders Since Inception $21.00 $32.15 $39.11 $48.64 $49.92 $4.12 $7.43 $13.22 $23.20 $21.19 $17.58 $32.58 $24.59 $20.92 $18.77 $17.49 $16.02 $13.92 $11.57 $8.56 $6.27 $3.67 1991 1993 1995 1997 1999 2001 2002 2003 2004 2005 2006 Share Price Book V
Slide 6: The Medical Liability Market in 2007
The Medical Liability Market in 2007 The Medical Liability Market in 2007 Frequency and severity appear to be moderating Optimism abounds in the Boardrooms Overall pricing is softening Terms and conditions are holding Frequency and severity appear to be moderating
Slide 7: Where is ProAssurance Now?
Where is ProAssurance Now? Where is ProAssurance Now? Pricing based on targeted returns, not market share or top line goals Focused on profitable business Selling from strength Balance sheet Defense of non-meritorious claims Risk management expertise Physician-connections Pricing based on targeted r
Slide 8: Where is ProAssurance Now?
Where is ProAssurance Now? Where is ProAssurance Now? Why is frequency moderating? Are lawsuits becoming more targeted as legal costs mount? Was 2006 a down year after a pre-Tort Reform rush? Will higher shock losses counteract loss trends in the working layers? Why is frequency moderating? Are laws
Slide 9: Where is ProAssurance Now?
Where is ProAssurance Now? Where is ProAssurance Now? Answers differ by state Variation even between territories in states Our unmatched geographical diversification spreads risk Targeting profitable states as the market evolves Answers
Slide 10: Where is ProAssurance Now? Concentrating on shareholder value
Where is ProAssurance Now? Concentrating on shareholder value Growing Book Value per Share Up $4.73/share through Q3 Focused on the long-term Maintaining leading market position Protecting the balance sheet Building strength for the next turn Evaluating all M & A opportunities Concentrating on share
Slide 11: Operational Highlights
Operational Highlights Operational Highlights ProAssurance Building on our successes Building on our successes
Slide 12: ProAssurance: Still the Leader
ProAssurance: Still the Leader ProAssurance: Still the Leader Market leaders in AL, DE, DC, OH, & WI Continuing to grow within our market footprint but not “forcing” top line growth Market leaders in AL, DE, DC, OH, & WI Continuing to grow within our market footprint but not “forcing” top line growt
Slide 13: ProAssurance: Still the Leader
ProAssurance: Still the Leader ProAssurance: Still the Leader 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-room” operations Co
Slide 14: Experience Counts More Than Ever
Experience Counts More Than Ever Experience Counts More Than Ever Experience IS the best teacher We have managed through several cycles and understand the pitfalls Management’s average tenure is 16 years Average industry experience is 21 years We are owners, not just managers Directors, officers and
Slide 15: Physician Heritage: Our Real Edge
Physician Heritage: Our Real Edge Physician Heritage: Our Real Edge Physician involvement at all levels promotes a direct relationship with our insureds Claims/Underwriting Committees in 16 key states Quarterly meetings, attended by senior management Provides claims and underwriting insight Creates
Slide 16: Underwriting Discipline
Underwriting Discipline Underwriting Discipline Disciplined pricing must reflect loss history Maintaining our margins Pricing must be actuarially-based Local knowledge remains the key to success Terms and conditions are holding No rush to new occurrence coverage options Disciplined pricing must refl
Slide 17: Reinsurance Review
Reinsurance Review Reinsurance Review $1 million retention predominates PIC Wisconsin quota share treaty in place through 2007 Now retaining some risk above $1 million 5% in the first layer ($4mil xs of $1mil) 2% in the second layer ($11mil xs of $5mil) Reflects confidence in claims handling and our
Slide 18: Claims Defense Remains our Core
Claims Defense Remains our Core Claims Defense Remains our Core The long-term competitive advantage of ProAssurance Generates lower costs and higher loyalty The long-term competitive advantage of ProAssurance Generates lower costs and higher loyalty 675 360 473 528 391 2002 2003 2004 2005 2006 We tr
Slide 19: Closed Claim Outcome Comparison
Closed Claim Outcome Comparison Closed Claim Outcome Comparison 13.3% 4.2% 10.7% 71.8% Dropped or Dismissed Defense Verdict Plaintiff Verdict Settled 13.3% 4.2% 10.7% 71.8% Dropped or Dismissed Defense Verdict Plaintiff Verdict Settled 22.5% 1.1% 5.6% 70.8% 22.5% 1.1% 5.6% 70.8% Favorable Outcomes:
Slide 20: Five-Year Loss Ratio Comparisons
Five-Year Loss Ratio Comparisons Our ability and willingness to defend claims allows us to achieve better results Our ability and willingness to defend claims allows us to achieve better results 41.6% 74.5% 56.6% 53.4% 33.9% 24.9% 56.6% 53.4% 33.9% Average Statutory Loss Ratio 2001-2005 41.6% 74.5%
Slide 21: ProAssurance Financial Overview
ProAssurance Financial Overview Financial Overview Operational Discipline Breeds Bottom Line Success Operational Discipline
Slide 22: Five-Year Return to Shareholders
Five-Year Return to Shareholders Created More Than $1 Billion in Shareholder Value Since July, 2001 Share Value at December 31, 2006, Book Value at September 30, 2006
Slide 23: Five-Year Return to Shareholders
Five-Year Return to Shareholders Five-Year Return to Shareholders $17.58 $21.00 $32.15 $39.11 $48.64 $49.92 $32.58 $24.59 $20.92 $18.77 $17.49 $16.02 2001 2002 2003 2004 2005 2006 Share Price Book Value $17.58 $21.00 $32.15 $39.11 $48.64 $49.92 $32.58 $24.59 $20.92 $18.77 $17.49 $16.02 2001 2002 200
Slide 24: Return on Equity Since 2001
Return on Equity Since 2001 Return on Equity Since 2001 ROE in 2006 is higher than 2005 despite having additional capital to put to work Policies priced for long-term average ROE of 12%-14% ROE in 2006 is higher than 2005 despite having additional capital to put to work Policies priced for long-term
Slide 25: Capital Structure
Capital Structure Capital Structure Debt to Equity Ratio: 16.5% Debt to Capitalization: 14.2% Convertible debt exchangeable for 2.6 million shares Debt to Equity Ratio: 16.5% Debt to Capitalization: 14.2% Convertible debt exchangeable for 2.6 million shares Stockholder’s Equity 86% Stockholder’s Equ
Slide 26: Cash Flow Stays Strong
Cash Flow Stays Strong Cash Flow Stays Strong Cash flow is over $1.3 billion since the creation of ProAssurance in 2001 Helping fuel higher investment returns Cash flow is over $1.3 billion since the creation of ProAssurance in 2001 Helping fuel higher investment returns $204 $446 $782 $1,106 $1,342
Slide 27: Management of Asset Risk
Management of Asset Risk Management of Asset Risk We limit risk in our portfolio because we recognize the risk in our business No derivatives Average fixed maturity duration of 3.8 years Fixed income portfolio Weighted average rating: “AA+” 97.8% investment grade Avg. tax-equivalent yield: 5.5% Net
Slide 28: Investment Income a Factor Again
Investment Income a Factor Again Investment Income a Factor Again Net Investment Income as a Percentage of Net Earned Premium 19% 16% 11% 16% 17% 19% 24% 26% 26% $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 9/30/2001 9/30/2002 9/30/2003 9/30/2004 9/30/2005 12/31/2005 3/31/2006 6/30/2006 9/30/2006 Investe
Slide 29: Playing to Our Strengths
Playing to Our Strengths Playing to Our Strengths Successful track record of market leadership We plan, execute and deliver Our plan for the future Proven platform with regional operating approach Organic growth and M&A expansion Our experienced and invested management team is focused on driving ret
Slide 30: Return to Shareholders Since Inception
Return to Shareholders Since Inception Return to Shareholders Since Inception $21.00 $32.15 $39.11 $48.64 $49.92 $4.12 $7.43 $13.22 $23.20 $21.19 $17.58 $32.58 $24.59 $20.92 $18.77 $17.49 $16.02 $13.92 $11.57 $8.56 $6.27 $3.67 1991 1993 1995 1997 1999 2001 2002 2003 2004 2005 2006 Share Price Book V
Slide 31: Victor T. Adamo and Edward L. Rand, Jr.
Victor T. Adamo President & COO President & COO Edward L. Rand, Jr. Edward L. Rand, Jr. Chief Financial Officer Chief Financial February 12, 2007 ProAssurance nyssa New York Society of Security Analysts
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