Proassurance Corporation · NYSE:PRA
Proassurance — Non-Deal Roadshow (August 2021)
53 slides from Proassurance's roadshow presentation, Aug 17, 2021
Slide 1: Investor Update Second Quarter 2021
PROASSURANCE. ‘Treated Fairly Investor Update Second Quarter 2021 August
Slide 2: ProAssurance Overview
ProAssurance Overview
Slide 3: Mission, Vision, & Values
ProAssurance Investor Briefing | August 2021 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 profe
Slide 4: At a Glance
4ProAssurance Investor Briefing | August 2021 At a Glance All data as of 6/30/21. Office locations and employee counts include NORCAL. Business Unit Principal Offices Employees Lines of Business HCPL 11 608 Healthcare Professional Liability Medmarc 1 27 Medical Technology Liability Innovative Specia
Slide 5: ProAssurance Executive Leadership
ProAssurance Investor Briefing | August 2021 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 Preside
Slide 6: ProAssurance Board of Directors
ProAssurance Investor Briefing | August 2021 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
Slide 7: ProAssurance Brand Profile
ProAssurance Investor Briefing | August 2021 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 | August 2021 8 ProAssurance Specialty Property & Casualty Specialty P&C is comprised of three major divisions. Healthcare Professional Liability (HCPL) offers coverage to healthcare providers and facilities. Excess and surplus coverage and alternative risk solutions (
Slide 9: Specialty Property & Casualty
9ProAssurance Investor Briefing | August 2021 • Deep expertise and broad product spectrum in healthcare and related sciences • Consolidation in HCPL → demand for comprehensive insurance solutions • Innovative Specialty Team (Small Business Unit) → strategy to deliver product and related services eff
Slide 10: Workers' Compensation Insurance
10ProAssurance Investor Briefing | August 2021 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
11ProAssurance Investor Briefing | August 2021 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
12ProAssurance Investor Briefing | August 2021 Lloyd’s of London Syndicates ProAssurance Funds at Lloyd’s (FAL) $72.3 Million 1 Property Insurance (All Other - Mainly US) 25% Casualty (Mainly US) 28% Specialty 16% Catastrophe Reinsurance (Excess of Loss) 10% Facility (US) 8% General Liability (US) 6
Slide 13: Consolidated Premiums, Policyholders & Distribution for 2021
ProAssurance Investor Briefing | August 2021 13 Specialty P&C 60% Workers' Comp 35% Specialty P&C 89% Workers' Comp 11% Standard Physicians 49% Specialty 15% Medical Technology Liability 1% Tail Coverages + Reinsurance <1% Small Business Unit 23% Segregated Portfolio Cell Reinsurance 2% Workers' Com
Slide 14: Financial Ratings & Balance Sheet Highlights
14ProAssurance Investor Briefing | August 2021 • 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
15ProAssurance Investor Briefing | August 2021 • $459 million debt at 6/30/2021 o Includes $175 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 5/6
Slide 16: Investment Philosophy & Portfolio
16ProAssurance Investor Briefing | August 2021 Corporate 50% Asset Backed 28% State & Muni 14% 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
17ProAssurance Investor Briefing | August 2021 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: Why We Will Be Successful
Why We Will Be Successful
Slide 19: A Foundation in Excellence
19ProAssurance Investor Briefing | August 2021 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
20ProAssurance Investor Briefing | August 2021 In 2020, We… Fo cu se d on U nd er w rit in g • Specialty Property & Casualty: o Completed the re‐underwriting of our HCPL Specialty book of business o Enhanced organizational structure and leadership Added new Senior Executive underwriting and actuar
Slide 21: In 2020, We… Achieved Strong Rate Gains
21ProAssurance Investor Briefing | August 2021 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 Business Model Adjustments
22ProAssurance Investor Briefing | August 2021 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: To date in 2021…
23ProAssurance Investor Briefing | August 2021 To date 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 6/30/2021 •
Slide 24: Cyclicality in Insurance
24ProAssurance Investor Briefing | August 2021 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: ProAssurance + NORCAL Group
ed ans Strategic Update @ PROASSURANCE. + NORCAL‘*) GROUP’ It’s go time.
Slide 26: Acquisition Created the #3 HCPL Insurer in the U.S.
ProAssurance Investor Briefing | August 2021 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 $2.8M Source: 2020 NAIC filings for all MPL lines,
Slide 27: Combination with NORCAL Creates the #3 HCPL Insurer
ProAssurance Investor Briefing | August 2021 27 Combination with NORCAL Creates the #3 HCPL Insurer in the U.S. Source: 2020 NAIC filings for all MPL lines Top Ten Market Share by DPW ($ in millions) • Ability to attract and retain key talent • Specialized products focused on healthcare professional
Slide 28: ProAssurance + NORCAL Competitive Position
ProAssurance Investor Briefing | August 2021 28 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) Arkans
Slide 29: Overview of NORCAL Insurance Company
ProAssurance Investor Briefing | August 2021 29 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 cri
Slide 30: Transaction Benefits
ProAssurance Investor Briefing | August 2021 30 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 int
Slide 31: Integration Goals & Objectives
31ProAssurance Investor Briefing | August 2021 Integration Goals & Objectives • 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
Slide 32: HCPL Regional Structure
ProAssurance Investor Briefing | August 2021 32 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
Slide 33: ProAssurance's Proven History of Successful Acquisitions
ProAssurance Investor Briefing | August 2021 33 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 2
Slide 34: Appendix
Appendix
Slide 35: Income Statement Highlights (6/30/21)
ProAssurance Investor Briefing | August 2021 35 Income Statement Highlights (6/30/21) Three Months Ended Six Months Ended June 30 2021 2020 2021 2020 Gross Premiums Written $ 208.5 $ 185.0 $ 433.2 $ 447.5 Net Premiums Earned $ 239.0 $ 207.3 $ 426.4 $ 411.1 Net Investment Result $ 29.3 $ (7.2)$ 51.1
Slide 36: Corporate Segment Financial Highlights
36ProAssurance Investor Briefing | August 2021 Corporate Segment Financial Highlights (6/30/21) Three Months Ended Six Months Ended June 30 2021 2020 2021 2020 Net investment income $ 16.7 $ 16.7 $ 30.8 $ 36.1 Equity in earnings (loss) of unconsolidated subsidiaries $ 11.9 $ (25.4)$ 18.7 $ (26.9) Ne
Slide 37: Specialty P&C Financial Highlights
ProAssurance Investor Briefing | August 2021 37 Current Accident Year Net Loss Ratio 89.4 % 137.7 % 89.6 % 116.5 % Effect of Prior Accident Year Reserve Development (6.3%) (12.2%) (4.7 %) (7.2 %) Net Loss Ratio 83.1 % 125.5 % 84.9 % 109.3 % Underwriting Expense Ratio 17.1 % 19.9 % 19.4 % 22.2 % Comb
Slide 38: Workers' Compensation Insurance Financial Highlights
ProAssurance Investor Briefing | August 2021 38 Workers’ Compensation Insurance Financial Highlights (6/30/21) Three Months Ended Six Months Ended June 30 2021 2020 2021 2020 Gross Premiums Written $ 57.8 $ 57.2 $ 130.2 $ 136.5 Net Premiums Earned $ 40.6 $ 42.4 $ 80.6 $ 86.9 Total Revenues $ 41.5 $
Slide 39: Segregated Portfolio Cell Reinsurance Financial Highlights
ProAssurance Investor Briefing | August 2021 39 Segregated Portfolio Cell Reinsurance Financial Highlights (6/30/21) Three Months Ended Six Months Ended June 30 2021 2020 2021 2020 Gross Premiums Written $ 16,060 $ 14,996 $ 41,211 $ 42,135 Net Premiums Earned $ 16,272 $ 16,748 $ 32,156 $ 33,728 Net
Slide 40: Lloyd's Segment Financial Highlights
ProAssurance Investor Briefing | August 2021 40 Lloyd’s Segment Financial Highlights (6/30/21) Three Months Ended Six Months Ended June 30 2021 2020 2021 2020 Gross Premiums Written $ 8.6 $ 20.7 $ 22.7 $ 48.6 Net Premiums Earned $ 13.5 $ 21.0 $ 29.3 $ 43.0 Total Revenues $ 14.4 $ 22.7 $ 31.1 $ 45.7
Slide 41: Subject to rounding (1) All other reinsurance arrangements primarily represent alternative market business ceded
ProAssurance Investor Briefing | August 2021 41 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. (
Slide 42: Investment Strategy and 2021 Outlook
42ProAssurance Investor Briefing | August 2021 Investment Strategy and 2021 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 43: YTD 2021 Net Investment Result
43ProAssurance Investor Briefing | August 2021 ($ in millions) 6/30/2021 6/30/2020 Change Net Investment Income Fixed maturities $ 33,848 $ 35,961 $ (2,113) Equities 1,142 2,892 (1,750) Short-term investments including Other 952 1,981 (1,029) BOLI 1,130 913 217 Investment fees and expenses (4,638) (
Slide 44: ProAssurance Recent Investment Performance
44ProAssurance Investor Briefing | August 2021 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 45: ProAssurance Portfolio Detail: Corporate
45ProAssurance Investor Briefing | August 2021 Utilities /Energy 10% Non US Sovrgn & Gov't 2% Basic Materials 3% Other 2% Technology 5% Communications 8% Consumer Oriented 22% Financials 40% Industrials 8% 6/30/2021 Subject to Rounding ProAssurance Portfolio Detail Corporate: $1.9 Billion (50% of Fi
Slide 46: Portfolio Detail: Asset Backed
46ProAssurance Investor Briefing | August 2021 6/30/2021 Subject to rounding ProAssurance Portfolio Detail: Asset Backed Weighted Average Rating: “AA+” Asset-Backed Securities: $1 Billion (28% of Fixed Income / 22% of Invested Assets) RMBS 45% Student Loans 2% Auto 9% Credit Cards 2% CLOs 3% Other 2
Slide 47: Portfolio Detail: Fixed-Trading
47ProAssurance Investor Briefing | August 2021 6/30/2021 Subject to rounding ProAssurance Portfolio Detail: Fixed-Trading Weighted Average Rating: “AA” Fixed Maturities: $46 Million (1% of Fixed Income / 1% of Invested Assets) All Fixed Trading Securities are owned by Lloyd’s Syndicate 1729 ABS & Ot
Slide 48: Portfolio Detail: Municipals
48ProAssurance Investor Briefing | August 2021 General Obligation 14% Pre-refunded 6% Special Revenue 80% 6/30/2021 Subject to rounding ProAssurance Portfolio Detail: Municipals Municipals: $513 Million (14% of Fixed Income / 11% Invested Assets) Weighted Average Rating: AA Top 10 Municipal Holdings
Slide 49: ProAssurance Portfolio: Equities & Other
49ProAssurance Investor Briefing | February 2021 6/30/2021 Subject to Rounding ProAssurance Portfolio: Equities & Other Common Equities 1% Private Equity 24% Private Credit 14% Real Estate LP 6% Other 1% Bond Funds 35% Convertible Bonds 15% Tax Credits 3% Equities & Other: $659 Million (14% of Inves
Slide 50: Combined Tax Credits Portfolio Detail & Projections
ProAssurance Investor Briefing | August 2021 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 $ 124,829
Slide 51: Change in Capital: 2011 - Q2 2021
ProAssurance Investor Briefing | August 2021 51 Change in Capital: 2011 ‒ Q2 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 Beginning Equity* $1,856 $2,164 $2,271 $2,394 $2,158 $1,958 $1,799 $1,595 $1,523 $1,512 $1,349 Cumulative-effect adjustments — — — — — — 149 8,334 (444) (4,076
Slide 52: Forward Looking Statements; Non-GAAP Measures
ProAssurance Investor Briefing | August 2021 52 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 a
Slide 53: Contact
© ProAssurance Corporation. All rights reserved. MAILING ADDRESS: ProAssurance Corporation 100 Brookwood Place Birmingham, AL 35209 CONTACT: Ken McEwen Investor Relations Manager 205.439.7903 KenMcEwen@ProAssurance.com