Slide 1: Caution Regarding Forward Looking Statements
0 Caution Regarding Forward Looking Statements Caution Regarding Forward Looking Statements This presentation will communicate historical information as well as forward-looking statements that are based upon ourstimates and anticipation of future events that are subject to certain risks and uncertai
Slide 2: Strategic Overview
Strategic Overview Strategic Overview Highlights Highlights Professional Liability Specialist Proven Track Record of Planning and Execution Market Leadership 1 EXHIBIT 99.1
Slide 3: Setting The Stage
Setting The Stage Setting The Stage Specialty insurance focus Growing the top and bottom line through careful growth and effective management Positioned for long-term success Specialty insurance focus Growing the top and bottom line through careful growth and effective management Positioned for long
Slide 4: Setting The Stage: Statutory Adjusted Loss Ratio
Setting The Stage Setting The Stage Superior results through careful underwriting, proper pricing and effective claims handling Confident in current reserves Rated “A-” by A. M. Best, S & P and Fitch Superior results through careful underwriting, proper pricing and effective claims handling Confiden
Slide 5: Setting The Stage
Setting The Stage Setting The Stage Nation’s fourth largest writer of medical liability Insuring over 31,500 policyholders* More than 24,000 physicians PIC Wisconsin adds almost 11,000 policyholders* More than 7,500 physicians Retention at 87% YTD 2006 NCRIC and new insureds balance out non-renewals
Slide 6: ProAssurance: Market Leadership
5 ProAssurance is the foremost writer in its states of operation ProAssurance is the foremost writer in its states of operation ProAssurance: Market Leadership ProAssurance: Market Leadership With NCRIC and PIC Wisconsin: market leaders in AL, DE, DC, OH, VA, & WI Strong Position in other states Con
Slide 7: ProAssurance: Market Leadership
ProAssurance: Market Leadership 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 Corporate strategy applied local
Slide 8: We Created a Leader Through Consolidation
We Created a Leader Through Consolidation We Created a Leader Through Consolidation 1994:Consolidation of: West Virginia Hosp. Ins Co. 1994:Consolidation of: West Virginia Hosp. Ins Co. 1995:Consolidation of; Physicians Ins Co of Indiana Assumed business of: Physicians Ins Co of Ohio 1995:Consolidat
Slide 9: Experienced & Integrated at the Top
8 Experienced & Integrated at the Top Experienced & Integrated at the Top 14 2 Chief Financial Officer Ned Rand Years in Industry Years at Company Position Name 23 17 Average 22 12 Liability Group President / Chief Claims Officer Darryl Thomas 19 19 Sr. Vice President / IR Frank O'Neil 22 22 Chief A
Slide 10: ProAssurance Growth Strategy
ProAssurance Growth Strategy We grow only when opportunities arise for profitable growth Hard Market Soft Market M & A de novo Expansion Internal Growth M & A is preferable because of pricing pressure All avenues open because of pricing power 9 EXHIBIT 99.1
Slide 11: ProAssurance Growth Strategy
ProAssurance Growth Strategy ProAssurance Growth Strategy We must have a strategic fit in medical liability Doctor-founded companies with similar culture The legal and regulatory environment must be favorable Understanding why companies are available Not all M&A opportunities should be pursed We don
Slide 12: Focusing on Success in 2006
Focusing on Success in 2006 Focus on adequate pricing, strict underwriting and claims defense Focus on profitable states in an evolving market Taking advantage of our geographic diversification 2006 is a pivotal year in evaluating frequency and severity data Focus on adequate pricing, strict underwr
Slide 13: Operational Overview
Operational Overview Operational Overview Highlights Highlights Operational Discipline Across all Stages of the Insurance Cycle Operational EXHIBIT 99.1
Slide 14: Pricing and Underwriting Review
13 Pricing and Underwriting Review Pricing and Underwriting Review Rates are adequate in all states We are maintaining the pricing needed to meet our ROE and margin targets Increases are slowing but margins are steady Premium levels affected by: Purchase of lower limits Adding exposures in lower-cos
Slide 15: Claims Defense Remains our Core
Claims Defense Remains our Core Claims Defense Remains our Core Driven from the top of the organization Our long-term competitive advantage Aggressive defense of non-meritorious claims Generates lower costs and higher loyalty Driven from the top of the organization Our long-term competitive advantag
Slide 16: 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 17: Four-Year Loss Ratio Comparisons
Four-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 47.5% 81.5% 56.6% 53.1% 35.9% 24.9% 56.6% 53.1% 35.9% Average Statutory Loss Ratio 2001-2004 Average Stat
Slide 18: Financial Overview
Financial Overview Highlights Highlights Ongoing Earnings Power Balance Sheet Strength Ongoing 17 EXHIBIT 99.1
Slide 19: Balance Sheet (Continuing Operations)
Balance Sheet (Continuing Operations) Balance Sheet (Continuing Operations) Total Assets $ 3,803 $ 3,342 $ 2,743 Cash & Invested Assets $ 3,101 $ 2,649 $ 2,166 Total Investments $ 3,075 $ 2,614 $ 2,146 Policy Liabilities $ 2,647 $ 2,224 $ 1,819 Shareholders’ Equity $ 910 $ 765 $ 611 in millions in m
Slide 20: YTD 2006 Income Statement Highlights
YTD 2006 Income Statement Highlights YTD 2006 Income Statement Highlights Premium Growth of 8% Primarily due to NCRIC acquisition Validates our strategy of growth by M&A Book Value Up $4.58 to $29.17 $3.50 from MEEMIC sale Cash Flow from Insurance Operations: $163.1 million Cash Flow from Operating
Slide 21: Focused on Shareholder Return
Focused on Shareholder Return Focused on Shareholder Return Five-year return to shareholders: 179% Annualized five-year return: 22.8% Steady increase in Return on Equity Created more than $1 billion in shareholder value Built Book Value per Share even as interest rates have risen Management incentiv
Slide 22: 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 $50.47 $29.17 $24.59 $20.92 $18.77 $17.49 $16.02 2001 2002 2003 2004 2005 YTD '06 Share Price Book Value $17.58 $21.00 $ 2004 2005 YTD '06 Share Price Book Value NCRIC adds $0.95 in Q3, 2005 NCRIC ad
Slide 23: Return to Shareholders Since Inception
Return to Shareholders Since Inception $21.00 $32.15 $39.11 $48.64 $50.47 $4.12 $7.43 $13.22 $23.20 $21.19 $17.58 29.17 $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 2006 YTD2006 Share Price Book Value $21.00 $32.15 $39.11 $48.64 $50.
Slide 24: Investment Income a Factor Again
Investment Income a Factor Again Investment Income a Factor Again Cash flow is over $1 billion since the creation of ProAssurance in 2001 Helping fuel higher investment returns Cash flow is over $1 billion since the creation of ProAssurance in 2001 Helping fuel higher investment returns Net Investme
Slide 25: Key Objective: Return on Equity
Key Objective: Return on Equity Key Objective: Return on Equity We price our policies to deliver a long-term average ROE of 12%-14% Assuming 1:1 premium-surplus Meeting the ROE Challenge ROE in 2006 is higher than ’05 despite having additional capital to put to work We price our policies to deliver
Slide 26: Key Objective: Strong Cash Flow
Key Objective: Strong Cash Flow Key Objective: Strong Cash Flow Cash flow remains strong Will benefit in 2006 from full-year NCRIC Additional benefit when PIC Wisconsin closes 2006 cash flow affected by Q2 investment strategy and timing/tax issues Cash flow remains strong Will benefit in 2006 from f
Slide 27: Key Objective: Combined Ratio
Key Objective: Combined Ratio Key Objective: Combined Ratio <97.1% 2006 Goal: 79.1% 97.1% 2005: Professional Liability Ratio History 97.7% 111.6% 2003: 90.2% 104.8% 2004: Operating Ratio Combined Ratio 26 EXHIBIT 99.1
Slide 28: Management Aligned with Shareholders
Management Aligned with Shareholders Management Aligned with Shareholders Book Value CAGR Based on: Total Return relative to a benchmark Three-year measurement period Directors 5x cash compensation CEO 5x base salary President 3x base salary Senior Officers 2x base salary Vice-Presidents 1x base sal
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: Supplemental Data
Supplemental Data Supplemental 29 EXHIBIT 99.1
Slide 31: 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 3.9 years Fixed income portfolio Weighted average rating: “AA+” 98.5% investment grade Avg. tax-equivalent yield: 5.2% Net unrealized loss: $58 mill
Slide 32: Will History Repeat Itself—Again?
Will History Repeat Itself—Again? $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Premium Initial Reserve Developed Loss Millions Source: A. M. Best Aggregates and Averages 1976 - 2001 Medical Malpractice In
Slide 33: Will History Repeat Itself—Again?
Will History Repeat Itself—Again? Will History Repeat Itself—Again? $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Premium Initial Reserve Developed Loss Millions Source: A. M. Best Aggregates and Averages
Slide 34: Will History Repeat Itself—Again?
Will History Repeat Itself—Again? Will History Repeat Itself—Again? $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Premium Initial Reserve Developed Loss Millions Source: A. M. Best Aggregates and Averages
Slide 35: Will History Repeat Itself—Again?
Will History Repeat Itself—Again? Will History Repeat Itself—Again? $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Premium Initial Reserve Developed Loss Millions Source: A. M. Best Aggregates and Averages
Slide 36: Will History Repeat Itself—Again?
Will History Repeat Itself—Again? Will History Repeat Itself—Again? $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Premium Initial Reserve Developed Loss Millions Source: A. M. Best Aggregates and Averages
Slide 37: Will History Repeat Itself—Again?
$2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Premium Initial Reserve Developed Loss $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Slide 38: ProAssurance Growth Strategy: De Novo vs. Acquisition
ProAssurance Growth Strategy The current market environment favors growth by acquisition The current market environment favors growth by acquisition DE NOVO GROWTH vs. GROWTH BY ACQUISITION - Must price your way into the market + Pricing can be adjusted - No prior history + Prior history available -