Proassurance Corporation · NYSE:PRA
Proassurance — New York Society of Security Analysts (February 2006)
31 slides from Proassurance's conference presentation, Feb 13, 2006
Slide 1: ProAssurance - New York Society of Security Analysts
ProAssurance nyssa New York Society of Security Analysts A. Derrill Crowe, M.D. Chairman & CEOEdward L. Rand, Jr., CPA Chief Financial Officer February 13, 2006 A. Derrill Crowe, M.D. Chairman & CEOEdward L. Rand, Jr., CPA Chief Financial Officer February 13, 2006
Slide 2: Caution Regarding Forward Looking Statements
Caution Regarding Forward Looking Statements This presentation contains historical information as well as forward-looking statements that are based upon our estimates and anticipation of future events that are subject to certain risks and uncertainties that could cause actual results to vary materia
Slide 3: ProAssurance Overview
ProAssurance Overview Market Cap: $1.6 Billion Gross Premiums: $790 million in 2004 Assets: $3.8 billion Nation's fourth-largest medical professional liability insurer Recently announced acquisition of PIC-Wisconsin Sale of personal lines business completed effective January 1, 2006 Geographically d
Slide 4: Experienced, Stable Management
Experienced, Stable Management Years at Years in Name Position Company1 Industry1 Derrill Crowe, M.D. Chairman & CEO 29 29 Victor Adamo President & COO 20 25 Jeff Bowlby Sr. Vice President / Marketing 7 21 Paul Butrus Vice Chairman 26 26 Howard Friedman Co-President Professional Liability Group and
Slide 5: Professional Liability: The Core of ProAssurance
Professional Liability The Core of ProAssurance 4
Slide 6: Professional Liability
Professional Liability Statutory Adjusted Loss Ratio* Medical Malpractice Insuring 30,000 physicians and US Industry dentists in 22 states and DC PRA 124.3% 109.7% Majority of insureds are smaller groups and solo practitioners Also insuring hospitals and other healthcare providers Superior results t
Slide 7: Professional Liability: Gross Written Premiums
Professional Liability Our focus is on the bottom line We grow through M&A and careful expansion Confident in current reserve levels Rated "A-" by A. M. Best, S & P and Fitch Gross Written Premiums (millions) 4 Year CAGR: $574 18.0% $543 $462 $349 2001 2002 2003 2004 6
Slide 8: We Created a Leader Through Consolidation
We Created a Leader Through Consolidation 7
Slide 9: Effective Regional Operations
Effective Regional Operations National Scale Regional Orientation Corporate Headquarters Consolidated financial strength is unmatched in our niche Corporate strategy applied locally to underwriting & claims Local knowledge crucial to understanding legal environment Local presence preserves long-term
Slide 10: PIC Wisconsin Transaction
PIC Wisconsin Transaction PIC Wisconsin fits our footprint-and our strategic goals Expands our presence in the Upper Midwest Local knowledge will be crucial for our shared success PIC Wisconsin will remain responsible for States of Origin or Acquisition Expansion States PIC Wis States Claims Offices
Slide 11: Market Leadership
Market Leadership We are the foremost writer in our states of operation We are market leaders in AL, DE, DC, OH and VA Opportunities for M&A will present themselves M & A will be our preferred method of growth We continue to grow within our market footprint but will not "force" top line growth 10
Slide 12: Pricing and Underwriting Review
Pricing and Underwriting Review Average renewal rate increase for 2005: 11% Retention rate is slightly higher New insureds balance out non-renewals We are maintaining our margins at levels that meet our ROE targets Premium levels affected by: Purchase of lower limits Change in mix of business--more
Slide 13: Keys to Success in 2006
Keys to Success in 2006 Continued attention to adequate pricing and strict underwriting Focus on profitable states in an evolving market Taking advantage of our geographic diversification Keep raising the bar for claims success 2006 is a pivotal year in evaluating frequency and severity data 12
Slide 14: Claims Defense Drives Us
Claims Defense Drives Us Driven from the top of the organization Our long-term competitive advantage Aggressive defense of non-meritorious claims Generates lower costs and higher loyalty We try more cases than any company is our line of business 528 473 391 360 2002 2003 2004 2005 13
Slide 15: Closed Claim Outcome Comparison
Closed Claim Outcome Comparison Dropped or Dismissed Plaintiff Verdict Defense Verdict Settled 1.1% 4.4% ProAssurance, 2004 Industry Data, 2004* Industry Data, 2004* *Source: Physician Insurers Association Data Sharing Project Average Indemnity Comparison 14
Slide 16: Weighted Average Indemnity Per Closed Claim
Weighted Average Indemnity Per Closed Claim $76,809 $63,399 ProAssurance, 2004 Industry Data, 2004* Industry Data, 2004* *Source: Physician Insurers Association Data Sharing Project 15
Slide 17: Four-Year Loss Ratio Comparisons
Four-Year Loss Ratio Comparisons Average Statutory Loss Ratio Our ability and willingness to defend claims allows us to achieve better results Legal Payments Loss Payments *Source: A. M. Best Aggregates & Averages Medial Malpractice Predomininating 16
Slide 18: Professional Liability Combined Ratio
Professional Liability Combined Ratio PL Industry PRA PL Only Combined Ratio 1999-2004 measures overall Operating Success 17
Slide 19: What About Tort Reform?
What About Tort Reform? Federal tort reform remains uncertain State-by-state reforms Passed in many forms in many states GA, FL, OH, MO, PA, TX & WV Long-term effectiveness yet to be proven No judicial review yet-could be found unconstitutional Wisconsin's were recently struck down after ten years R
Slide 20: Financial Overview: The Heart of ProAssurance
Financial Overview The Heart of ProAssurance
Slide 21: Financial Highlights
Financial Highlights Cash Flow from Operations $373.5 Consolidated Combined Ratio Operations continues to decrease Professional Liability: 99.1% YTD1 $282.8 Return on Equity exceeding our targets $177.0 15.6% YTD1 (includes Personal Lines) $61.3 $36.3 Solid bottom line growth and strong cash flows 2
Slide 22: Key Objective: 12%-14% ROE
Key Objective: 12%-14% ROE ROE targets drive our consolidated combined ratio goal of 96% or lower Professional Liability Ratio History Combined Ratio Operating Ratio YTD 2005: 99.1% (Goal <104.8%) 81.8% 2004: 104.8% 90.2% 2003: 111.6% 2002: 124.5% 97.7% 104.1% 21
Slide 23: Combined Ratio Returning to Historic Norms
Combined Ratio Returning to Historic Norms Underwriting Profitability in Q3, 2005 Results First Reflect Dramatic Increases in Losses and Loss Costs Year-to-Date at each quarter-end, Medical Assurance, Inc. Data Prior to Q3, 2001 22
Slide 24: Consistent Growth in Book Value per Share
Consistent Growth in Book Value per Share Annual stock price performance of PRA and predecessors is 18.9% since inception in September, 1991 23
Slide 25: Consistent Growth in Our Asset Base
Consistent Growth in Our Asset Base Total Assets in millions Adds NCRIC 24
Slide 26: EPS Reflects Pricing and Underwriting Actions
EPS Reflects Pricing and Underwriting Actions 25
Slide 27: Returning Our ROE to Acceptable Levels
Returning Our ROE to Acceptable Levels Cumulative ROE at each quarter end 15.6% 0.1% Q3, Q1, Q1, Q1, Q1, 2001 2002 2003 2004 2005 Annualized Net Income / Average Shareholder's Equity 26
Slide 28: Financial Effect of MEEMIC Sale
Financial Effect of MEEMIC Sale Total Transaction Value $ 400 million (at September 30, 2005) MEEMIC Total Investments $ 315 million MEEMIC Total Assets $ 530 million MEEMIC Total Liabilities $ 141 million MEEMIC Net Earned Premium $ 307 million MEEMIC will be a component of Discontinued Operations
Slide 29: PIC Wisconsin Overview
PIC Wisconsin Overview Total Transaction Value ~ $ 100 million (at 12/31/04--Statutory Basis) PIC Wis Total Investments1 $ 248 million PIC Wis Total Assets1 $ 275 million PIC Wis Policyholder Surplus1 $89 million PIC Wis Net Written Premium1 $57 million PIC Wisconsin is Rated "A-" (Excellent) by A.
Slide 30: Our Opportunities
Our Opportunities Leader in medical malpractice industry Organic growth and M&A expansion Proven platform with regional operating approach Divesting niche personal lines business in a $400 million transaction Experienced management team focused on driving returns Conservative financial position 29
Slide 31: ProAssurance - New York Society of Security Analysts
ProAssurance nyssa New York Society of Security Analysts A. Derrill Crowe, M.D. Chairman & CEOEdward L. Rand, Jr., CPA Chief Financial Officer February 13, 2006
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