Proassurance Corporation · NYSE:PRA
Proassurance — Investor Presentation (March 2014)
90 slides from Proassurance's investor presentation, Mar 3, 2014
Slide 1: Investor Presentation
Investor Presentation W. Stancil Starnes Chairman and Chief Executive Officer Edward L. Rand, Jr. Chief Financial Officer Frank B. O’Neil Chief Communications Officer
Slide 2: Forward Looking Statements
F ORWARD L OOKING S TATEMENTS 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 projected in this p
Slide 3: ProAssurance Corporate Profile
ProAssurance Corporate Profile Specialty liability insurance writer Healthcare Professional Liability (HCPL) Only public company writing predominately HCPL Workers' Compensation Life sciences and medical devices Attorney’s professional liability Market Cap: ~$2.9 billion Shareholders’ Equity: $2.4 b
Slide 4: Our View of 2013
Our View of 2013 Our commentary on strong results posted on February 20, 2014
Slide 5: Strong Financial Results
Strong Financial Results Gross Written Premiums up 6% year - over - year Important contributions from acquisitions New business in our legacy MPL lines Continued underwriting and pricing discipline Return on Equity: 11.4% Shareholders’ Equity: $2.4 billion Up 68% since 2008 Book Value: $39.19 Up 6%
Slide 6: The Payoff: Consistent Book Value Growth
$1.84 $3.14 $4.28 $5.79 $6.96 $8.01 $9.39 $10.46 $12.30 $16.81 $19.35 $21.35 $26.30 $30.17 $39.13 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Cumulative Dividends Book Value per Share $35.67 $43.56 $40.23 The Payoff: Consistent Book Value Growth Captures our focus on long -
Slide 7: Strong Shareholder Value Creation
Strong Shareholder Value Creation Total Return 2013: 17.5% 6 Source: SNL Financial
Slide 8: Strong Shareholder Value Creation: Total Return 2004-2013
Strong Shareholder Value Creation Total Return 2013: 17.5% Total Return 2004 - 2013: 233% vs. US P&C: 74% -75% 25% 125% 225% 2004 2006 2008 2010 2012 2014 Hundreds PRA +233% U.S. P&C +74% 7 Source: SNL Financial
Slide 9: Strong Shareholder Value Creation: Total Return Since IPO
Strong Shareholder Value Creation Total Return 2013: 17.5% Total Return 2003 - 2013: 233% vs. US P&C: 138% Total Return 1991 (IPO) - 2013: 1917% vs. US: 751% 0% 500% 1000% 1500% 2000% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 PRA +1917% U.S. P&C +751% 8 Source: SNL Financial
Slide 10: Returning Capital to Shareholders
Strong Shareholder Value Creation Quarterly dividend increased by 20% Yield now 2.7% Share buybacks resumed in Q4 2013 $32.5 mi in 2013 $44.2 mil YTD in 2014 $158 mil remaining in current authorization $400 mil since 2001 Returning Capital to Shareholders $44 $79 $192 $36 $106 $52 $88 $54 YTD 14 201
Slide 11: Strong Operational Results
Strong Operational Results Combined Ratio: 70.6% (Five Year Avg: 63.5%) Operating Ratio: 46.1% (Five Year Avg: 37.0%) 69.1% 68.0% 52.5% 57.3% 70.6% 38.8% 39.8% 27.6% 32.6% 46.1% 2009 2010 2011 2012 2013 Five Year Combined Ratio and Operating Ratio Combined Ratio Operating Ratio 10
Slide 12: 2013 / 2014 Milestones
2013 / 2014 Milestones Acquired Medmarc and IND effective 1/1/13 Both well integrated into ProAssurance and making significant contributions to our performance Issued long - term debt Improves leverage at an advantageous coupon Announced Eastern Insurance transaction Closed effective 1/1/2014 Signif
Slide 13: Strategies for Future Success
12 Strategies for Future Success Our view for ensuring future success Our experience and deep expertise uniquely qualify ProAssurance to insure the widest range of healthcare risks
Slide 14: What We Know About the Future
What We Know About the Future We are a healthcare - centric specialty insurance company Our healthcare delivery system is changing due to cost pressures and changing demographics This change was happening, and will happen, regardless of the payment and insurance regimen Our healthcare payment and in
Slide 15: What We Know About the Future
What We Know About the Future A great portion of healthcare will be delivered by larger, geographically - diverse systems Will demand a broad range of coverages from companies with significant financial size, wide geographic reach and demonstrated expertise Traditional small groups and solo practiti
Slide 16: Strategy for an Evolving Market
Strategy for an Evolving Market We are building the platform that will allow us to serve the broad spectrum of healthcare Prudently leveraging our success and experience with the addition of specialized expertise Adding capacity & capability through M&A Eastern Insurance, Medmarc, PICA & Mid - Conti
Slide 17: Positioned to Succeed
Positioned to Succeed ProAssurance has the right combination of geographic scope, broad experience, and financial strength for success in the new world of healthcare liability Medical Protective National Recent Hospital Experience $795 Doctors Co National Limited Hospital Experience $794 MLMIC NY On
Slide 18: ProAssurance's Successful M&A History
ProAssurance’s Successful M&A History Original Companies 1. Purchased Company 2. Demutualization OHIC HOSPITALS ONLY 2 1 1 1 1 1 1 1 1 3 4 4 1 4 3. Renewal Rights 4. Assumed Business 2 2 † 2 3 1 3 3 1 SERTA 17
Slide 19: Strategy for an Evolving Market: Larger Accounts
Strategy for an Evolving Market Leverage our reach, expertise and financial strength with larger accounts Example: The Certitude tm program with Ascension Health Largest non - profit healthcare system in the US Now in Michigan, Florida, Illinois, Indiana and Texas Insuring Ascension - affiliated phy
Slide 20: Strategy for an Evolving Market
Strategy for an Evolving Market Joint physician/hospital insurance products to address the unique risk tolerance and claims - handling expectation of each insured Partnerships with existing physician - focused companies to leverage hospital expertise Recently announced California venture with CAP -
Slide 21: Key Investor Points
Key Investor Points ProAssurance has always evolved ahead of the curve in our industry — we continue that trend We have proven our ability to thrive across insurance cycles and produce significant returns for long - term shareholders Our long - term focus on financial strength and sustained value cr
Slide 22: Investor Meetings
W. Stancil Starnes Chairman and Chief Executive Officer Edward L. Rand, Jr. Chief Financial Officer Frank B. O’Neil Chief Communications Officer Investor Meetings
Slide 23: Additional Information
Our one - on - one investor meetings will use these slides in addition to the presentation materials that precede this section. A DDITIONAL I NFORMATION
Slide 24: ProAssurance Corporate Profile
ProAssurance Corporate Profile Specialty liability insurance writer Healthcare Professional Liability (HCPL) Only public company writing predominately HCPL Life sciences and medical devices Legal professional liability Market Cap: ~$2.9 billion Shareholders’ Equity: $2.4 billion Total Assets: $5.3 b
Slide 25: Hot Topics for Investors
Hot Topics for Investors Our commentary on recent announcements and transactions
Slide 26: Strong Financial Results
Strong Financial Results Gross Written Premiums up 6% year - over - year Important contributions from acquisitions New business in our legacy HCPL lines Continued underwriting and pricing discipline Return on Equity: 11.4% Shareholders’ Equity: $2.4 billion Up 68% since 2008 Book Value: $39.19 Up 6%
Slide 27: 2013 Income Statement Highlights
2013 Income Statement Highlights in millions, except per share data December 31, Y - OVER - Y Change 2013 2012 Gross Premiums Written $ 568 $ 536 +6% Net Investment Result $ 137 $ 129 +6% Total Revenues $ 740 $ 716 +3% Total Expenses (Includes Loss Costs) $ 375 $ 320 +17% Net Income (Includes Realiz
Slide 28: 2013 Balance Sheet Highlights
2013 Balance Sheet Highlights Split adjusted, in billions, except Book Value per share Shareholders’ Equity $ 2.4 $ 2.3 +5% Total Investments 3.9 3.9 ‒ Total Assets 5.2 4.9 +6% Policy Liabilities 2.4 2.3 +1% 2013 2012 CHANGE $1.42 $1.70 $1.86 $2.16 $2.27 $2.39 2008 2009 2010 2011 2012 2013 Sharehold
Slide 29: Returning Capital to Shareholders
Strong Shareholder Value Creation Quarterly dividend increased by 20% Yield now ~2.7% Share buybacks resumed in Q4 2013 $32.5 mln in 2013 $44.2 mln YTD in 2014 $158 mln remaining in current authorization $400 mln since 2001 Returning Capital to Shareholders $44 $79 $192 $36 $106 $52 $88 $54 YTD 14 2
Slide 30: Capital Management Priorities
Capital Management Priorities Strong capital positions us for a firming market We recognize the effect on ROE The manner in which capital is used has an effect on financial ratings 1.4 1.3 1.0 0.5 0.4 0.3 0.3 0.3 0.3 0.2 0.2 $- $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 2013 2012 20
Slide 31: Debt Issuance
Debt Issuance $250 million long - term debt 10 - year notes due 11/15/2023 at a coupon of 5.30% Used for general corporate purposes, including debt repayment and capital management Debt - to - capital at levels acceptable to rating agencies Our balance sheet will benefit from the addition of leverag
Slide 32: Strong Operational Results
Strong Operational Results Combined Ratio: 70.6% (Five Year Avg: 63.5%) Operating Ratio: 46.1% (Five Year Avg: 37.0%) 69.1% 68.0% 52.5% 57.3% 70.6% 38.8% 39.8% 27.6% 32.6% 46.1% 2009 2010 2011 2012 2013 Five Year Combined Ratio and Operating Ratio Combined Ratio Operating Ratio 31
Slide 33: 2013 / 2014 Milestones
2013 / 2014 Milestones Acquired Medmarc and IND effective 1/1/13 Both well integrated into ProAssurance and making significant contributions to our performance Issued long - term debt Improves leverage at an advantageous coupon Announced Eastern Insurance transaction Closed effective 1/1/2014 Signif
Slide 34: ProAssurance Business Profile
ProAssurance Business Profile 33 Physicians & Dentists 64.0% Ancillary Healthcare 14.6% Life Sciences/ Med Tech 1.6% Hospitals & Facilities 0.8% Attorneys 17.9% Other 1.1% Physician & Dental 77.7% Ancillary Healthcare 6.5% Life Sciences 6.0% Hospitals & Facilities 4.6% Attorneys 4.9% Other 0.3% 2013
Slide 35: Transaction Updates – Eastern Insurance Holdings
Transaction Updates – Eastern Insurance Holdings Our acquisition of Eastern Insurance Holdings was effective January 1, 2014
Slide 36: Eastern Insurance Transaction
Eastern Insurance Transaction Transaction closed effective January 1, 2014 All cash transaction Aggregate value: $205 million 1.38x 9/30/13 Book Value per Share Modestly accretive to ProAssurance in 2014 “Bolt - on” transaction — limited integration risk Experienced, successful management team remai
Slide 37: Eastern Insurance Transaction
Eastern Insurance Transaction Continues building the platform to serve the needs of larger integrated health systems and healthcare delivery organizations Workers’ compensation represents one of the single largest liability expenditures for healthcare entities Eastern and ProAssurance underwrite lar
Slide 38: Eastern Insurance Transaction
Eastern Insurance Transaction Eastern’s segregated portfolio cell structure and expertise will help expand alternative market opportunities to healthcare customers for workers’ compensation and professional liability Combination of the companies is very attractive from a product and geographic diver
Slide 39: ProAssurance Proforma with Eastern
ProAssurance Proforma with Eastern 38 ProForma 12/31/13 Using projected ProAssurance accounting Includes Acquisitions Tail Premium Allocated by Line Physicians & Dentists 56.9% Ancillary Healthcare 13.0% Life Sciences/ Med Tech 1.4% Hospitals & Facilities 0.7% Attorneys 16.0% Workers' Comp 11.0% Oth
Slide 40: Eastern Insurance Performance: Combined Ratio
Eastern Insurance Performance: Combined Ratio 39 Source: Eastern Insurance Holdings Investor Presentation 6/30/13 and Q3 2013 10 Q Combined Ratio YTD at 9/30/13: 89.7% vs 92.3% At 9/30/12
Slide 41: Eastern Insurance Performance: Premium Growth
Eastern Insurance Performance: Premium Growth 40 Source: Eastern Insurance Holdings Investor Presentation 6/30/13
Slide 42: Eastern Insurance Performance: Book Value
Eastern Insurance Performance: Book Value 41 Source: Eastern Insurance Holdings Investor Presentation 6/30/13 and Q3 2013 10 Q Fully Diluted Book Value 9/30/13: $17.66
Slide 43: Transaction Updates – Lloyd's Syndicate 1729
Transaction Updates – Lloyd's Syndicate 1729 Lloyd’s Syndicate 1729 began operation on January 1, 2014
Slide 44: Lloyd's Syndicate Transaction Details
Lloyd’s Syndicate Transaction Details First policies underwritten January 1, 2014 Healthcare professional liability expertise, but experienced underwriters in place for other risks ProAssurance is providing 57% of underwriting capital Remaining capital from other corporates and private names ProAssu
Slide 45: Lloyd's Syndicate Transaction Rationale
Lloyd’s Syndicate Transaction Rationale Investment opportunity with knock - on insurance benefits Provides access to international medical professional liability opportunities Direct benefit to Medmarc in reaching international medical technology and life sciences risks Increases flexibility for Pro
Slide 46: Strategies for Future Success
Strategies for Future Success Our successful experience and deep expertise uniquely qualify ProAssurance to insure the widest range of healthcare risks
Slide 47: What We Know About the Future
What We Know About the Future We are a healthcare - centric specialty insurance company Our healthcare delivery system is changing due to cost pressures and changing demographics This change was happening, and will happen, regardless of the payment and insurance regimen Our healthcare payment and in
Slide 48: What We Know About the Future
What We Know About the Future A great portion of healthcare will be delivered by larger, geographically - diverse systems Will demand a broad range of coverages from companies with significant financial size, wide geographic reach and demonstrated expertise Traditional small groups and solo practiti
Slide 49: Strategy for an Evolving Market
Strategy for an Evolving Market We are building the platform that will allow us to serve the broad spectrum of healthcare Prudently leveraging our success and experience with the addition of specialized expertise Adding capacity & capability through M&A Eastern Insurance, Medmarc, PICA & Mid - Conti
Slide 50: Positioned to Succeed
Positioned to Succeed ProAssurance has the right combination of geographic scope, broad experience, and financial strength for success in the new world of healthcare liability Medical Protective National Recent Hospital Experience $795 Doctors Co National Limited Hospital Experience $794 MLMIC NY On
Slide 51: ProAssurance's Successful M&A History
ProAssurance’s Successful M&A History Original Companies 1. Purchased Company 2. Demutualization OHIC HOSPITALS ONLY 2 1 1 1 1 1 1 1 1 3 4 4 1 4 3. Renewal Rights 4. Assumed Business 2 2 † 2 3 1 3 3 1 SERTA 50
Slide 52: Strategy for an Evolving Market: Larger Accounts
Strategy for an Evolving Market Leverage our reach, expertise and financial strength with larger accounts Example: The Certitude tm program with Ascension Health Largest non - profit healthcare system in the US Now in Michigan, Florida, Illinois, Indiana, and Texas Insuring Ascension - affiliated ph
Slide 53: Strategy for an Evolving Market
Strategy for an Evolving Market Joint physician/hospital insurance products to address the unique risk tolerance and claims - handling expectation of each insured Partnerships with existing physician - focused companies to leverage hospital expertise Recently announced California venture with CAP -
Slide 54: Key Investor Points
Key Investor Points ProAssurance has always evolved ahead of the curve in our industry — we continue that trend We have proven our ability to thrive across insurance cycles and produce significant returns for long - term shareholders Our long - term focus on financial strength and sustained value cr
Slide 55: Sound Strategy = Consistent Profitability
Sound Strategy = Consistent Profitability
Slide 56: Management is Experienced & Invested
Effective senior management remains in place — 13 years average tenure Average ProAssurance tenure through the VP level is 16 years; 25 years average industry experience Management and employees are invested, owning ~5.6 % of ProAssurance stock Management is Experienced & Invested W. Stancil Starnes
Slide 57: The Payoff: Consistent Book Value Growth
$1.84 $3.14 $4.28 $5.79 $6.96 $8.01 $9.39 $10.46 $12.30 $16.81 $19.35 $21.35 $26.30 $30.17 $39.13 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Cumulative Dividends Book Value per Share $35.67 $43.56 $40.23 The Payoff: Consistent Book Value Growth Captures our focus on long -
Slide 58: The Payoff: Steady Share Price Increase
$2.62 $3.85 $3.80 $4.77 $6.24 $6.59 $11.60 $15.75 $10.09 $8.34 $8.79 $10.50 $16.08 $19.56 $24.32 $24.96 $27.46 $26.39 $26.86 $30.30 $39.91 $42.19 $48.48 $45.75 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 YTD 14 Share price reflects investor confidence in our business decisio
Slide 59: Producing Sustained Return on Equity
Producing Sustained Return on Equity Targeting a long - term ROE of 12% - 14% Nine - year average is 13% (2005 - 2013) 11.6% 13.5% 14.2% 13.3% 14.2% 13.0% 14.3% 12.4% 11.4% Average 13.1% 0.0% 5.0% 10.0% 15.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 58
Slide 60: Driven to Excel / Focused on Shareholder Value
Driven to Excel / Focused on Shareholder Value Maintaining profitability Continuing growth in book value per share Producing sustainable shareholder value Focusing on long - term — ready for the market turn 0.00 0.50 1.00 1.50 2.00 2.50 $- $10.00 $20.00 $30.00 $40.00 $50.00 Sep-91 Mar-93 Sep-94 Mar-
Slide 61: Additional Information: MPL Operations
Additional Information: MPL Operations
Slide 62: Consistent Approach to HCPL Reserves
Consistent Approach to HCPL Reserves Recognizing loss trends as they appear No change in long - term results but potential volatility quarter - to - quarter No change in reserving philosophy or process Ten - Year Reserve Development History by Quarter by Year $16 $20 $19 $25 $40 $47 $53 $20 $31 $37
Slide 63: Underwriting for Profitability Not Market Share
Underwriting for Profitability Not Market Share Underwriting process driven by individual risk selection and assessment of loss history, areas of practice and location Rates contemplate specific ROE expectations Frequent rate/loss reviews ensure adequate prices Rate filings consider the results of t
Slide 64: ProAssurance Outperforms in Insurance
ProAssurance Outperforms in Insurance 63 Source: A.M . Best Aggregates and Averages for Each Lines of Business and Period Selected 104.8% 101.0% 104.0% 107.9% 95.0% 84.0% 89.7% 78.0% 59.0% 1991-2012 10-Year 5-Year Average Combined Ratio Overall P&C MPL PRA
Slide 65: ProAssurance Outperforms in HCPL
ProAssurance Outperforms in HCPL 64 ProAssurance consistently outperforms in a volatile line of business 40% 60% 80% 100% 120% 140% 160% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Calendar Year Combined Ratio 1991 - 2012 ProAssurance MPL Source: 1991 - 2012 A.M. Best Aggregates and Avera
Slide 66: ProAssurance Outperforms in HCPL
ProAssurance Outperforms in HCPL HCPL remains volatile despite recent favorable overall trends 65 Source: Max / Min is the weighted average of the five highest and five lowest Combined Ratios 1991 - 2012 A.M. Best Aggregates and Averages, Medical Malpractice Lines of Business -600% -500% -400% -300%
Slide 67: ProAssurance HCPL Pricing History
ProAssurance HCPL Pricing History Peak pricing was in 2006 Improved frequency trends are reflected in recent rate declines Improvement in frequency has outweighed the steady, manageable rise in severity Loss trends have improved in states with and without tort reforms Rate changes (up or down) throu
Slide 68: HCPL Retention Remains High
HCPL Retention Remains High Continued underwriting vigilance is being used today to ensure future success Market share is important, but NOT as important as profitability Retention remains in line with recent quarters 84% 84% 85% 87% 90% 90% 89% 90% 89% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Y
Slide 69: ProAssurance's Standing in HCPL
ProAssurance’s Standing in HCPL ProAssurance is the largest independent publicly - traded writer of HCPL insurance Fourth largest overall writer Rank Market Share ‘12 ‘11 ‘10 Company 2012 MPL DPW (000’s) ‘12 ‘11 ‘10 Comments 1 2 2 Berkshire Hathaway $ 840,579 8.4% 8.2% 8.3% Majority written through
Slide 70: The HCPL Market Today
The HCPL Market Today Market remains fragmented even after two decades of consolidation More than 100 writers Largest market share is ~8% 87% of top 100 companies have <2% 76% of top 100 companies have <1% 69
Slide 71: Key State Rate Comparison
Key State Rate Comparison $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 Family Practice (No Surgery) Anesthesiology Plastic Surgery General Surgery Orthopedic Surgery w/Spine Obstetrics Birmingham, AL $7,484 $17,422 $26,774 $30,515 $37,997 $41,737 Louisville, KY $12
Slide 72: Claims Trends Remain Favorable
3,686 4,265 4,043 4,460 4,377 4,310 4,850 2013 2012 2011 2010 2009 2008 2007 New Claims Opened Each Year 765 503 444 336 273 319 237 2007 2008 2009 2010 2011 2012 2013 Claims Trends Remain Favorable Fewer cases to try following significant decline in frequency Severity trends steady and manageable N
Slide 73: Differentiate Through Claims Defense
Differentiate Through Claims Defense We leverage our financial strength to give our insureds the opportunity for an uncompromising defense of each claim Differentiates our product Provides long - term financial and marketing advantages Retains business and deters future lawsuits Increasingly importa
Slide 74: The Ohio Example: 2005–2011 Data
The Ohio Example: 2005 – 2011 Data Comprehensive, reliable data provided by the Ohio Department of Insurance Broad range of competitors and business approaches www.insurance.ohio.gov/Legal/Reports/Documents/2011ClosedClaimReport.pdf 92% 75% 8% 25% ProAssurance All Others With Indemnity NO Indemnity
Slide 75: The Bottom Line Benefits of Strong Defense
Our ability and willingness to defend claims allows us to achieve better results 2006 2007 2008 2009 2010 2011 2012 PRA Industry 66% 42% 34% 58% The Bottom Line Benefits of Strong Defense Source: Statutory Basis, A.M. Best Aggregates & Averages Some totals may not agree due to rounding ProAssurance
Slide 76: Behind the Numbers
Behind the Numbers 8 PROASSURANCE, “rested Fy
Slide 77: Capital Growth: 2008-2013
Capital Growth: 2008 - 2013 2008 2009 2010 2011 2012 2013 Dividends (15,269) (192,466) (64,777) Earnings 177,725 222,026 231,598 287,096 275,470 297,523 Employee Stock Transactions 11,673 7,205 6,147 6,855 7,780 9,261 Stock Issued 112,478 - - - - - Treasury Stock (87,561) (46,884) (106,347) (21,005)
Slide 78: Inside ProAssurance's Balance Sheet
Inside ProAssurance’s Balance Sheet Cash & Investments: 80.5% Insurance Receivables 7.1% Goodwill & Intangible Assets: 4.1% Other Assets: 8.3% Retained Earnings: 39.1% Other Equity: 7.4% Reinsurance Payable & Other Liabilities: 8.3% Unearned Premiums: 5.0% Loss Reserves: 40.2% Assets: $5.2 bln Liabi
Slide 79: Inside ProAssurance's Income Statement
Inside ProAssurance’s Income Statement Net Premiums Earned: 71.3% Net Realized Investment Gains: 9.2% Net Investment Income: 17.5% Other: 2.0% Net Income (Exclusive of Gain on Acquistion): 35.8% Provision for Income Taxes: 13.5% Underwriting, Policy Acquisitions, Operating and Interest Expenses: 20.
Slide 80: Book Value per Share History
Book Value per Share History 79 $21.35 $26.30 $30.17 $35.42 $36.85 $39.13 $20.26 $24.04 $26.58 $31.93 $33.34 $35.64 $20.80 $23.13 $25.29 $29.80 $30.98 $34.67 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 Book Value per Share Tangible Book Value per Share Tangible Book Value per Share excl. Unreal
Slide 81: Steady Return in an Unfavorable Environment
Steady Return in an Unfavorable Environment Long - term ROE target: 12% - 14% 80 Components of Return on Equity (in millions) 7.2% 5.9% 2.9% - 4.3% - 0.3% Pre-Tax Underwriting Profit $168 Pre-Tax Investment Income $137 Non-Operating Gains $68 Taxes $(100) Interest & Intangibles $(8) 2013 Return on E
Slide 82: Investment Portfolio Detail
Investment Portfolio Detail ProAssurance remains conservatively invested to ensure our ability to keep our long - term promise of insurance protection
Slide 83: 2013 Investment Developments
2013 Investment Developments Maintaining duration of approximately four years Book yield has stabilized 4.3% tax effective on a QTD and YTD basis Overall credit quality is stable at A - Reduced allocations in some investment classes as part of investment risk management process Maintained static equ
Slide 84: 2014 Investment Strategy & Outlook
2014 Investment Strategy & Outlook Focusing on integration of Eastern Review of equity holdings relative to overall market valuation 83
Slide 85: Q4 2013 Investment Profile
ProAssurance: Q4 2013 Investment Profile Fixed Income 79% Short Term (incl cash) 6% Equities & Equity Substitutes 14% BOLI 1% $3.9 Billion Overall Portfolio State & Muni 37% Corporate 44% Asset Backed 13% Govt & Agency 7% $ 3.1 Billion Fixed Income Portfolio Average duration: 3.9 years Average tax -
Slide 86: Portfolio Detail: Asset Backed
Sub - Prime 1% Other 5% Auto 11% Credit Cards 3% Non Agency MBS 1% Agency MBS/CMBS 65% Non Agency CMBS 15% ProAssurance Portfolio Detail: Asset Backed 12/31/13 Subject to Rounding Asset Backed: $399 Million Weighted Average Rating: “ AAA” 85
Slide 87: Portfolio Detail: Corporate
Financials 29% Industrials 29% Utilities/ Energy 21% Other 1% Consumer Oriented 20% ProAssurance Portfolio Detail: Corporate Corporates: $ 1.4 Billion Weighted Average Rating: BBB+ Top 20 Banks/Financials: $ 227 million in millions JPM Chase $26 PNC $10 Goldman Sachs $18 American Honda Fin $10 GECC
Slide 88: Portfolio Detail: Municipals
General Obligation 27% Special Revenue 58% Prerefunded 15% ProAssurance Portfolio Detail: Municipals Municipals: $ 1.2 Billion / Average Rating is AA Investment policy has always required investment grade rating prior to applying the effect of insurance Top 10 Municipal Holdings in millions State of
Slide 89: Portfolio Detail: Equities & Other
Equities 49% Alternative Equity & Debt 9% Real Estate LP 4% Private Equity 10% FHLB Stock 1% Tax Credits 27% ProAssurance Portfolio Detail: Equities & Other 12/31/13 88 Equities & Other: $520 Million 5.3% TE Book Yield 13% TE IRR
Slide 90: Portfolio Detail: Various
ProAssurance Portfolio Detail: Various Govt MMF 97% Other 3% Best Rating: A 7% Best Rating: A+ 58% Best Rating: A++ 35% Rated A1/P1 or better Money Markets: Moody’s: Aaa S&P: AAA Weighted average rating Moody’s: AA3 S&P: AA - A. M. Best: A+ Treasuries 43% TIPS 41% FHLB Debentures 3% FNMA Sr Debentur