![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit1.jpg)
W. Stancil Starnes Chairman and Chief Executive Officer
Edward L. Rand, Jr. Chief Financial Officer
Frank B. O’Neil Investor Relations Officer
April 15-16, 2009
Boston Roadshow
Boston Roadshow
Arranged by Stifel Nicolaus
Arranged by Stifel Nicolaus
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit2.jpg)
Forward Looking Statements
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 presentation. The principal risk factors that may cause these differences are
described in various documents we file with the Securities and Exchange Commission,
such as our current reports on Form 8-K, and our regular reports on Forms 10-Q and 10-
K, particularly in “Item 1A, Risk Factors.” Please review this presentation in
conjunction with a thorough reading and understanding of these risk factors.
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 presentation. The principal risk factors that may cause these differences are
described in various documents we file with the Securities and Exchange Commission,
such as our current reports on Form 8-K, and our regular reports on Forms 10-Q and 10-
K, particularly in “Item 1A, Risk Factors.” Please review this presentation in
conjunction with a thorough reading and understanding of these risk factors.
This presentation contains Non-GAAP measures, and we may reference
Non-GAAP measures in our remarks. A reconciliation of these measures to GAAP
measures is available in our latest quarterly news release, which is available in the
Investor Relations section of our website, www.ProAssurance.com, and in
the related Current Reports on Form 8K disclosing that release.
Non-GAAP measures in our remarks. A reconciliation of these measures to GAAP
measures is available in our latest quarterly news release, which is available in the
Investor Relations section of our website, www.ProAssurance.com, and in
the related Current Reports on Form 8K disclosing that release.
2
Non-GAAP Measures
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit3.jpg)
ProAssurance: Quick Facts
Market Cap: $1.6 Billion / Equity: $1.4 Billion
Fifth largest1 writer of medical liability
Writing business in 491 jurisdictions
More than 57,0002 policyholders
45,000 physicians and dentists
7,000 ancillary and other healthcare professionals
8,100 attorneys
Majority in small or solo practice
Highly rated by A. M. Best and Fitch
3
1 Includes PICA 2 Includes PICA and Georgia
Lawyers
Lawyers
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit4.jpg)
ProAssurance: 2008 Highlights
Increased Shareholders’ Equity
and Book Value per Share
and Book Value per Share
Significantly increased profits
Announced three M&A transactions
Major brand enhancement project
4
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit5.jpg)
ProAssurance: Long-Term Success
Our Balance Sheet remains strong
Conservative investments
Little debt
Low leverage
Solid stock performance over time
Growing organically and through M & A
Adding over $100 million in annualized premium
to our top line in 2009 through M & A
to our top line in 2009 through M & A
Diversifying our risk profile
5
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit6.jpg)
ProAssurance: Long-Term Success
6
NYSE Closing Price at Each year-End
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit7.jpg)
ProAssurance: Long-Term Success
7
NYSE Closing Price at Each year-End
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit8.jpg)
ProAssurance: Recent Transactions
Podiatry Insurance Company of America (PICA)
Dominant (70%), profitable, national company
~$96 million Direct Premium in 2009
Mid-Continent General Agency
Large writer of ancillary healthcare
~$26 million in total premium in 2008
$20 million healthcare related—most will come to PRA
Georgia Lawyers
Adds 5,100 Georgia attorneys to our legal book
~$5.7 million Direct Premium in 2008
8
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit9.jpg)
Operational Discipline: Strategy
Local strategies with national scale
Local knowledge remains the key to our business
9
We leverage the benefits of
our many M & A transactions
through long-term customer
relationships and enhanced
local knowledge
our many M & A transactions
through long-term customer
relationships and enhanced
local knowledge
Corporate Headquarters
Corporate Headquarters
Claims / Underwriting Offices
Claims / Underwriting Offices
PICA Only States
PICA Only States
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit10.jpg)
Operational Discipline: Strategy
Broad geographic diversification provides an
unmatched spread of risk
unmatched spread of risk
10
Our spread of risk provides
better market awareness and
more data points to gauge loss
trends
better market awareness and
more data points to gauge loss
trends
Our internal actuarial depth
allows us to assess emerging
trends and respond quickly
allows us to assess emerging
trends and respond quickly
Corporate Headquarters
Corporate Headquarters
Claims / Underwriting Offices
Claims / Underwriting Offices
PICA Only States
PICA Only States
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit11.jpg)
Operation Discipline: Claims
Our balance sheet strength and deep expertise
ensures our insureds have the option of an
uncompromising defense of their claim
ensures our insureds have the option of an
uncompromising defense of their claim
We defend our insureds at trial more often
than any other company in our line
than any other company in our line
Provides a long-term financial and marketing
advantage
advantage
A key differentiating factor in the market
as claims data becomes public
as claims data becomes public
11
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit12.jpg)
Claims Trends Remain Favorable
12
Frequency trends are
stable after declining
since 2005/2006
stable after declining
since 2005/2006
The results is fewer
cases to try
cases to try
Severity trends also stable
ProAssurance Claims Tried
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit13.jpg)
The Age of Transparency
13
Board / Discipline / Med Mal
Med Mal disclosure
legislation proposed
legislation proposed
P
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit14.jpg)
Operational Discipline: Underwriting
14
Pricing Discipline
Using credits allows us to maintain existing
rate filings
rate filings
Pricing developed using multiple years
Not unduly influenced by current market
conditions
conditions
Rates on renewing business down less than
10% from the peak of pricing in 2006
10% from the peak of pricing in 2006
Rates down 2% in 2007
Rates down 7% in 2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit15.jpg)
Operational Discipline: Actuarial
Initial Accident Year Loss Ratios
2008 Industry is
A. M. Best Data
Through Q3 2008
A. M. Best Data
Through Q3 2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit16.jpg)
Operational Discipline: Actuarial
16
Reserve History
(billions)
(billions)
2008
$ 2.7
2007
$ 2.9
2006
$ 2.6
2005
$ 2.2
2004
$ 1.8
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit17.jpg)
Growth Opportunities in 2009
We have closed three transactions that diversify
our risk profile and add significant premium
our risk profile and add significant premium
We are incrementally expanding our footprint
Wyoming and South Carolina
Taking advantage of improving conditions in
selected markets within our footprint
selected markets within our footprint
17
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit18.jpg)
The Promise of Treat Fairly
Treated Fairly is our brand enhancement initiative
Affirms our existing, enduring commitment to
every stakeholder
every stakeholder
Insureds
Agents
Investors
The public
We run our business as owners who are
rewarded for long-term success
rewarded for long-term success
18
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit19.jpg)
Financial Highlights
Ned Rand
CFO
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit20.jpg)
Entering 2009 in a Strong Position
Emphasizing an appropriate balance of risk vs. return
Committed to enduring balance sheet strength
Responding to the low interest rate environment
$ amounts
in Billions
in Billions
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit21.jpg)
ProAssurance 2008 Highlights
21
in millions, except per share data
Gross Premiums Written $ 472 $ 549 - 14%
Net Investment Income 158 171 - 8%
Total Revenue 567 706 - 20%
Total Expenses 470 561 -16%
Operating Income $ 207 $ 172 20%
Net Income (Includes Investment Losses) $ 178 $ 168 6%
Operating Income/Diluted Share $ 6.07 $ 4.90 24%
Operating Cash Flow $ 165 $ 244 -32%
December 31, Y-OVER-Y
2008 2007 CHANGE
Selected 2008 ProForma with PICA
Gross Premiums Written $ 567
Net Investment Income $ 162
Total Revenue $ 673
Total Invested Assets $ 3,697 (PRA Only at 12/31/08: $3,576)
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit22.jpg)
Responding to Low Interest Rates
The choice: Chase yield or extend duration
We are maintaining duration, looking for opportunities
22
Loss in value assuming a 100 basis point shift in the yield curve
Yields based on Single A composite corporate debt
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit23.jpg)
Responding to Low Interest Rates
23
Loss ratio required
to generate a 13%
after-tax ROE
to generate a 13%
after-tax ROE
Assumes a 1:1 premium to surplus ratio for physicians professional
liability claims-made coverages
liability claims-made coverages
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit24.jpg)
(in millions)
Prepared for an
improving market
improving market
Prudent capital
management
management
Premiums to Surplus for
Each year
Each year
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit25.jpg)
Excess Capital vs. Excess Capacity
25
“A” Rating
Threshold
Threshold
Projected A. M. Best BCAR Scores if
Premiums Increase
Surplus is Reduced
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit26.jpg)
26
Little Dependence on Debt
Low Debt to Cap Ratio
Little strain on cash flow
Repurchased additional
$22 million of debt in Q4
$22 million of debt in Q4
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit27.jpg)
Balancing Risk vs. Return
27
Our conservative investment
philosophy balances
risk and return
philosophy balances
risk and return
We are building cash and short-
term balances as we look to the
future
term balances as we look to the
future
Low equity allocation helps
mute the impact of the volatile
equity markets
mute the impact of the volatile
equity markets
$3.6 Billion
$3.6 Billion
Portfolio
Portfolio
Fixed Income: 83%
Fixed Income: 83%
Short
Term: 13%
Term: 13%
Short
Term: 13%
Term: 13%
Equity and Other
Investments: 2%
Investments: 2%
Equity and Other
Investments: 2%
Investments: 2%
BOLI: 2%
BOLI: 2%
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit28.jpg)
Fixed Income: $3.0 Billion
28
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit29.jpg)
SUMMARY
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit30.jpg)
ProAssurance
Concentrating on shareholder value
Growing Book Value per Share
Focused on the long-term
Maintaining leading market position
Protecting the balance sheet
Building strength for the next cycle turn
Evaluating all M & A opportunities
30
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit31.jpg)
ProAssurance
Proven success throughout the cycles
Disciplined pricing and underwriting
Consistent reserving policy
Proven claims strategy
Balance sheet strength
Significant share ownership throughout the
company
company
Demonstrated commitment to a long-term
view of a complicated business
view of a complicated business
31
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit32.jpg)
Appendix: Claims
Appendix: Claims
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit33.jpg)
Why Claims Strategy Matters
Favorable
Outcomes:
82%
Outcomes:
82%
Favorable
Outcomes:
82%
Outcomes:
82%
Favorable
Outcomes:
74%
Outcomes:
74%
Favorable
Outcomes:
74%
Outcomes:
74%
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit34.jpg)
Why Claims Strategy Matters
Our ability and willingness to defend claims
allows us to achieve better results
allows us to achieve better results
81.4%
ProAssurance Stand Alone
2005 - - 2007
76.0%
64.3%
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit35.jpg)
Appendix: Investments
Appendix: Investments
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit36.jpg)
Portfolio Overview
36
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit37.jpg)
37
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit38.jpg)
Equities & Other Investments
38
$ in 000’s
Performance Q1, 2005 - Q4, 2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit39.jpg)
39
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit40.jpg)
40
Alt-A LTV: 62%
Whole Loan LTV: 57%
Further Details Provided on
Sub-Prime and CMBS on
following pages
Sub-Prime and CMBS on
following pages
Bloomberg Data
12/31/2008
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit41.jpg)
Portfolio Overview: Sub-Prime
At 12/31/08
Type
Quality
$6.9Mln
Mortgage-Backed
AA+ avg - LTV 72%
$4.7Mln
Home Equity
AA avg
41
$11.7 million market value in AFS portfolio
$2.5 million unrealized loss)
$5.0 million market value in high-yield LP
rated BB
rated BB
LP’s focus is distressed ABS)
At 12/31/08
Vintage
$6.2 Mln
2004 & Prior
$3.7 Mln
2005
Quality & Vintage information only on direct holdings
12/31/08
12/31/08
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit42.jpg)
Portfolio Overview: CMBS
$171 million Fair Value in non-agency CMBS
Book Value: $194 Book Value
6% of fixed income portfolio
42
At 12/31/08
Quality
$169 Mln
AAA
$2 Mln
AA
At 12/31/08
Wtd Avg LTV
85%
<70%
15%
<72%
At 12/31/08
Credit Support
78%
>20%
7%
15% - 20%
12%
10% - 15%
3%
Less than 10%
At 12/31/08
Deal Cumulative Delinquencies
32%
None
36%
0% - 0.5%
16%
0.5% - - 1.0%
14%
1.0% - - 2.0%
2%
2.0% - - 2.6%
At 12/31/08
Debt Service Coverage
89%
>1.5x
11%
>1.2-1.5x
AT
12/31/2008
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit43.jpg)
43
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit44.jpg)
Portfolio: Corporate-Financials
Top 20 Largest Banks/Financials: $ 200 million
$17 mm FDIC
BoA/ML $27 ($1)
Credit Suisse $7
Wells/Wachovia $21
Depfa ACS $5
M Stanley $24 ($4)
DeutscheBk $5
JPM Chase $20 ($10)
BONY $5
GECC $13
Unilever Cap $4
Amer Exp $12
John Deere Cap $4
Citi $11
CIT $4
Goldman $9
Met Life $4
Hypotheken Essn $9
FMCC $4
NRUC $9
CAT Fin $3
FDIC backed listed in parentheses
44
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit45.jpg)
Portfolio: Treasury/GSE
45
$177 million
Average Rating: AAA
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit46.jpg)
Portfolio: FRE and FNM
46
$499 million
Average Rating: AAA
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit47.jpg)
Portfolio Overview: Short Term
47
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit48.jpg)
48
12/31/2008
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit49.jpg)
Appendix: Industry History
Appendix: Industry History
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit50.jpg)
Will History Repeat Itself—Again?
50
Source: A. M. Best Aggregates and Averages 1976 - 2001
Medical Malpractice Industry, Net Basis Occurrence and Claims-Made Combined
Medical Malpractice Industry, Net Basis Occurrence and Claims-Made Combined
(Estimated)
(Actual)
Industry Data 1976 Through 2007
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit51.jpg)
Appendix: M & A History
Appendix: M & A History
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit52.jpg)
2004: Purchased Selected Renewal Rights from:
OHIC Insurance Company
OHIC Insurance Company
2004: Purchased Selected Renewal Rights from:
OHIC Insurance Company
OHIC Insurance Company
We Created a Leader Through Consolidation
1994: Consolidation of:
West Virginia Hosp. Ins Co.
West Virginia Hosp. Ins Co.
1994: Consolidation of:
West Virginia Hosp. Ins Co.
West Virginia Hosp. Ins Co.
1995: Consolidation of;
1995: Consolidation of;
Physicians Ins Co of Indiana
Physicians Ins Co of Indiana
Assumed business of:
Physicians Ins Co of Ohio
Physicians Ins Co of Ohio
Assumed business of:
Physicians Ins Co of Ohio
Physicians Ins Co of Ohio
1996: Consolidation of:
1996: Consolidation of:
Missouri Medical Ins Co
Missouri Medical Ins Co
1995: Assumed business of:
Associated Physicians Ins Co. (IL)
Associated Physicians Ins Co. (IL)
1995: Assumed business of:
Associated Physicians Ins Co. (IL)
Associated Physicians Ins Co. (IL)
1998: Consolidation of:
Physicians Protective Trust Fund (FL)
Physicians Protective Trust Fund (FL)
1998: Consolidation of:
Physicians Protective Trust Fund (FL)
Physicians Protective Trust Fund (FL)
1996: Assumed business of:
American Medical Ins Exchange (IN)
American Medical Ins Exchange (IN)
1996: Assumed business of:
American Medical Ins Exchange (IN)
American Medical Ins Exchange (IN)
Founding in the 1970’s
Founding in the 1970’s
1999: Assumed business of:
Medical Defense Associates (MO)
Medical Defense Associates (MO)
1999: Assumed business of:
Medical Defense Associates (MO)
Medical Defense Associates (MO)
Mutual Assurance
Physicians Ins. Co. of Michigan
Professionals Group
2005: Consolidation of:
NCRIC Group
NCRIC Group
2005: Consolidation of:
NCRIC Group
NCRIC Group
2006: Consolidation of:
PIC Wisconsin Group
PIC Wisconsin Group
2006: Consolidation of:
PIC Wisconsin Group
PIC Wisconsin Group
2008: Consolidation of:
Podiatry Insurance Company of
America
Podiatry Insurance Company of
America
2008: Consolidation of:
Podiatry Insurance Company of
America
Podiatry Insurance Company of
America
Mid-Continent General Agency
Mid-Continent General Agency
Georgia Lawyers Insurance Co.
Georgia Lawyers Insurance Co.
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit53.jpg)
Profitable Growth Through M & A
ProAssurance has been built through M & A
53
ProAssurance was formed by
the combination of two
successful companies with a
history of M & A
the combination of two
successful companies with a
history of M & A
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit54.jpg)
Profitable Growth Through M & A
ProAssurance has been built through M & A
54
Each company brought
multiple transactions into
ProAssurance at our founding
in 2001
multiple transactions into
ProAssurance at our founding
in 2001
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit55.jpg)
Profitable Growth Through M & A
ProAssurance has been built through M & A
55
We have continued to grow
through M & A
through M & A
NCRIC in the mid-Atlantic
PIC-Wisconsin in the upper
Midwest
Midwest
PICA Nationwide
![](https://capedge.com/proxy/8-K/0001194794-09-000059/exhibit56.jpg)
Denovo Growth Also Plays a Role
We have added states as opportunities arose
56
We carefully evaluate the
medical and legal climate of
each state before entering
medical and legal climate of
each state before entering
We are the market leaders in
AL, DE, DC, OH, & WI
AL, DE, DC, OH, & WI