NEWS RELEASE
For More Information: |
Frank B. O’Neil |
Sr. Vice President, Corporate Communications & Investor Relations |
800-282-6242 • 205-877-4461 • foneil@ProAssurance.com |
ProAssurance Reports Results for First Quarter 2013
BIRMINGHAM, AL – (PRNewswire) – May 6, 2013 – ProAssurance Corporation (NYSE: PRA) today reported first quarter 2013 Net Income of $112.9 million, which included a $35.5 million gain resulting from the acquisition of Medmarc Mutual Insurance Company and a $16 million increase in net realized investment gains. Operating Income was $60.0 million in the quarter, an increase of $12 million year-over-year. Net Income per diluted share was $1.82 and Operating Income was $0.97 per diluted share. Book Value per Share is now $38.19; Total Assets now exceed $5 billion.
Unaudited Consolidated Financial Summary (in thousands) | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Gross Premiums Written | $ | 163,210 | $ | 170,448 | ||||
Net Premiums Written | $ | 150,053 | $ | 157,998 | ||||
Net Premiums Earned | $ | 134,578 | $ | 136,659 | ||||
Net Investment Income | $ | 32,126 | $ | 33,492 | ||||
Equity in Earnings (Loss) of Unconsolidated Subsidiaries | $ | (223 | ) | $ | (2,066 | ) | ||
Net Investment Result | $ | 31,903 | $ | 31,426 | ||||
Net Realized Investment Gains (Losses) | $ | 26,680 | $ | 10,677 | ||||
Other Income | $ | 1,813 | $ | 1,809 | ||||
Total Revenues | $ | 194,974 | $ | 180,571 | ||||
Net Losses and Loss Adjustment Expenses | $ | 57,626 | $ | 70,199 | ||||
Underwriting, Policy Acquisition and Operating Expenses | $ | 37,285 | $ | 34,398 | ||||
Interest Expense | $ | 371 | $ | 825 | ||||
Total Expenses | $ | 95,282 | $ | 105,422 | ||||
Gain on Acquisition | $ | 35,492 | $ | – | ||||
Tax Expense | $ | 22,334 | $ | 19,504 | ||||
Net Income | $ | 112,850 | $ | 55,645 | ||||
Operating Income | $ | 60,015 | $ | 48,226 | ||||
Net Operating Cash Flow | $ | (13,107 | ) | $ | 28,100 |
Earnings per Share | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Weighted average number of common shares outstanding (in 000’s) | ||||||||
Basic | 61,708 | 61,177 | ||||||
Diluted | 61,963 | 61,703 | ||||||
Net Income per share (Basic) | $ | 1.83 | $ | 0.91 | ||||
Net Income per share (Diluted) | $ | 1.82 | $ | 0.90 | ||||
Operating Income per share (Diluted) | $ | 0.97 | $ | 0.78 |
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Key Ratios | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Current Accident Year Loss Ratio | 82.3 | % | 86.1 | % | ||||
Effect of Prior Accident Years’ Reserve Development | (39.5 | %) | (34.7 | %) | ||||
Net Loss Ratio | 42.8 | % | 51.4 | % | ||||
Expense Ratio | 27.7 | % | 25.2 | % | ||||
Combined Ratio | 70.5 | % | 76.6 | % | ||||
Operating Ratio | 46.6 | % | 52.0 | % | ||||
Return on Equity (Excludes Gain on Acquisition) | 13.4 | % | 10.2 | % |
Return on Equity is calculated by dividing annualized Net Income, excluding the gain on the acquisition of Medmarc Mutual Insurance Company, since renamed Medmarc Casualty Insurance Company (Medmarc), for the period by the average of beginning and ending Shareholders’ Equity.
We recognized a gain of $35.5 million in connection with our acquisition of Medmarc because the fair value of the net assets we acquired exceeded our purchase price.
Non-GAAP Financial Measures
In addition to Net Income, we use Operating Income, which is a “Non-GAAP” financial measure that is widely used in our industry to evaluate the performance of underwriting operations. Our calculation of Operating Income excludes the after-tax net effects of the gain on our acquisition of Medmarc, confidential settlements, Net Realized Investment (Gains) Losses, and Guaranty Fund (Recoupments) Assessments. We believe Operating Income, when considered along with Net Income, presents a useful view of the performance of our insurance operations.
While we believe disclosure of certain Non-GAAP information is appropriate, you should not consider this information without also considering the information we present in accordance with GAAP, which includes the net effects of the gain on our acquisition of Medmarc, confidential settlements, Net Realized Investment (Gains) Losses, and Guaranty Fund (Recoupments) Assessments during the periods presented below. The following table reconciles Net Income to Operating Income.
Reconciliation of Net Income to Operating Income (in thousands, except per share data) | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Net Income | $ | 112,850 | $ | 55,645 | ||||
Items Excluded in the Calculation of Operating Income: | ||||||||
Net Realized Investment (Gains) Losses | $ | (26,680 | ) | $ | (10,677 | ) | ||
Guaranty Fund (Recoupments) Assessments | $ | (1 | ) | $ | (23 | ) | ||
Gain on Acquisition | $ | (35,492 | ) | $ | – | |||
Effect of Confidential Settlements (Net) | $ | – | $ | (714 | ) | |||
Pre-Tax Effect of Exclusions | $ | (62,173 | ) | $ | (11,414 | ) | ||
Tax Effect at 35%, Exclusive of Non-Taxable Gain on Acquisition | $ | 9,338 | $ | 3,995 | ||||
Operating Income | $ | 60,015 | $ | 48,226 | ||||
Per Diluted Common Share: | ||||||||
Net Income | $ | 1.82 | $ | 0.90 | ||||
Effect of Adjustments | $ | (0.85 | ) | $ | (0.12 | ) | ||
Operating Income Per Diluted Common Share | $ | 0.97 | $ | 0.78 |
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Management Commentary
“We continue to see the benefits of a disciplined application of a long-term strategy that enhances security for our insureds while creating value for our investors,” said W. Stancil Starnes, the Chairman and Chief Executive Officer of ProAssurance. He added, “We are also seeing the benefits of a successful M&A strategy that added $12 million of gross premium to our top line. The purchase of Independent Nevada Doctors Insurance Exchange (IND) solidified our position as the top medical professional liability writer in Nevada. Our acquisition of Medmarc added significant volume to our lawyers’ professional liability line and, most importantly, broadened our medically-related coverage to include products liability for medical technology and life sciences. We are especially encouraged by Medmarc’s ability to attract new business and retain existing accounts by leveraging its expertise and the financial strength of ProAssurance.”
Gross Written Premium (in thousands) | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Healthcare Professional Liability | $ | 142,416 | $ | 151,106 | ||||
Legal Professional Liability | $ | 8,072 | $ | 5,699 | ||||
Medical Technology and Life Sciences | $ | 5,885 | $ | – | ||||
Extended Reporting Endorsements (All Lines) | $ | 6,319 | $ | 13,197 | ||||
Other | $ | 518 | $ | 446 | ||||
$ | 163,210 | $ | 170,448 |
Business Detail | ||||||||
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Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Current Accident Year Net Losses | $ | 110.7 | $ | 117.7 | ||||
Prior Accident Year Net Losses | $ | (53.1 | ) | $ | (47.5 | ) | ||
Net Losses | $ | 57.6 | $ | 70.2 |
Investment Commentary |
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Balance Sheet Highlights (in thousands, except per share data) | ||||||||
March 31, 2013 | December 31, 2012 | |||||||
Shareholders’ Equity | $ | 2,361,043 | $ | 2,270,580 | ||||
Total Investments | $ | 4,318,352 | $ | 3,926,902 | ||||
Total Assets | $ | 5,218,746 | $ | 4,876,578 | ||||
Policy Liabilities | $ | 2,540,053 | $ | 2,334,446 | ||||
Accumulated Other Comprehensive Income (Loss) | $ | 137,626 | $ | 145,380 | ||||
Goodwill | $ | 161,123 | $ | 163,055 | ||||
Book Value per Share | $ | 38.19 | $ | 36.85 |
Capital Management |
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About ProAssurance
ProAssurance Corporation is an industry-leading specialty insurance company with extensive expertise in medical professional liability, products liability for medical technology and life sciences and legal professional liability. ProAssurance is recognized as one of the top performing insurance companies in America by virtue of our inclusion in the Ward’s 50 for the past six years and is consistently ranked as a top performing property casualty insurer in Moody’s Yearly Statistical Handbook. ProAssurance is rated “A” (Strong) by Fitch Ratings; ProAssurance Group is rated “A” (Excellent) by A.M. Best.
Conference Call Information |
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Caution Regarding Forward-Looking Statements
Statements in this news release that are not historical fact or that convey our view of future business, events or trends are specifically identified as forward-looking statements. Forward-looking statements are based upon our estimates and anticipation of future events and highlight certain risks and uncertainties that could cause actual results to vary materially from our expected results. We expressly claim the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, for any forward-looking statements in this news release. Forward-looking statements represent our outlook only as of the date of this news release. Except as required by law or regulation, we do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Forward-looking statements are generally identified by words such as, but not limited to, “anticipate,” “believe,” “estimate,” “expect,” “hope,” “hopeful,” “intend,” “likely,” “may,” “optimistic,” “possible,” “potential,” “preliminary,” “project,” “should,” “will,” and other analogous expressions. When we address topics such as liquidity and capital requirements, the value of our investments, return on equity, financial ratios, net income, premiums, losses and loss reserves, premium rates and retention of current business, competition and market conditions, the expansion of product lines, the development or acquisition of business in new geographical areas, the availability of acceptable reinsurance, actions by regulators and rating agencies, court actions, legislative actions, payment or performance of obligations under indebtedness, payment of dividends, and other similar matters, we are making forward-looking statements.
Risks that could adversely affect the mergers of Medmarc and IND into ProAssurance include, but are not limited to, the following:
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The following important factors are among those that could affect the actual outcome of other future events:
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Additional risk factors that may cause outcomes that differ from our expectations or projections are described in various documents filed by ProAssurance Corporation with the Securities and Exchange Commission, such as current reports on Form 8-K, and regular reports on Forms 10-Q and 10-K, particularly in “Item 1A, Risk Factors.
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