ProAssurance Reports Fourth Quarter and Full Year 2002 Results
BIRMINGHAM, Ala.--(BUSINESS WIRE)--Feb. 24, 2003--
SUMMARY
Net Income for ProAssurance (NYSE:PRA) was $0.43 per diluted share
for the fourth quarter of 2002, and $0.46 per diluted share for the
year ended December 31, 2002. Operating Income per diluted share was
$0.16 for the fourth quarter of 2002, and $0.58 for the year. The
Company's professional liability segment continued to improve as the
effects of rate increases flow to the bottom line. ProAssurance's
personal lines segment remained a major contributor to the Company's
overall profitability. Book Value per share increased 9% in 2002.
ProAssurance Corporation (NYSE: PRA) reports the following results
for the quarter and year ended December 31, 2002:
Unaudited Consolidated Financial Summary
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2002 2001 2002
------------------ ------------
Gross Premiums Written $171,093 $126,378 $636,156
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Net Premiums Written $150,817 $103,449 $537,123
======== ======== ========
Net Premiums Earned $131,378 $111,631 $477,408
======== ======== ========
Investment Income $ 18,145 $ 19,617 $ 76,918
======== ======== ========
Net Realized Investment Gains
(Losses) $ 12,032 $ 3,389 $ (5,306)
======== ======== ========
Total Revenues $163,018 $135,950 $555,767
======== ======== ========
Total Expenses $143,961 $131,784 $542,157
======== ======== ========
Income before cumulative effect of
accounting change $ 11,975 $ 4,254 $ 10,513
Cumulative effect of accounting
change - - $ 1,694
-------- -------- --------
Net Income $ 11,975 $ 4,254 $ 12,207
======== ======== ========
Operating Income $ 4,527 $ 2,621 $ 15,411
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Weighted average number of common
shares outstanding:
Basic 27,377 25,798 26,231
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Diluted 27,419 25,804 26,254
======== ======== ========
Earnings per share (basic)
Income before cumulative
effect of accounting change $ 0.44 $ 0.16 $ 0.40
Cumulative effect of accounting
change - - $ 0.07
-------- -------- --------
Net Income per basic share $ 0.44 $ 0.16 $ 0.47
======== ======== ========
Operating Income per basic share $ 0.17 $ 0.10 $ 0.59
======== ======== ========
Earnings per share (diluted)
Income before cumulative
effect of accounting change $ 0.43 $ 0.16 $ 0.39
Cumulative effect of accounting
change - - $ 0.07
-------- -------- --------
Net Income per diluted share $ 0.43 $ 0.16 $ 0.46
======== ======== ========
Operating Income per diluted
share $ 0.16 $ 0.10 $ 0.58
======== ======== ========
Net Cash Provided by Operating
Activities $ 19,000 $ 11,500 $176,000
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In the table above, and in subsequent income statement tables in
this release, data for the year ended December 31, 2001 is not
presented because ProAssurance did not exist as a consolidated entity
until June 27, 2001. Therefore, comparable income statement data is
not available for periods prior to the third quarter of 2001.
ProAssurance's Operating Income per diluted share increased 60% as
compared to the fourth quarter of 2001, rising from $0.10 per share to
$0.16 per diluted share. Operating Income for 2002 was $0.58 per
diluted share.
Chairman A. Derrill Crowe, M.D. said the increase in Operating
Income was primarily the result of ProAssurance's focus on insurance
basics over the past two years. "For some time now we've been
dedicating our attention to careful underwriting, adequate pricing and
our commitment to customer service, especially in the area of claims.
The results of our focus on adequate pricing are becoming evident. But
while we've paid close attention to the revenue side, we've also paid
closer attention to expenses, both claims-related and administrative.
The payoff is now showing up in our bottom line, which we measure by
Operating Income," said Dr. Crowe.
Operating Income is a "Non-GAAP" financial measure which excludes
the after-tax effects of guaranty fund assessments, capital gains or
losses and the results of accounting changes. The following table is a
reconciliation of Net Income to Operating Income:
Reconciliation of Net Income to Operating Income
(in thousands)
Three Months Year
Ended Ended
December 31, December 31,
2002 2001 2002
---------------- ------------
Net Income $11,975 4,254 12,207
Add:
Net Realized Investment Losses - - 3,449
Guaranty Fund Assessments 373 570 1,449
------- ------- -------
12,348 4,824 17,105
------- ------- -------
Subtract:
Net Realized Investment Gains 7,821 2,203 -
Cumulative effect of Accounting
Change - - 1,694
------- ------- -------
Operating Income $ 4,527 $2,621 $15,411
======= ======= =======
Unaudited Balance Sheet Highlights:
(in millions, except per share data)
December 31, December 31,
2002 2001
------------ ------------
Stockholders' Equity $ 505 $ 413
Total Investments $1,679 $1,521
Total Assets $2,586 $2,238
Policy Liabilities $1,933 $1,680
Book Value Per Share $17.49 $16.02
Book Value Per Share
(excluding unrealized gains or losses) $16.26 $15.89
ProAssurance currently has approximately $35.5 million in net
unrealized gains (after-tax) in its portfolio, primarily in fixed
income securities. Total Goodwill is $18.9 million, none of which is
impaired under the new accounting treatment adopted in the first
quarter, and which includes $18.2 million related to the Professionals
Group combination. The Company did not repurchase any shares of its
common stock during the quarter; 1.02 million shares remain authorized
for repurchase.
Professional Liability Segment
The companies in ProAssurance's professional liability segment are
The Medical Assurance Company, Inc., Medical Assurance of West
Virginia, Inc., ProNational Insurance Company and Red Mountain
Casualty Insurance Company, Inc. Each focuses on the delivery of
professional liability insurance to physicians and surgeons, dentists,
hospitals, and others involved in the delivery of health care.
Selected Segment Data:
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2002 2001 2002
------------------- ------------
Gross Premiums Written $126,002 $89,812 $461,715
========= ========= =========
Net Premiums Written $109,806 $68,320 $376,702
========= ========= =========
Net Premiums Earned $ 91,450 $77,061 $327,645
========= ========= =========
Investment Income $ 15,543 $17,113 $ 66,790
========= ========= =========
Capital Gains (Losses) $ 11,869 $ 3,389 $ (6,100)
========= ========= =========
Total Revenues $119,924 $98,369 $393,296
========= ========= =========
Total Expenses $110,110 $98,286 $407,933
========= ========= =========
Net Loss Ratio 103.5% 105.4% 107.2%
Expense Ratio 16.9% 22.1% 17.3%
--------- --------- ---------
Combined Ratio 120.4% 127.5% 124.5%
========= ========= =========
"Our focus on rate adequacy has resulted in higher revenues per
unit of risk, and the effects of those rate increases are having a
measurable effect on the bottom line. We continue to increase rates to
compensate for ever-increasing loss costs, and we are starting to see
progress in our results," said Dr. Crowe. He emphasized the Company's
continuing discipline in underwriting and pricing, "Recent industry
events have again demonstrated the imperatives of rate adequacy and
proper reserving in this turbulent environment. We are determined to
protect our balance sheet, and provide long-term stability for our
policyholders. Our follow-on share offering, which was completed in
November, has enhanced our capacity to write business at higher rate
levels and where we see opportunities arise," said Dr. Crowe.
The President of ProAssurance, Victor T. Adamo, noted that much of
the recent premium growth in professional liability has come through
higher prices on renewal business, although the additional capital
raised in the November offering did allow ProAssurance to take on
additional policyholders in the fourth quarter. "Our renewal rate
remains at approximately 90%, and we have been able to add new
customers. That says to us that our customers place a real value on
our clear commitment to maintain financial strength and provide an
unstinting defense of claims," Adamo said.
ProAssurance's newest professional liability insurance subsidiary,
Red Mountain Casualty Insurance Company, Inc., has received approval
to write as an excess and surplus lines insurer in ten states. Red
Mountain Casualty began operations in October 2002 to accommodate the
growing number of physicians and other healthcare risks that don't
meet the tighter underwriting criteria in the standard medical
professional liability insurance market. Red Mountain wrote
approximately $2.7 million in premium during the fourth quarter of
2002.
Personal Lines Segment
MEEMIC Insurance Company (MEEMIC), the sole company in
ProAssurance's personal lines segment, principally provides auto and
homeowners' coverages, primarily for educational employees and their
families.
Selected Personal Lines Segment Data:
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2002 2001 2002
------------------ ------------
Gross Premiums Written $45,091 $36,566 $174,441
======= ======= ========
Net Premiums Written $41,011 $35,129 $160,421
======= ======= ========
Net Premiums Earned $39,928 $34,570 $149,763
======= ======= ========
Investment Income $ 2,545 $ 2,505 $ 10,071
======= ======= ========
Capital Gains $ 163 $ - $ 794
======= ======= ========
Total Revenues $43,037 $37,580 $162,414
======= ======= ========
Total Expenses $33,179 $32,523 $131,349
======= ======= ========
Net Loss Ratio 58.3% 72.8% 64.6%
Expense Ratio 24.8% 21.3% 23.1%
------- ------- --------
Combined Ratio 83.1% 94.1% 87.7%
======= ======= ========
Mr. Adamo highlighted MEEMIC's continuing contribution to the
profitability of ProAssurance. "MEEMIC's focus on the education
community provides the advantage of a preferred market where growth
can be carefully monitored and controlled. MEEMIC's efficient claims
handling benefited from favorable weather in the final quarter of
2002. The result was another profitable quarter and profitable year
for MEEMIC" said Mr. Adamo.
Merger and Tender Offer Update
On January 29, 2003 MEEMIC Holdings, the parent company of MEEMIC
Insurance Company, completed a tender offer and merger and purchased
all of the issued and outstanding shares of its common stock, other
than those held by ProAssurance's subsidiary, ProNational Insurance
Company (ProNational). As a result of the merger, MEEMIC Holdings was
delisted from the NASDAQ stock market, and MEEMIC Insurance Company
became a wholly-owned subsidiary of ProNational. "We expect the merger
will be modestly accretive to EPS, but more importantly, it brings
MEEMIC, and its outstanding results and prospects for growth fully
into the ProAssurance family," said Mr. Adamo.
Conference Call Information
ProAssurance's conference call to address these results will be
held at 9:00 AM ET on Tuesday, February 25, 2003. Investors may
participate by calling (800) 547-8960 or (706) 645-9133. The call will
be webcast at www.streetevents.com and on the Investor Relations
section of the ProAssurance website, www.ProAssurance.com. There will
be a telephone replay through February 28, 2003 at (800) 642-1687 or
(706) 645-9291 (access code 7535644), and an internet replay at the
same websites.
About ProAssurance
ProAssurance Corporation is a specialty insurer with more than
$2.5 billion in assets and more than $625 million in annualized gross
written premiums. The Company was formed by the combination of Medical
Assurance, Inc. and Professionals Group, Inc. in June 2001. As the
nation's third largest active writer of medical professional liability
insurance, ProAssurance's subsidiaries, The Medical Assurance Company,
Inc., Medical Assurance of West Virginia, Inc., ProNational Insurance
Company and Red Mountain Casualty Insurance Company, Inc. are
recognized leaders in developing solutions which serve the needs of
the evolving health care industry. ProAssurance is the tenth largest
writer of personal auto coverage in Michigan through its subsidiary,
MEEMIC Insurance Company. A. M. Best assigns a rating of "Excellent"
to ProAssurance and its subsidiaries; Standard & Poor's assigns the
Company's professional liability carriers a "Strong" rating.
Caution Regarding Forward Looking Statements
This news release contains historical information as well as
forward-looking statements that are based upon ProAssurance's
estimates and anticipation of future events that are subject to
certain risks and uncertainties that could cause actual results to
vary materially from the expected results described in the
forward-looking statements. The words "anticipate," "believe,"
"estimate," "expect," "intend," "may," "preliminary," "project,"
"should," "will," and similar expressions are intended to identify
these forward-looking statements. There are numerous important factors
that could cause actual results to differ materially from those in the
forward-looking statements. Thus, sentences and phrases that convey
the Company's view of future events and trends in the medical
professional liability insurance marketplace are expressly designated
as Forward Looking Statements. The principal risk factors that may
cause actual results to differ materially from those expressed in the
forward-looking statements are described in various documents filed by
ProAssurance Corporation with the Securities and Exchange Commission,
including Form 10K for the year ended December 31, 2001 and Form 10Q
for the most recent quarter. In view of the many uncertainties
inherent in the forward-looking statements made in this document, the
inclusion of such information should not be taken as representation by
the Company or any other person that ProAssurance's objectives or
plans will be realized. ProAssurance expressly disclaims any
obligation to update or alter its forward looking statements whether
as a result of new information, future events or otherwise, except as
required by law.
CONTACT: ProAssurance
Frank B. O'Neil, 800/282-6242 or 205/877-4461
foneil@ProAssurance.com