Exhibit 99.1
ProAssurance Reports Results for the Third Quarter of 2006
BIRMINGHAM, Ala.--(BUSINESS WIRE)--Nov. 8, 2006--ProAssurance Corporation
(NYSE: PRA):
SUMMARY
ProAssurance Corporation's Net Income per diluted share was $0.96 for the
third quarter of 2006. Net Income per diluted share for the nine months ended
September 30, 2006 was $5.88, including $3.17 per diluted share, recognized in
the first quarter, related to the sale of ProAssurance's Personal Lines
business. Year-to-date cash flow from continuing operations was $134.5 million.
Book value per share increased by $3.41 to $32.58 during the quarter ended
September 30, 2006, largely due to the purchase of Physicians Insurance Company
of Wisconsin, Inc. (PIC Wisconsin). ProAssurance reached an important milestone
in the quarter, as Stockholder's Equity topped $1.0 billion dollars.
ProAssurance Corporation's results for the quarter and nine months ended
September 30, 2006 are as follows:
Unaudited Consolidated Financial Summary:
- ----------------------------------------------------------------------
(in thousands, except per share data)
Continuing Operations(1),(2)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Gross Premiums Written $163,273 $167,308 $452,264 $434,741
========= ========= ========= =========
Net Premiums Written $152,043 $155,842 $421,004 $399,991
========= ========= ========= =========
Net Premiums Earned $149,444 $144,963 $429,295 $399,892
========= ========= ========= =========
Net Investment Income $ 38,623 $ 25,280 $108,622 $ 71,361
========= ========= ========= =========
Net Realized Investment Gains
(Losses) $ (510) $ (618) $ (1,120) $ 1,315
========= ========= ========= =========
Total Revenues $189,245 $170,730 $541,228 $476,069
========= ========= ========= =========
Guaranty Fund Assessments $ 314 $ 458 $ 1,374 $ 343
========= ========= ========= =========
Interest Expense $ 2,886 $ 2,290 $ 8,074 $ 6,457
========= ========= ========= =========
Total Expenses $142,782 $143,686 $414,579 $404,722
========= ========= ========= =========
Tax Expense $ 13,095 $ 6,827 $ 35,455 $ 18,223
========= ========= ========= =========
Income From Continuing
Operations(1),(2) $ 33,368 $ 20,217 $ 91,194 $ 53,124
========= ========= ========= =========
Discontinued Operations(1)
Income From Discontinued
Operations $ - $ 9,120 $109,441 $ 25,615
========= ========= ========= =========
Net Income
Net Income $ 33,368 $ 29,337 $200,635 $ 78,739
========= ========= ========= =========
(1) Results from our Personal Lines operations, net of tax, are
reported as discontinued operations in all periods presented. The
sale of that business was effective January 1, 2006. All other data
is attributable to continuing operations from our Professional
Liability business.
(2) Continuing Operations reflects results from PIC Wisconsin for the
months of August and September 2006.
Earnings Per Share
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
-------- --------- -------- --------
Weighted average number of
common shares outstanding
Basic 32,551 30,480 31,640 29,700
Diluted 35,438 33,345 34,525 32,546
Earnings per share (Basic)
Income from Continuing
Operations $ 1.03 $ 0.66 $ 2.88 $ 1.79
Income from Discontinued
Operations - 0.30 3.46 0.86
-------- --------- -------- --------
Net Income per share (Basic) $ 1.03 $ 0.96 $ 6.34 $ 2.65
======== ========= ======== ========
Earnings per share (Diluted)
Income from Continuing
Operations $ 0.96 $ 0.63 $ 2.71 $ 1.70
Income from Discontinued
Operations - 0.27 3.17 0.79
-------- --------- -------- --------
Net Income per share (Diluted) $ 0.96 $ 0.90 $ 5.88 $ 2.49
======== ========= ======== ========
Cash Flow Analysis
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- -------- --------- ---------
Cash Provided by Insurance
Operations $89,371 $88,194 $236,411 $251,278
Taxes Paid on Sale of
Discontinued Operations
(Personal Lines) - - (54,565) -
Net Purchases of Trading
Portfolio Securities 2,916 (100) (47,378) (669)
--------- -------- --------- ---------
Net Cash Provided by Operating
Activities $92,287 $88,094 $134,468 $250,609
========= ======== ========= =========
-- Year-to-date Net Cash Provided by Operating Activities (Operating Cash
Flow) was affected by net outflows from trading securities activity of
$47.4 million and the payment of $54.6 million in taxes in the second
quarter on the sale of our Personal Lines operations.
Balance Sheet Highlights(1)
September 30, 2006 December 31, 2005
------------------ -----------------
Stockholders' Equity $ 1,081,961 $ 765,046
Total Investments (Continuing
Operations) $ 3,462,041 $ 2,614,319
Total Assets (Continuing
Operations) $ 4,330,381 $ 3,341,600
Policy Liabilities (Continuing
Operations) $ 2,978,115 $ 2,572,008
Accumulated Other Comprehensive
Income (Loss) $ 602 $ (8,834)
Goodwill (Continuing Operations) $ 67,148 $ 29,494
Book Value per Share $ 32.58 $ 24.59
(1) 2006 Balance Sheet Highlights reflect the addition of PIC
Wisconsin.
Key Ratios (Continuing Operations)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
--------- -------- -------- --------
Net Loss Ratio 76.3% 81.3% 76.5% 82.9%
Expense Ratio 17.3% 16.2% 18.2% 16.7%
--------- -------- -------- --------
Combined Ratio 93.6% 97.5% 94.7% 99.6%
========= ======== ======== ========
Operating Ratio 67.8% 80.1% 69.4% 81.8%
========= ======== ======== ========
Return on Equity 13.4% 11.6% 13.2% 10.5%
========= ======== ======== ========
-- Third quarter Gross Premiums Written were down slightly year-over-year
because of overall market conditions. PIC Wisconsin made only a modest
contribution to premium in the quarter, as the third quarter is
traditionally the low point of renewals for PIC Wisconsin. However,
year-to-date Gross Premiums Written were higher year-over-year because
of additional business generated by our acquisition of NCRIC, Inc. in
August 2005.
-- Policyholder retention in the third quarter was 80%, affected by the
expected move of a 500-member physician group into a self-insured
captive. Excluding that event, our retention rate was 84%.
Year-to-date retention was 84%, and, excluding the group's departure,
86%.
-- Premiums on renewing policies were higher by 3% in both the quarter
and year-to-date when compared to the same periods a year ago.
-- There was favorable net reserve development of $11.0 million in the
quarter; year-to-date, favorable net reserve development stands at
$23.0 million. This positive development continues to come primarily
from the 2003 and 2004 accident years.
-- Net Investment Income continues to become a more important factor in
our results as we put the proceeds of our sale of MEEMIC to work, and
continue to see the benefits of strong cash flow and higher interest
rates.
Large Verdict Commentary
On September 29, 2006, a jury in Tampa awarded $117 million in a medical
malpractice case against insureds of one of our subsidiaries; on October 3,
2006, the jury added $100 million in punitive damages. To date, no claim has
been made directly against ProAssurance or any subsidiary. There are many open
legal issues still to be decided regarding both the merits of the case and the
availability of coverage to the defendants. Based on similar cases, we believe
it will be several years before this case is ultimately resolved.
As a part of our reserving process, we evaluate the likely outcomes from
such verdicts giving consideration to appellate issues, coverage issues,
potential recoveries from our insurance and reinsurance programs, and settlement
discussions, as well as our historical settlement practices. This information is
then used in evaluating the overall adequacy of our reserves. Based upon our
current analysis of these factors, we believe our reserves are adequate. We will
continue to monitor the developments with this verdict, as we do all verdicts,
and will make adjustments to our reserves as necessary.
PIC Wisconsin Acquisition
The merger of PIC Wisconsin into ProAssurance was effective August 1, 2006,
and the integration process is proceeding well, as expected. Former shareholders
of PIC Wisconsin are entitled to receive a total of 1,992,111 shares of
ProAssurance stock and we have exchanged approximately 75% of the PIC Wisconsin
shares involved.
Conference Call Information
-- Live: Wednesday, November 8, 2006, 10:00 AM ET. Dial (800) 500-0177 or
(719) 457-2679 outside North America. The call will also be webcast on
our website, ProAssurance.com, and on StreetEvents.com.
-- Replay: By telephone, through November 17, 2006 at (888) 203-1112 or
(719) 457-0820, using access code 2141203. Via internet, through
November 30, 2006 at ProAssurance.com and StreetEvents.com.
-- Podcast: Available on a free subscription basis through a link on the
home page of the ProAssurance website.
About ProAssurance
ProAssurance Corporation is the nation's fourth largest writer of medical
professional liability insurance through our principal subsidiaries The Medical
Assurance Company, Inc., ProNational Insurance Company, NCRIC, Inc., Physicians
Insurance Company of Wisconsin, Inc., and Red Mountain Casualty Insurance
Company, Inc. We also write professional liability coverage through Woodbrook
Casualty Insurance, Inc.
A.M. Best assigns a rating of "A-" (Excellent) to the ProAssurance Group
and our principal professional liability subsidiaries, except NCRIC, Inc., which
is rated B++ (Very Good). Standard & Poor's assigns our principal professional
liability carriers a rating of "A-" ("Strong") and Fitch assigns a rating of
"A-" to ProAssurance.
Caution Regarding Forward-Looking Statements
Any statements in this News Release that are not historical facts are
specifically identified as forward-looking statements. These statements are
based upon our estimates and anticipation of future events and 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. Forward-looking statements are identified by words such as, but not
limited to, "anticipate," "believe," "estimate," "expect," "hope," "hopeful,"
"intend," "may," "optimistic," "preliminary," "project," "should," "will" and
other analogous expressions. There are numerous important factors that could
cause our actual results to differ materially from those in the forward-looking
statements. Thus, sentences and phrases that we use to convey our view of future
events and trends are expressly designated as forward-looking statements as are
sections of this news release clearly identified as giving our outlook on future
business.
Forward-looking statements relating to our business include, among other
things: statements concerning liquidity and capital requirements, 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, payment or performance of obligations
under indebtedness, payment of dividends, and other matters.
These forward-looking statements are subject to significant risks,
assumptions and uncertainties, including, among other things, the following
important factors that could affect the actual outcome of future events:
-- general economic conditions, either nationally or in our market area,
that are worse than anticipated;
-- regulatory and legislative actions or decisions that adversely affect
our business plans or operations;
-- inflation and changes in the interest rate environment;
-- performance of financial markets and/or changes in the securities
markets that adversely affect the fair value of our investments or
operations;
-- changes in laws or government regulations affecting medical
professional liability insurance;
-- changes to our ratings assigned by rating agencies;
-- the effects of health care changes, including managed care;
-- uncertainties inherent in the estimate of loss and loss adjustment
expense reserves and reinsurance, and changes in the availability,
cost, quality, or collectibility of reinsurance;
-- bad faith litigation may arise from cases in which the amount of a
judgment is above our policy limits;
-- post-trial motions may produce rulings adverse to us and/or appeals we
undertake may be unsuccessful;
-- significantly increased competition among insurance providers and
related pricing weaknesses in some markets;
-- our ability to achieve continued growth through expansion into other
states or through acquisitions or business combinations;
-- the expected benefits from acquisitions may not be achieved or may be
delayed longer than expected due to, among other reasons, business
disruption, loss of customers and/or employees, increased operating
costs or inability to achieve cost savings, and assumption of greater
than expected liabilities;
-- changes in accounting policies and practices that may be adopted by
our regulatory agencies and the Financial Accounting Standards Board;
-- changes in our organization, compensation and benefit plans; and
-- any other factors listed or discussed in the reports we file with the
Securities and Exchange Commission under the Securities Exchange Act
of 1934.
Our results may differ materially from those we expect and discuss in any
forward-looking statements. The principal risk factors that may cause these
differences are described in various documents we file with the Securities and
Exchange Commission, including the Registration Statement filed on February 15,
2006 and updated on June 2, 2006, as well as in our periodic reports filed 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."
We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and wish to
advise readers that the factors listed above could affect our financial
performance and could cause actual results for future periods to differ
materially from any opinions or statements expressed with respect to future
periods in any current statements. Except as required by law or regulations, 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.
CONTACT: ProAssurance Corporation
Frank B. O'Neil, 800-282-6242 or 205-877-4461
Sr. Vice President, Corporate Communications
& Investor Relations
foneil@ProAssurance.com