Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,422.02 13.48 0.08%
S&P 500 1,864.85 2.54 0.14%
NASDAQ 4,098.09 2.57 0.06%
Ticker Volume Price Price Delta
STOXX 50 3,155.81 16.55 0.53%
FTSE 100 6,625.25 41.08 0.62%
DAX 9,409.71 91.89 0.99%
Ticker Volume Price Price Delta
NIKKEI 14,512.38 -3.89 -0.03%
TOPIX 1,171.40 -1.97 -0.17%
HANG SENG 22,760.24 64.23 0.28%

ProAssurance Reports Second Quarter 2013 Results



               ProAssurance Reports Second Quarter 2013 Results

PR Newswire

BIRMINGHAM, Ala., Aug. 5, 2013

BIRMINGHAM, Ala., Aug. 5, 2013 /PRNewswire/ -- ProAssurance Corporation (NYSE:
PRA) today reported Net Income of $50.5 million for the second quarter of
2013, and $163.3 million for the six months ended June 30, 2013. Operating
Income was $44.9 million for the quarter and $104.9 million for the six
months. Net Income per diluted share was $0.81 for the quarter and $2.63 for
the six months. Operating Income for the same periods was $0.72 and $1.69 per
diluted share respectively. Book Value per Share is now $37.79.

(Photo: http://photos.prnewswire.com/prnh/20130506/CL08197)
(Logo: http://photos.prnewswire.com/prnh/20081024/PROASSURANCELOGO)

Unaudited Consolidated Financial Summary (in thousands)
                         Three Months Ended June 30, Six Months Ended June 30,
                         2013          2012          2013        2012
Gross Premiums Written   $             $             $           $        
                          122,816       102,228      286,025      272,676
Net Premiums Written     $             $             $           $        
                          110,120       91,870       260,172      249,868
Net Premiums Earned      $             $             $           $        
                          130,352       131,266      264,930      267,925
Net Investment Income    $             $             $           $          
                          33,267        34,510       65,393       68,003
Equity in Earnings
(Loss) of                $             $             $           $          
    Unconsolidated        (2,972)       (2,227)       (3,195)     (4,293)
Subsidiaries
Net Investment Result    $             $             $           $          
                         30,295         32,283        62,198      63,710
Net Realized Investment  $             $             $           $            
Gains (Losses)           8,471          (1,548)       35,151      9,130
Other Income             $             $             $           $            
                         1,687          1,868         3,500       3,675
Total Revenues           $             $             $           $        
                         170,805        163,869       365,779     344,440
Net Losses and Loss      $             $             $           $        
Adjustment Expenses      70,609        48,084        128,235      118,283
Underwriting, Policy     $             $             $           $          
Acquisition and          34,959        35,405        72,244      69,803
    Operating Expenses
Interest Expense         $             $             $           $            
                          392             826           763      1,651
Total Expenses           $             $             $           $        
                         105,960       84,315        201,242     189,737
Gain on Acquisition      $             $             $           $            
                               -               -     35,492              -
Tax Expense              $             $             $           $          
                         14,394        21,101        36,728      40,605
Net Income               $             $             $           $        
                         50,451        58,453        163,301     114,098
Operating Income         $             $             $           $        
                         44,930        59,459        104,946     107,683
Net Operating Cash Flow  $             $             $           $          
                          835          4,605         (12,272)    32,705

Earnings per Share (in thousands, except for per share data)
Weighted average       Three Months Ended June 30, Six Months Ended June 30,
number of
common shares          2013          2012          2013          2012
outstanding
Basic                  61,825        61,317        61,766        61,247
Diluted                62,046        61,832        62,005        61,767
Net Income per share   $             $             $             $            
(Basic)                0.82           0.95         2.64            1.86
Net Income per share   $             $             $             $            
(Diluted)              0.81           0.95         2.63            1.85
Operating Income per   $             $             $             $            
share (Diluted)        0.72           0.96         1.69            1.74

Key Ratios
                         Three Months Ended June 30, Six Months Ended June 30,
                         2013          2012          2013         2012
Current Accident Year    83.70%        82.40%        83.00%       84.30%
Loss Ratio
Effect of Prior Accident
Years' Reserve           -29.50%       -45.80%       -34.60%      -40.20%
Development
Net Loss Ratio           54.20%        36.60%        48.40%       44.10%
Expense Ratio            26.80%        27.00%        27.30%       26.10%
Combined Ratio           81.00%        63.60%        75.70%       70.20%
Operating Ratio          55.50%        37.30%        51.00%       44.80%
Return on Equity
(Excludes Gain on        8.60%         10.40%        11.10%       10.30%
Acquisition)

In the first quarter of 2013, we recognized a gain of $35.5 million in
connection with our acquisition of Medmarc Casualty Insurance Company,
formerly Medmarc Mutual Insurance Company, (Medmarc) because the fair value of
the net assets we acquired exceeded our purchase price.

Return on Equity is calculated by dividing annualized Net Income, excluding
the gain on the acquisition of Medmarc, for the period by the average of
beginning and ending Shareholders' Equity.

Non-GAAP Financial Measures
Operating income is a non-GAAP financial measure that is widely used to
evaluate performance within the insurance sector. In calculating operating
income, we have excluded the after-tax effects of net realized investment
gains or losses, guaranty fund assessments or recoupments, a gain recognized
as the result of an acquisition and the effect of confidential settlements
that do not reflect normal operating results. We believe operating income
presents a useful view of the performance of our insurance operations, but
should be considered in conjunction with net income computed in accordance
with GAAP.

The following table is a reconciliation of Net Income to Operating Income:

Reconciliation of Net Income to Operating Income (in thousands, except per
share data)
                       Three Months Ended June 30, Six Months Ended June 30,
                       2013          2012          2013          2012
Net Income             $             $             $             $          
                        50,451       58,453         163,301      114,098
Items Excluded in the
Calculation of
Operating Income:
Net Realized           $             $             $             $            
Investment              (8,471)      1,548          (35,151)     (9,130)
(Gains)Losses
Guaranty Fund          $             $             $             $            
Assessments              (23)             (1)       (23)             (25)
(Recoupments)
Gain on Acquisition    $             $             $             $            
                             -              -      (35,492)              -
Effect of Confidential $             $             $             $            
Settlements, Net             -              -           -          (714)
Pre-Tax Effect of      $             $             $             $          
Exclusions              (8,494)       1,547        (70,666)       (9,869)
Tax Effect at 35%,
Exclusive of           $             $             $             $            
Non-Taxable            2,973          (541)        12,311        3,454
Gain on Acquisition
Operating Income       $             $             $             $        
                       44,930         59,459       104,946       107,683
Per Diluted Common
Share:
Net Income             $             $             $             $            
                       0.81          0.95           2.63          1.85
Effect of Adjustments  $             $             $             $          
                       (0.09)        0.01          (0.94)         (0.11)
Operating Income Per   $             $             $             $            
Diluted Common Share    0.72         0.96           1.69          1.74

Management Commentary
"We are encouraged by our ability to grow our top line by adding well
underwritten, adequately priced business that we expect to meet our return
targets," said W. Stancil Starnes, the Chairman and Chief Executive Officer of
ProAssurance. He also highlighted the success of newly acquired insurers. He
said, "We are seeing the benefits of a successful M&A strategy that added $14
million of gross premium to our top line in the quarter and $26 million
year-to-date. 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."

Business Detail
Gross Premium Written (in thousands, premium for reporting endorsements
allocated by line)
                         Three Months Ended June 30, Six Months Ended June 30,
                         2013          2012          2013        2012
Healthcare Professional  $             $             $           $      
Liability                 105,805      97,943        254,440      262,174
Legal Professional       $             $             $           $          
Liability                 7,221        3,953         15,385      9,723
Medical Technology and   $             $             $           $            
Life Sciences Products   9,394                -      15,289            -
Liability
Other                    $             $             $           $            
                          396            332            911       779
                         $             $             $           $      
                         122,816        102,228      286,025     272,676

  o Gross Premiums Written were $123 million in the second quarter of 2013
    compared to $102 million in the same quarter of 2012. Gross Premiums
    Written also increased, year-over-year for the first six months of 2013,
    to $286 million. Net Premiums Earned for the second quarter of 2013 were
    $130 million, essentially unchanged from the same quarter in 2012, and for
    the six months ended June 30, 2013, Net Premiums Earned were $265 million,
    a decline of approximately 1%.
    Healthcare Professional Liability Gross Premiums Written increased $7.9
    million, or 8%, quarter-over-quarter. This primarily reflects $4.6 million
    due to our shifting of renewal dates and will have no effect on future
    earned premium. Our acquisition of IND added $1.7 million in premium in
    the second quarter, and $5.2 million year-to-date.
    Our acquisition of Medmarc resulted in $9.4 million of new premium in
    medical technology and life sciences products liability in the quarter and
    added $15.3 million for the six months ended June 30, 2013. Medmarc also
    added $2.7 million of new premium in our legal professional liability line
    in the second quarter and $5.4 million in new legal professional liability
    premium year-to-date.
  o Premium retention for our standard physician business was 91% in the
    second quarter, compared to 88% in the year-ago quarter, and year-to-date,
    is 89% compared to 90% in 2012.
  o Renewal pricing on our physician professional liability book averaged 1%
    higher for the second quarter of 2013 and is unchanged, on average, for
    the year-to-date.

Loss and Loss Adjustment Expenses
Net Losses (in millions)
                       Three Months Ended June 30,   Six Months Ended June 30,
                       2013           2012           2013          2012
Current Accident Year  $       109.1  $       108.2  $             $      
Net Losses                                            219.8         225.8
Prior Accident Year    $              $              $             $      
Net Losses              (38.5)         (60.1)        (91.6)        (107.5)
Net Losses             $         70.6 $         48.1 $             $      
                                                      128.2         118.3

  o We recognized $38.5 million of net favorable reserve development in the
    second quarter, compared to $60.1 million in the year-ago quarter. Based
    upon an analysis of trends in our detailed review of loss data through the
    first six months of the year, we are recognizing a lower level of
    favorable development for the second quarter of 2013 than indicated by the
    data available in this year's first quarter. Year-to-date net favorable
    reserve development has been $91.6 million, compared to $107.5 million in
    2012.
  o Our current accident year loss ratio was 83.7% for the quarter, and 83.0%
    for the year-to-date. The modest difference from prior year periods is due
    to slightly higher estimates for unallocated loss adjustment expenses
    partially offset by changes in the geographic mix of insured risks.

Cash Flow

  o Approximately $5 million of the decline in operating cash flows is
    attributable to acquisitions and reflects both the payment of transaction
    expenses and the timing of expense payments. Exclusive of acquisitions,
    2013 cash flows reflect the effect of significantly higher tax payments,
    lower premium receipts and increased underwriting and operating expense
    payments.

Investment Commentary

  o Net Investment Income was $33.3 million in the second quarter, down 3.6%
    compared to second quarter 2012 primarily due to the continuing effect of
    lower yields on our fixed income portfolio. Year-to-date Net Investment
    Income is $65.4 million, down 3.8% due to the same factors. Our average
    tax equivalent income yield for the six months ended June 30, 2013 was
    4.3% compared with 4.5% during the first six months of 2012.
  o The CUSIP-level disclosure of our investment holdings as of June 30, 2013
    is available under Supplemental Investor Information in the Investor
    Relations section of our website, www.ProAssurance.com.

 

Balance Sheet Highlights (in thousands, except per share data)
                                              6/30/2013  12/31/2012
Shareholders' Equity                          $2,336,788 $2,270,580
Total Investments                             $4,156,888 $3,926,902
Total Assets                                  $5,112,045 $4,876,578
Policy Liabilities                            $2,495,113 $2,334,446
Accumulated Other Comprehensive Income (Loss) $75,062    $145,380
Goodwill                                      $161,115   $163,055
Book Value per Share                          $37.79     $36.85

  o Book Value per share, while up 2.6% year-to-date, declined from March 31,
    2013 due to a reduction in the fair value of our available-for-sale
    securities.

Capital Management

  o Our Board declared a $0.25 per share regular dividend in May 2013 which
    was paid on July 12, 2013.

Rating Actions

  o In the second quarter A. M. Best upgraded many of our subsidiary insurance
    companies. The claims-paying rating of the ProAssurance Group was upgraded
    to "A+" (Superior) and Medmarc was upgraded to "A" (Excellent).

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 seven years
and is consistently ranked as a top performing property casualty insurer in
Moody's Yearly Statistical Handbook. ProAssurance Group is rated "A+"
(Superior) by A.M. Best and ProAssurance is rated "A" (Strong) by Fitch
Ratings.

Conference Call Information

  o Live: Tuesday, August 6, 2013, 10:00 AM ET. Investors may dial (888)
    503-8175 (toll free) or (719) 325-2376. The call will also be webcast on
    our website, www.ProAssurance.com, and on StreetEvents.com.
  o Replay: By telephone, through August 30, 2013, at (888) 203-1112 or (719)
    457-0820, using access code 5336851. The replay will also be available on
    our website, www.ProAssurance.com, and on StreetEvents.com, through at
    least August 30, 2013.
  o Podcast: A replay, and other information about ProAssurance, is available
    on a free subscription basis through a link on the ProAssurance website or
    through Apple's iTunes.

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:

  o The outcome of any potential claims from policyholders of Medmarc and IND
    relating to payments or other issues arising from their respective
    conversions to stock insurance companies and subsequent mergers into
    ProAssurance;
  o the businesses of ProAssurance and Medmarc or ProAssurance and IND may not
    be integrated successfully, or such integration may take longer to
    accomplish than expected;
  o cost savings from either transaction may not be fully realized or may take
    longer to realize than expected; and
  o operating costs, customer loss and business disruption following either or
    both transactions, including adverse effects on relationships with
    employees, may be greater than expected.

The following important factors are among those that could affect the actual
outcome of other future events:

  o changes in general economic conditions;
  o our ability to maintain our dividend payments;
  o regulatory, legislative and judicial actions or decisions that could
    affect our business plans or operations;
  o the enactment or repeal of tort reforms;
  o formation or dissolution of state-sponsored medical professional liability
    insurance entities that could remove or add sizable groups of physicians
    from or to the private insurance market;
  o the impact of deflation or inflation;
  o changes in the interest rate environment;
  o changes in U.S. laws or government regulations regarding financial markets
    or market activity that may affect the U.S. economy and our business;
  o changes in the ability of the U.S. government to meet its obligations that
    may affect the U.S. economy and our business;
  o performance of financial markets affecting the fair value of our
    investments or making it difficult to determine the value of our
    investments;
  o formation or dissolution of state-sponsored medical professional liability
    insurance entities that could remove or add sizable groups of physicians
    from or to the private insurance market;
  o the impact of deflation or inflation;
  o changes in accounting policies and practices that may be adopted by our
    regulatory agencies and the Financial Accounting Standards Board, the
    Securities and Exchange Commission, or the Public Company Accounting
    Oversight Board;
  o changes in laws or government regulations affecting the financial services
    industry, the property and casualty insurance industry, or particular
    insurance lines underwritten by our subsidiaries.;
  o the effects of changes in the healthcare delivery system, including, but
    not limited to, the Patient Protection and Affordable Care Act;
  o consolidation of healthcare providers and entities that are more likely to
    self-insure and not purchase medical professional liability insurance;
  o uncertainties inherent in the estimate of loss and loss adjustment expense
    reserves and reinsurance;
  o changes in the availability, cost, quality, or collectability of
    insurance/reinsurance;
  o the results of litigation, including pre- or post-trial motions, trials
    and/or appeals we undertake;
  o allegation of bad faith which may arise from our handling of any
    particular claim, including failure to settle;
  o loss of independent agents;
  o changes in our organization, compensation and benefit plans;
  o our ability to retain and recruit senior management;
  o assessments from guaranty funds;
  o our ability to achieve continued growth through expansion into other
    states or through acquisitions or business combinations;
  o changes to the ratings assigned by rating agencies to our insurance
    subsidiaries, individually or as a group;
  o provisions in our charter documents, Delaware law and state insurance law
    may impede attempts to replace or remove management or may impede a
    takeover;
  o state insurance restrictions may prohibit assets held by our insurance
    subsidiaries, including cash and investment securities, from being used
    for general corporate purposes;
  o taxing authorities can take exception to our tax positions and cause us to
    incur significant amounts of legal and accounting costs and, if our
    defense is not successful, additional tax costs, including interest and
    penalties;
  o insurance market conditions may alter the effectiveness of our current
    business strategy and impact our revenues; and
  o expected benefits from completed and proposed acquisitions may not be
    achieved or may be delayed longer than expected due to business
    disruption; loss of customers, employees and key agents; increased
    operating costs or inability to achieve cost savings; and assumption of
    greater than expected liabilities among other reasons.

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.

SOURCE ProAssurance Corporation

Website: http://www.proassurance.com
Contact: Frank B. O'Neil, Sr. Vice President, Corporate Communications &
Investor Relations, 800-282-6242, 205-877-4461, foneil@ProAssurance.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement