ProAssurance Corporation (NYSE:PRA) Q3 2023 Earnings Conference Call November 9, 2023 10:00 AM ET Company Participants Frank O'Neil - Senior Vice President of Corporate Communications, Investor Relations Edward Rand - President and Chief Executive Officer Dana Hendricks - Executive Vice President, Chief Financial Officer, and Treasurer Robert Francis - President, Healthcare Professional Liability Kevin Shook - President, Workers' Compensation Insurance Conference Call Participants Jon Newsome - Piper Sandle ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Commission File Number: 0-16533 ProAssurance Corporation (Exact name of registrant as specified in its charter) (State or other jurisdiction of Delaware 63-1261433 incorporation or organization) (I.R.S. Employer Identification No.) 100 Brookwood Place, Birmingham, AL 35209 (Address of principal executive offices) (Zip Code) (205) 877-4400 (Registrant's telephone number, including area code) (Former ...

ProAssurance Corporation (NYSE:PRA) Q2 2023 Earnings Conference Call August 9, 2023 10:00 AM ET Company Participants Ned Rand - President and CEO Dana Hendricks - CFO Rob Francis - President, Healthcare Professional Liability Kevin Shook - President, Eastern Alliance Conference Call Participants Mark Hughes - Truist Paul Newsome - Piper Sandler Robert Farnam - Janney Matt Carletti - JMP Operator Good morning, everyone, and welcome to ProAssurance's Conference Call to discuss the company's Second Quarter 202 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Commission File Number: 0-16533 ProAssurance Corporation (Exact name of registrant as specified in its charter) (State or other jurisdiction of Delaware 63-1261433 incorporation or organization) (I.R.S. Employer Identification No.) 100 Brookwood Place, Birmingham, AL 35209 (Address of principal executive offices) (Zip Code) (205) 877-4400 (Registrant's telephone number, including area code) (Former ...

ProAssurance Corporation (NYSE:PRA) Q1 2023 Earnings Conference Call May 10, 2023 10:00 AM ET Company Participants Jason Gingerich - Investor Relations Ned Rand - President and Chief Executive Officer Dana Hendricks - Chief Financial Officer Conference Call Participants Greg Peters - Raymond James Mark Hughes - Truist Paul Newsome - Piper Sandler Jason Gingerich Welcome to ProAssurance’s Conference Call to discuss the company’s First Quarter 2023 Results. These results were reported in a news release issued ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Commission File Number: 0-16533 ProAssurance Corporation (Exact name of registrant as specified in its charter) (State or other jurisdiction of Delaware 63-1261433 (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- ...

Financial Data and Key Metrics Changes - The consolidated combined ratio increased by about 6 points in Q4 2022 and about 1 point for the full year compared to the same periods in 2021, primarily due to lower prior accident year favorable development and a higher expense ratio [7][38] - Operating income for Q4 2022 was $3.5 million or $0.06 per diluted share, while for the full year it was $24.5 million or $0.45 per share [19] - The consolidated net investment result was $28 million for Q4 and $101 million for the full year, with significant unrealized holding losses of $315 million on the fixed income portfolio for the year [9][35] Business Line Data and Key Metrics Changes - Gross written premium increased to $173 million in Q4 and $807 million for the year, representing a top-line growth of 23% driven primarily by the NORCAL acquisition [11] - The Specialty Property & Casualty segment saw renewal pricing increases of 7% for both the quarter and the full year, with a 9% increase in Q4 and a 10% increase for the year in specialty health care [24] - The Workers' Compensation Insurance segment produced a combined ratio of 99.9% for the year, with gross written premium increasing by 4.5% in Q4 and 2.7% for the full year [47] Market Data and Key Metrics Changes - The medical professional liability loss environment remains challenged due to social inflation and higher-than-anticipated severity trends, although there is below historical frequency in some areas [6] - The company experienced a competitive market environment, particularly in the Specialty P&C segment, which helped maintain premium levels despite challenges [19][41] Company Strategy and Development Direction - The company aims to differentiate itself through outstanding customer service and disciplined underwriting strategies, particularly in the specialty space [6][68] - Management is optimistic about the future, focusing on profitable growth opportunities while navigating challenges such as price decreases and economic inflation [31][68] Management's Comments on Operating Environment and Future Outlook - Management noted that the claims environment is pressured by social inflation and severity trends, with a focus on monitoring these impacts on current loss trends [6] - The company expects net investment income to be significantly higher in 2023 due to reinvestment strategies and higher interest rates [35][39] Other Important Information - The company recognized net favorable prior accident year reserve development of $5 million in Q4 and $37 million for the full year, which was lower than the previous year due to loss severity trends [8][25] - The expense ratio for Q4 was 25.6%, reflecting an increase primarily due to higher policy acquisition costs and lower earned premium [26] Q&A Session Summary Question: Can you discuss your approach to case reserves? - Management emphasized the importance of consistency in establishing initial reserves and adjusting them as more information becomes available, particularly in a heightened claims environment [54] Question: How does the current claims environment compare to previous years? - Management noted that the current environment reflects a continuation of trends observed before COVID, with an increase in large verdicts and heightened jury reactions due to societal tensions [64][66] Question: What is the outlook for growth in the current competitive environment? - Management indicated a focus on maintaining share while navigating cost pressures, with a disciplined approach to underwriting and taking advantage of pricing opportunities as they arise [72]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022, or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . 100 Brookwood Place, Birmingham, AL 35209 (Address of principal executive offices) (Zip Code) (205) 877-4400 (Registrant's telephone number ...

ProAssurance Corporation (NYSE:PRA) Q3 2022 Earnings Conference Call November 10, 2022 10:00 AM ET Company Participants Jason Gingerich - VP, IR Ned Rand - President and CEO Dana Hendricks - CFO Michael Boguski - President, Specialty, Property and Casualty Lines Kevin Shook - President, Worker’s Compensation Insurance Conference Call Participants Paul Newsome - Piper Sandler Operator Ladies and gentlemen, good morning and thank you for attending today ProAssurance Third Quarter 2022 Earnings call. My name i ...

Preliminary Information [Glossary of Terms and Acronyms](index=2&type=section&id=Glossary%20of%20Terms%20and%20Acronyms) This section defines key financial, insurance, and regulatory terms and acronyms for clarity throughout the report - The report includes a comprehensive glossary defining key terms such as **HCPL** (Healthcare professional liability), **IBNR** (Incurred but not reported), and **FAL** (Funds at Lloyd's), which are essential for understanding the company's business[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [Caution Regarding Forward-Looking Statements](index=4&type=section&id=Caution%20Regarding%20Forward-Looking%20Statements) This section warns that forward-looking statements are based on current estimates and actual results may differ due to various risks and uncertainties - Forward-looking statements cover aspects like liquidity, capital requirements, investment performance, premiums, and loss reserves[13](index=13&type=chunk) - Key risk factors that could cause actual results to differ include changes in economic conditions, regulatory actions, tort reforms, interest and tax rate changes, market performance, and uncertainties in loss reserve estimates[14](index=14&type=chunk) - Specific risks related to the company's participation in the Lloyd's market are also highlighted, such as levies by the Council of Lloyd's, rating agency downgrades of Lloyd's, and dependence on a specialized management team[16](index=16&type=chunk) PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents ProAssurance Corporation's unaudited condensed consolidated financial statements for Q3 2022, including balance sheets, income statements, and cash flows, with explanatory notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased from **$6.19 billion** to **$5.78 billion**, primarily due to reduced fixed maturity investments, while shareholders' equity declined significantly Condensed Consolidated Balance Sheet Data (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Investments** | $4,385,507 | $4,828,323 | | **Total Assets** | $5,783,319 | $6,191,477 | | **Total Liabilities** | $4,717,323 | $4,763,090 | | **Total Shareholders' Equity** | $1,065,996 | $1,428,387 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company reported a **net loss of $14.3 million** for the nine months ended September 30, 2022, a reversal from prior-year net income, primarily due to net investment losses Income Statement Highlights (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net Premiums Earned | $771,337 | $698,598 | | Total Revenues | $811,980 | $811,344 | | Total Expenses | $832,947 | $776,900 | | Gain on Bargain Purchase | $0 | $74,408 | | **Net Income (Loss)** | **($14,344)** | **$111,984** | | **Comprehensive Income (Loss)** | **($354,869)** | **$78,264** | | Diluted EPS | ($0.27) | $2.07 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to **$6.7 million**, while overall cash and cash equivalents declined by **$102.2 million** for the nine months ended September 30, 2022 Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $6,673 | $69,363 | | Net Cash from Investing Activities | ($91,749) | ($25,531) | | Net Cash from Financing Activities | ($17,154) | ($56,661) | | **Decrease in Cash & Cash Equivalents** | **($102,230)** | **($12,829)** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of accounting policies and financial data, covering fair value measurements, investments, loss reserves, and segment information - Beginning in 2022, the company revised its process for estimating Unallocated Loss Adjustment Expenses (ULAE) due to the integration of NORCAL, prospectively increasing operating expenses by **$21.8 million** and decreasing net losses by the same amount, with no impact on total expenses or net income[37](index=37&type=chunk) - The company holds passive interests in various Variable Interest Entities (VIEs), primarily LPs/LLCs, totaling **$276.2 million** at Sep 30, 2022, and has consolidated PPM RRG, acquired with NORCAL, as its primary beneficiary[148](index=148&type=chunk)[149](index=149&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of financial condition and operations, covering critical accounting estimates, liquidity, and detailed results across five business segments [Overview](index=44&type=section&id=MD%26A_Overview) ProAssurance operates across five segments, with critical accounting estimates including loss reserves and investment valuation, and a key 2022 change in ULAE estimation - The company operates in five segments: Specialty P&C, Workers' Compensation Insurance, Segregated Portfolio Reinsurance, Lloyd's Syndicates, and Corporate[174](index=174&type=chunk) - A change in the estimation of ULAE was implemented in 2022, reclassifying costs from 'net losses and loss adjustment expenses' to 'underwriting, policy acquisition and operating expenses' with no impact on total expenses or net income[179](index=179&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=MD%26A_Liquidity%20and%20Capital%20Resources) ProAssurance's liquidity, primarily from investment revenues, included **$86 million** in cash and liquid investments, while operating cash flow significantly decreased due to higher paid losses and expenses - The holding company held approximately **$86 million** in cash and liquid investments outside of its insurance subsidiaries as of September 30, 2022[181](index=181&type=chunk) - Operating cash flow for the nine months ended Sep 30, 2022, decreased by **$62.7 million** compared to the prior year, mainly due to a **$204.6 million** increase in paid losses and a **$96.9 million** increase in cash paid for operating expenses, largely related to the NORCAL acquisition[195](index=195&type=chunk) - The company has **$250 million** available under its Revolving Credit Agreement, with a potential **$50 million** accordion feature, and no borrowings were outstanding as of November 2, 2022[181](index=181&type=chunk) [Results of Operations](index=54&type=section&id=MD%26A_Results%20of%20Operations) The company reported a **net loss of $14.3 million** for the nine months ended September 30, 2022, with a combined ratio of **105.7%**, influenced by the NORCAL acquisition and investment valuations Consolidated Financial Highlights (in thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net Premiums Written | $803,055 | $677,527 | | Net Premiums Earned | $771,337 | $698,598 | | Net Losses and LAE | $585,166 | $555,030 | | **Net Income (Loss)** | **($14,344)** | **$111,984** | | Combined Ratio | 105.7% | 108.1% | - Non-GAAP operating income for the nine months ended Sep 30, 2022 was **$21.0 million**, down from **$42.5 million** in the prior year, excluding net investment gains/losses and other non-recurring items like the 2021 gain on bargain purchase[242](index=242&type=chunk) - Book value per share decreased to **$19.75** at Sep 30, 2022 from **$26.46** at year-end 2021, primarily due to a **$6.00 per share** negative impact from Accumulated Other Comprehensive Income (AOCI) driven by unrealized investment losses[247](index=247&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=100&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are interest rate and credit risk, with a **100 bps interest rate increase** projected to decrease fixed maturities fair value from **$3.43 billion** to **$3.31 billion** - The company's primary market risks are identified as **interest rate risk** and **credit risk**[359](index=359&type=chunk) Interest Rate Sensitivity of Available-for-Sale Fixed Maturities (in millions) | Interest Rate Shift | Fair Value at Sep 30, 2022 | | :--- | :--- | | -100 bps | $3,558 | | **Current** | **$3,431** | | +100 bps | $3,309 | | +200 bps | $3,193 | - As of September 30, 2022, **92%** of the company's fixed maturity securities were rated investment grade, which helps mitigate credit risk[369](index=369&type=chunk) [Controls and Procedures](index=103&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no significant changes in internal controls during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[372](index=372&type=chunk) - No significant changes were made to internal controls over financial reporting during the third quarter of 2022[373](index=373&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=103&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 6 for details on legal proceedings, noting that no material reserves were established for corporate legal actions - For information on legal proceedings, the report directs readers to Note 6 of the financial statements[374](index=374&type=chunk) [Risk Factors](index=103&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section states no material changes to risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's 2021 Form 10-K[375](index=375&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=103&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased **138,980 shares** in July 2022 at **$23.38 per share**, with **$106.4 million** remaining authorized for future repurchases Share Repurchase Activity (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2022 | 138,980 | $23.38 | | August 2022 | — | N/A | | September 2022 | — | N/A | | **Total** | **138,980** | **$23.38** | - As of September 30, 2022, approximately **$106.4 million** remained authorized for share or debt repurchases under the company's plan, which has no expiration date[376](index=376&type=chunk) [Exhibits](index=104&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL Interactive Data Files - Filed exhibits include officer certifications pursuant to SEC Rules 13a-14(a) and 13a-14(b), and XBRL data files[378](index=378&type=chunk)