BIRMINGHAM, Ala., May 4 /PRNewswire-FirstCall/ -- ProAssurance
(NYSE: PRA) reports first quarter 2009 Operating Earnings of $33.1
million or $0.99 per diluted share. Net Income for the period was
$28.4 million or $0.84 per diluted share. Book Value grew to $44.19
in the quarter. (Logo:
http://www.newscom.com/cgi-bin/prnh/20081024/PROASSURANCELOGO )
Unaudited Consolidated Financial Summary (in thousands, except per
share data) Three Months Ended March 31, 2009 2008 Gross Premiums
Written $154,544 $160,266 Net Premiums Written $142,387 $148,415
Net Premiums Earned $103,891 $120,577 Net Investment Income $34,569
$41,059 Equity in Earnings (Loss) of Unconsolidated Subsidiaries
$(1,428) $(1,946) Net Realized Investment Gains (Losses) $(7,537)
$(1,426) Total Revenues $130,969 $159,626 Guaranty Fund Assessments
(Recoupments) $(190) $(369) Interest Expense $627 $2,422 Total
Expenses $93,723 $110,347 Tax Expense $8,880 $13,411 Net Income
$28,366 $35,868 Operating Income $33,142 $36,555 Net Cash Provided
by Operating Activities $8,032 $61,325 Earnings Per Share Three
Months Ended March 31, 2009 2008 Weighted average number of common
shares outstanding Basic 33,367 32,182 Diluted 33,609 35,068
Operating Income per share (Basic) $0.99 $1.14 Operating Income per
share (Diluted) $0.99 $1.06 Net Income per share (Basic) $0.85
$1.11 Net Income per share (Diluted) $0.84 $1.04 Non-GAAP Financial
Measures Operating Income is a "Non-GAAP" financial measure that is
widely used in our industry to evaluate the performance of
underwriting operations. Operating Income thus excludes the
after-tax effects of realized investment gains or losses, guaranty
fund assessments and the results of accounting changes, and we
believe it presents a more appropriate 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 effect of net realized
investment losses incurred during the first quarter of 2009. 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 March 31, 2009
2008 Net Income $28,366 $35,868 Adjustments, net of tax effects:
Add: Net Realized Investment Losses 4,900 927 Subtract: Guaranty
Fund Recoupments 124 240 Operating Income $33,142 $36,555 Per
diluted common share: Net Income $0.84 $1.04 Effect of adjustments
$0.15 $0.02 Operating Income per diluted common share $0.99 $1.06
Key Ratios Three Months Ended March 31, 2009 2008 Current Accident
Year Loss Ratio 84.3% 84.3% Prior Accident Year Loss Ratio (17.8%)
(16.6%) Net Loss Ratio 66.5% 67.7% Expense Ratio 23.1% 21.8%
Combined Ratio 89.6% 89.5% Operating Ratio 56.3% 55.4% Return on
Equity 7.9% 11.3% ProAssurance's Chief Executive Officer, W.
Stancil Starnes, said, "We remain very positive about the success
of our insurance operations, despite the effect of the continuing
dislocation in the financial markets on our investment returns. We
were able to add new premium in our core physician business and our
retention of renewing business was higher than full year 2008, both
of which demonstrate the value of our product and our service. At
the same time, we are seeing the first contributions from our newly
acquired subsidiaries, Mid-Continent and Georgia Lawyers." Business
Commentary -- We have seen the first signs of an end to market
softening, although aggressive, price-based competition continues
to be the norm. We added $4.4 million of new physician business in
the quarter; however, the acquisition of new business remains
challenging. We are also adding to the top line as new premium
begins to flow from our acquisition of Mid-Continent General Agency
and Georgia Lawyers Insurance Company. -- Our retention rate was
89% in the first quarter of 2009, higher than in the last quarter
of 2008, and equal to the first quarter of 2008. -- The continuing
improvement in loss trends is reflected in the average four percent
decrease in premiums for our renewing physician business in the
first quarter of 2009. Much of the loss trend improvement from
recent years is now factored into our rates. -- We recognized $18.5
million of favorable net loss reserve development in the first
quarter of 2009. The reduction in expected loss costs comes
primarily from accident years 2004 through 2007. -- Expenses were
$17 million lower compared to the year-ago quarter. Our expense
management initiatives kept operating expenses at expected levels,
and variable expenses such as losses, acquisition costs and
interest payments were lower, in line with market dynamics.
However, declining premiums again had the effect of raising our
expense ratio. Balance Sheet Highlights March 31, December 31, 2009
2008 Stockholders' Equity $1,462,064 $1,423,585 Total Investments
$3,574,071 $3,575,942 Total Assets $4,322,067 $4,280,938 Policy
Liabilities $2,728,875 $2,693,101 Accumulated Other Comprehensive
Income (Loss) $(13,805) $(35,898) Goodwill $90,250 $72,213 Book
Value per Share $44.19 $42.69 -- We were able to grow Book Value
per Share by 4% in the quarter. Investment Commentary -- Overall
investment results declined 15% in the quarter compared to the same
period a year ago. Negative inflation accruals on Treasury
Inflation Protected bonds and lower average invested assets were
the primary factors in this reduction. -- Our net realized
investment losses were $7.5 million in the first quarter, primarily
due to recognition of Other-Than-Temporary-Impairments. This
represents less than a quarter of a percent of our $3.6 billion
portfolio. -- Cash flow was reduced primarily due to $28 million in
higher tax payments stemming from fourth quarter 2008 earnings,
lower reinsurance recoveries of $21 million as compared to higher
than usual recoveries in 2008, and the reduction in premium
writings. -- We have updated the online disclosure of our entire
investment portfolio to provide details of our holdings through
March 31, 2009. The disclosure is available under Supplemental
Investor Information in the Investor Relations section of our
website, http://www.proassurance.com/. Capital Management In the
first quarter we repurchased approximately 443,000 shares of our
common shares at a cost of $18.6 million. This leaves approximately
$55.8 million authorized and available to repurchase our common
stock or retire debt. Transaction Updates We closed our $135
million, all-cash purchase of The PICA Group on April 1, 2009.
Policyholders of the PICA Group voted overwhelmingly in support of
the transaction at a special meeting on March 31, 2009. "With the
PICA transaction behind us, and premium flowing into ProAssurance
as a result of our acquisitions we closed in the first quarter, we
believe we are well-positioned to add more than $100 million of
profitable premium, on an annualized basis, to our top line during
the remaining quarters of 2009. Beyond the national expansion of
our company with PICA, and the addition of profitable business, we
believe the acquisition of Mid-Continent prepares us to respond to
the growing professional liability needs of the ancillary health
care providers whose role in health care delivery will surely grow
under the Obama Administration's current healthcare plans," said
Mr. Starnes. Conference Call Information -- Live: Tuesday, May 5,
2009, 10:00 a.m. ET. Investors may dial (877) 874-1586 (toll free)
or (719) 325-4782. The call will also be webcast on our website,
http://www.proassurance.com/, and on StreetEvents.com. -- Replay:
By telephone, through May 20, 2009 at (888) 203-1112 or (719)
457-0820, using access code 5384398. The replay will also be
available through June 5, 2009 on our website,
http://www.proassurance.com/ and on StreetEvents.com. -- Podcast: A
replay of the call, and other information about ProAssurance, is
available on a free subscription basis through a link on the home
page of the ProAssurance website or through Apple's iTunes. About
ProAssurance ProAssurance Corporation is the nation's fifth largest
writer of medical professional liability insurance, based on the
2008 writing of its current subsidiaries. The company's recently
completed transactions with The PICA Group and Mid-Continent
General Agency are expected to significantly increase
ProAssurance's medical professional liability business, and the
strategic acquisition of Georgia Lawyers Insurance Company will add
legal professional liability business and should facilitate
expansion of that line of insurance in the southeast. ProAssurance
is recognized as one of the top performing insurance companies in
America by virtue of its inclusion in the Ward's 50 for the past
two years. 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," "may," "optimistic," "potential," "preliminary,"
"project," "should," "will," and other analogous expressions. When
we address topics such as 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, court actions, legislative actions,
payment or performance of obligations under indebtedness, payment
of dividends, and other, similar matters, we are making forward
looking statements. The following important factors are among those
that that could affect the actual outcome of future events: --
general economic conditions, either nationally or in our market
areas, that are different than anticipated; -- regulatory,
legislative and judicial actions or decisions could affect our
business plans or operations; -- the enactment or repeal of tort
reforms; -- formation of state-sponsored malpractice insurance
entities that could remove some physicians from the private
insurance market; -- the impact of deflation or inflation; --
changes in the interest rate environment; -- the effect that
changes in laws or government regulations affecting the U.S.
economy or financial institutions, including the Emergency Economic
Stabilization Act of 2008 and the American Recovery and
Reinvestment Act of 2009, may have on the U.S. economy and our
business; -- performance of financial markets affecting the fair
value of our investments or making it difficult to determine the
value of our investments; -- changes in accounting policies and
practices that may be adopted by our regulatory agencies and the
Financial Accounting Standards Board, or the Securities and
Exchange Commission; changes in laws or government regulations
affecting medical professional liability insurance or the financial
community; -- the effects of changes in the health care delivery
system; -- uncertainties inherent in the estimate of loss and loss
adjustment expense reserves and reinsurance, and changes in the
availability, cost, quality, or collectibility of
insurance/reinsurance; -- the results of litigation, including
pre-or-post-trial motions, trials and/or appeals we undertake; --
bad faith litigation which may arise from our handling of any
particular claim, including failure to settle; -- loss of
independent agents; -- changes in our organization, compensation
and benefit plans; -- our ability to retain and recruit senior
management; -- our ability to purchase reinsurance and collect
payments from our reinsurers; -- increases in guaranty fund
assessments; -- our ability to achieve continued growth through
expansion into other states or through acquisitions or business
combinations; -- changes to the ratings assigned by rating agencies
to our insurance subsidiaries, individually or as a group; --
changes in competition among insurance providers and related
pricing weaknesses in our markets; and -- the 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 and employees, 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 we file 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."
http://www.newscom.com/cgi-bin/prnh/20081024/PROASSURANCELOGO
http://photoarchive.ap.org/ DATASOURCE: ProAssurance CONTACT: Frank
B. O'Neil, Sr. Vice President, Corporate Communications &
Investor Relations, +1-800-282-6242 or +1-205-877-4461, Web Site:
http://www.proassurance.com/
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