BIRMINGHAM, Ala., Feb. 24 /PRNewswire-FirstCall/ -- ProAssurance
(NYSE: PRA) reports that the year ending December 31, 2008 was one
of the most successful in the Company's history. Operating Earnings
for the year were $6.07 per diluted share, 24% higher than 2007.
Operating Earnings for the fourth quarter of 2008 were $2.36 per
diluted share, 53% higher than the final quarter of 2007. Net
Income for 2008 was $178 million, a 6% increase over 2007; Net
Income for the fourth quarter of 2008 was $76.3 million, an
increase of 49% compared to 2007. Book Value stood at $42.69 per
share at year-end 2008, a 10% increase for the year. (Logo:
http://www.newscom.com/cgi-bin/prnh/20081024/PROASSURANCELOGO )
Unaudited Consolidated Financial Summary (in thousands, except per
share data) Three Months Ended Year Ended December 31, December 31,
2008 2007 2008 2007 Gross Premiums Written $97,089 $108,888
$471,482 $549,074 Net Premiums Written $85,398 $99,588 $429,007
$506,397 Net Premiums Earned $109,484 $128,165 $459,278 $533,513
Net Investment Income $36,166 $43,114 $158,384 $171,308 Equity in
Earnings (Loss) of Unconsolidated Subsidiaries $(4,082) $389
$(7,997) $1,630 Net Realized Investment Gains (Losses) $(9,903)
$(4,374) $(50,913) $(5,939) Total Revenues $136,383 $168,440
$567,162 $706,068 Guaranty Fund Assessments (Recoupments) $(340)
$(337) $(1,334) $553 Interest Expense $1,037 $3,031 $6,892 $11,981
Total Expenses $24,418 $94,917 $318,776 $469,729 Tax Expense
$35,673 $22,160 $70,661 $68,153 Net Income $76,292 $51,363 $177,725
$168,186 Operating Income $79,537 $53,987 $206,980 $172,406 Net
Cash Provided by Operating Activities $22,764 $36,895 $164,775
$244,106 Earnings Per Share Three Months Ended Year Ended December
31, December 31, 2008 2007 2008 2007 Weighted average number of
common shares outstanding Basic 33,439 32,598 32,750 32,960 Diluted
33,758 35,447 34,362 35,823 Operating Income per share (Basic)
$2.38 $1.66 $6.32 $5.23 Operating Income per share (Diluted) $2.36
$1.54 $6.07 $4.90 Net Income per share (Basic) $2.28 $1.58 $5.43
$5.10 Net Income per share (Diluted) $2.26 $1.47 $5.22 $4.78
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 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 in 2008. The
following table is a reconciliation of Net Income to Operating
Income: Reconciliation of Net Income to Operating Income (in
thousands) Three Months Ended Year Ended December 31, December 31,
2008 2007 2008 2007 Net Income $76,292 $51,363 $177,725 $168,186
Adjustments, net of tax effects: Add: Net Realized Investment
Losses 6,437 2,843 33,093 3,860 Guaranty Fund Assessments - - - 360
Subtract: Net Realized Investment Gains - - - - Guaranty Fund
Recoupments 221 219 867 - Debt Retirement Gain 2,971 - 2,971 -
Operating Earnings $79,537 $53,987 $206,980 $172,406 Per diluted
common share: Net Income $2.26 $1.47 $5.22 $4.78 Effect of
adjustments $0.10 $0.07 $0.85 $0.12 Operating Income per diluted
common share $2.36 $1.54 $6.07 $4.90 Key Ratios Three Months Ended
Year Ended December 31, December 31, 2008 2007 2008 2007 Current
Accident Year Loss Ratio 94.0% 85.4% 86.4% 85.5% Prior Accident
Year Loss Ratio (95.0%) (34.6%) (40.3%) (19.7%) Net Loss Ratio
(1.0%) 50.8% 46.1% 65.8% Expense Ratio 22.3% 20.9% 21.9% 20.0%
Combined Ratio 21.3% 71.7% 68.0% 85.8% Operating Ratio -11.7% 38.1%
33.5% 53.7% Return on Equity 22.1% 16.7% 13.3% 14.2% ProAssurance's
Chief Executive Officer, W. Stancil Starnes, said, "Our 2008
results, achieved in the face of intense marketplace competition
and unprecedented turmoil in the financial markets, demonstrate the
power of our operating strategy and the benefit of our long-term
focus. We believe that continuing to execute the strategies that
produced these excellent results will benefit our investors and
insureds in the years ahead." Business Commentary -- We recognized
$104 million of favorable net loss reserve development in the
fourth quarter, bringing total favorable net loss reserve
development for the year to $185 million. The reduction in expected
loss costs comes primarily from accident years 2004 though 2006. --
Our premium rates continue to reflect the improvement in loss
trends from the past few years as compared to historical data. On
average, our overall rates are 6% lower than 2007. -- We renewed
88% of expiring policies in 2008. Our overall premium and retention
levels are in-line with our expectations, although we continue to
note that new business acquisition remains challenging. -- Expenses
were lower than the year-ago quarter and continue to be within our
expectations. However, declining premiums have the effect of
increasing the expense ratio. Balance Sheet Highlights December 31,
December 31, 2008 2007 Stockholders' Equity $1,423,585 $1,255,070
Total Investments $3,575,942 $3,639,395 Total Assets $4,280,938
$4,440,808 Policy Liabilities $2,693,101 $2,906,317 Accumulated
Other Comprehensive Income (Loss) $(35,898) $9,902 Goodwill $72,213
$72,213 Book Value per Share $42.69 $38.69 Investment Commentary --
Despite the significant investment market challenges, we grew Book
Value per Share by 10%. -- Overall investment results declined 13%
in 2008, as compared to 2007; the decline was 26% in the fourth
quarter. These results include investment income and the equity in
earnings of unconsolidated subsidiaries. -- Earnings on our
short-term portfolio were down $7.8 million for the year and $1.6
million in the quarter. This is primarily due to lower interest
rates, although our average invested balances were higher. --
Income from our TIPS portfolio declined $1.0 million in the quarter
due to negative inflation figures. -- The distressed debt fund in
which we have an interest made no distribution in the fourth
quarter vs. a $1.9 million distribution in the fourth quarter of
2007. Overall distributions from this fund were down approximately
$5.8 million for the year. -- Our net realized losses were $9.9
million in the fourth quarter and $50.9 million for the year,
including impairments. The losses for the year are less than two
percent of our $3.6 billion portfolio. -- We have updated and
enhanced the online disclosure of our entire investment portfolio
to provide details of our holdings through December 31, 2008. The
disclosure is available under Supplemental Investor Information in
the Investor Relations section of our website,
http://www.proassurance.com/. Debt Retirement and Capital
Management In August 2008, our Board authorized us to spend up to
$100 million to repurchase our common stock, trust preferred
securities or the debentures that secure the trust preferreds. This
authorization was granted after we expended the funds in an
authorization of $150 million granted in April, 2007. -- In the
fourth quarter we spent $18.4 million to reacquire $23.0 million of
our issued and outstanding trust preferred securities. This
resulted in a pre-tax gain of approximately $4.6 million. -- We
repurchased 164,544 shares of our common stock at a cost of
approximately $7.2 million during the fourth quarter of 2008. These
purchases were made under the August 2008 authorization. For the
year, we repurchased 1.8 million shares at a total cost of $87.6
million, using funds from both the August 2008 and April 2007
authorizations. We have approximately $74.4 million remaining in
our existing share and debt repurchase authorization. Transaction
Updates -- We have received all regulatory approvals required to
proceed with the sponsored demutualization of The PICA Group, which
is expected to become part of ProAssurance through a $135 million
all-cash transaction. The PICA Group will hold a special meeting of
shareholders on March 31, 2009 to consider the transaction. If
approved, the transaction will close early in the second quarter.
The PICA Group, which is the nation's leading insurer of podiatric
physicians, wrote $95.8 million in Direct Written Premium in 2008.
-- We closed our acquisition of Mid-Continent General Agency in
January, 2009. Mid-Continent produced approximately $26.0 million
of premium in 2008, primarily from ancillary healthcare providers.
This transaction expands our presence in one of the fastest growing
segments of the healthcare delivery market. -- Our acquisition of
the Georgia Lawyers Insurance Company closed in February, 2009.
Georgia Lawyers, which has been merged into our existing legal
professional liability operations, reported Direct Written Premium
of $5.7 million in 2008. We believe this acquisition will enhance
our ability to grow this attractive line of business in the
southeast and strengthen our position in the overall legal
professional liability market. "We expect these transactions to add
more than $100 million a year, on an annualized basis, to our total
revenues. We believe these acquisitions will contribute to
profitable growth while helping us diversify our risk profile in
lines of business where we can apply our considerable professional
liability expertise," said Mr. Starnes. Subsidiary Company
Developments We have completed the renaming of our major insurance
subsidiaries so that each bears the ProAssurance name, which will
solidify our brand identity across the country. As part of this
project, Woodbrook Casualty Insurance, Inc., was merged into
another subsidiary. A supplemental listing of the subsidiaries and
their names is included at the end of this news release. Conference
Call Information -- Live: Wednesday, February 25, 2009, 9:30 am et.
Investors may dial (877) 718-5095 (toll free) or (719) 325-4840.
The call will also be webcast on our website,
http://www.proassurance.com/, and on StreetEvents.com. -- Replay:
By telephone, through March 13, 2009 at (888) 203-1112 or (719)
457-0820, using access code 4854600. The replay will also be
available via the internet, through http://www.proassurance.com/
and 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. The company's recently announced
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 statement 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." ProAssurance Subsidiary Renaming Guide Former
Name New Name The Medical Assurance Company, Inc. ProAssurance
Indemnity Company, Inc. (ProAssurance Indemnity) ProNational
Insurance Company ProAssurance Casualty Company (ProAssurance
Casualty) NCRIC, Inc. ProAssurance National Capital Insurance
Company (ProAssurance National) Physicians Insurance Company of
Wisconsin, Inc. ProAssurance Wisconsin Insurance Company
(ProAssurance Wisconsin) Woodbrook Casualty Insurance, Inc No
Longer Exists Red Mountain Casualty Insurance Company, Inc.
ProAssurance Specialty Insurance Company, Inc. (ProAssurance
Specialty)
http://www.newscom.com/cgi-bin/prnh/20081024/PROASSURANCELOGODATASOURCE:
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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