ProAssurance Reports Third Quarter 2009 Results

BIRMINGHAM, Ala., Nov. 2 /PRNewswire-FirstCall/ -- ProAssurance (NYSE: PRA)
reports Operating Income of $52.2 million, or $1.58 per diluted share for the
third quarter of 2009. Net Income in the quarter was $55.2 million, or $1.67
per diluted share. For the nine months ended September 30, 2009, Operating
Income was $135.8 million, or $4.08 per diluted share, and Net Income was
$137.4 million, or $4.13 per diluted share.

(Logo: http://www.newscom.com/cgi-bin/prnh/20081024/PROASSURANCELOGO )

Gross Premiums Written increased 34% compared to the year-ago quarter, to
$168.6 million, primarily due to recent acquisitions. Book Value per share is
$50.50, an 18% increase since year-end.

Unaudited Consolidated Financial Summary
(in thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----

Gross Premiums Written $168,559 $126,122 $434,714 $374,393
======== ======== ======== ========
Net Premiums Written $158,705 $116,409 $401,634 $343,609
======== ======== ======== ========
Net Premiums Earned $131,956 $113,449 $363,591 $349,794
======== ======== ======== ========
Net Investment Income $38,573 $39,845 $112,839 $122,218
======= ======= ======== ========
Equity in Earnings (Loss) of
Unconsolidated Subsidiaries $1,637 $(1,967) $328 $(3,916)
====== ======= ==== =======
Net Realized Investment Gains
(Losses) $7,275 $(34,236) $4,822 $(41,011)
====== ======== ====== ========
Total Revenues $182,594 $118,088 $488,804 $430,779
======== ======== ======== ========
Guaranty Fund Assessments
(Recoupments) $(152) $(356) $(630) $(995)
===== ===== ===== =====
Interest Expense $808 $1,141 $2,638 $5,855
==== ====== ====== ======
Loss on Extinguishment of
Debt $2,839 $- $2,839 $-
====== == ====== ==
Total Expenses $103,118 $90,891 $295,081 $294,358
======== ======= ======== ========
Tax Expense $24,275 $4,950 $56,274 $34,988
======= ====== ======= =======
Net Income $55,201 $22,247 $137,449 $101,433
======= ======= ======== ========
Operating Income $52,219 $44,269 $135,751 $127,443
======= ======= ======== ========
Net Cash Provided by
Operating Activities $3,867 $43,432 $15,941 $144,887
====== ======= ======= ========

Earnings per Share

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Weighted average number of
common shares outstanding
Basic 32,701 33,496 32,988 32,519
Diluted 33,023 33,866 33,267 34,561
Operating Income per share
(Basic) $1.60 $1.32 $4.12 $3.92
===== ===== ===== =====
Operating Income per share
(Diluted) $1.58 $1.31 $4.08 $3.73
===== ===== ===== =====
Net Income per share (Basic) $1.69 $0.66 $4.17 $3.12
===== ===== ===== =====
Net Income per share (Diluted) $1.67 $0.66 $4.13 $2.98
===== ===== ===== =====

Key Ratios
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Current Accident Year Loss Ratio 84.9% 83.9% 83.5% 84.0%
Prior Accident Year Loss Ratio (32.2%) (26.4%) (26.9%) (23.2%)
------ ------ ------ ------
Net Loss Ratio 52.7% 57.5% 56.6% 60.8%
Expense Ratio 21.9% 21.5% 22.5% 21.6%
----- ----- ----- -----
Combined Ratio 74.6% 79.0% 79.1% 82.4%
===== ===== ===== =====
Operating Ratio 45.4% 43.9% 48.1% 47.5%
===== ===== ===== =====
Return on Equity 13.9% 6.9% 11.9% 10.5%
===== ==== ===== =====

ProAssurance'sChief Executive Officer, W. Stancil Starnes, said, "In our
historical professional liability book we are adding new insureds who value
our commitment to Treated Fairly and the financial security that we offer. At
the same time, we are bringing in substantial new premium writings from The
PICA Group and our other recent acquisitions, which validates the
effectiveness of our strategy of profitable growth through carefully thought
out M&A. We believe this level of success clearly demonstrates the power of
our disciplined operating philosophy."

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 excludes the after-tax effects of realized gains or losses, guaranty
fund assessments and debt retirement loss, 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
gains and losses incurred during the quarter and nine month period ended
September 30, 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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net Income $55,201 $22,247 $137,449 $101,433
Adjustments, net of tax effects:
Add:
Net Realized Investment Losses $- $22,253 $- $26,657
Debt Retirement Loss $1,845 $- $1,845 $-
Subtract:
Net Realized Investment Gains $4,728 $- $3,133 $-
Guaranty Fund Recoupments 99 231 410 647
-- --- --- ---
Operating Income $52,219 $44,269 $135,751 $127,443
======= ======= ======== ========
Per diluted common share:
Net Income $1.67 $0.66 $4.13 $2.98
Effect of adjustments $(0.09) $0.65 $(0.05) $0.75
------ ----- ------ -----
Operating Income per diluted
common share $1.58 $1.31 $4.08 $3.73
===== ===== ===== =====

Business Commentary
-- The PICA Group, which writes approximately 50% of its business in the
third quarter, accounted for $43.1 million of new business for
ProAssurance in the quarter ($56.9 million for the year).

-- Retention, which is calculated on renewing physician policies,
remained
at 89% for the quarter and year-to-date in our historical medical
liability book. PICA's retention was also steady at 95% for the
quarter
and year-to-date.
-- Premium rates on policies renewing in our historical medical liability
book declined three percent in the quarter, and four percent
year-to-date as a result of improvements in overall loss trends over
the
past few years. This compares to a seven percent decline last year.
Premium rates on renewing business at PICA held steady for the quarter
and year-to-date.

-- Favorable net loss reserve development was $42.5 million in the third
quarter. Year-to-date, our favorable net loss reserve development has
been $98.0 million. This favorable development is principally the
result
of a reduction in expected loss costs, primarily from accident years
2004 through 2007. There was no reserve development at PICA.

Investment Commentary
-- The improvement in our income from investments in unconsolidated
subsidiaries was principally due to improved market conditions and
helped offset a three percent decline in net investment income in the
quarter. Net Investment income was down primarily due to lower
interest
rates on both short term and fixed income securities. The PICA Group
added $1.9 million to our investment result in the quarter ($4.0
million
for the year).
-- Gains in our trading portfolio and net proceeds from the sale of
securities resulted in $7.3 million in net realized investment gains
in
the quarter. This compares to net realized investment losses of $34.2
million in the same period a year ago.

-- We have updated the online disclosure of our investment portfolio to
provide details of our holdings at September 30, 2009. The disclosure
is
available under Supplemental Investor Information in the Investor
Relations section of our website, www.ProAssurance.com.

Balance Sheet Highlights
September 30, December 31,
2009 2008
---------- ----------
Shareholders' Equity $1,649,460 $1,423,585
Total Investments $3,863,396 $3,575,942
Total Assets $4,669,440 $4,280,938
Policy Liabilities $2,853,794 $2,693,101
Accumulated Other Comprehensive
Income (Loss) $76,394 $(35,898)
Goodwill $118,997 $72,213
Book Value per Share $50.50 $42.69

Capital Management
-- In the third quarter we purchased approximately 41,000 shares of our
common stock on the open market at a cost of $2.1 million. That
brought
the total share repurchase through the first nine months of the year
to
approximately 881,000 shares, purchased at a cost of $38.1 million.
Since the end of the third quarter we have purchased approximately
250,000 shares at a cost of $12.9 million. This leaves $116.3 million
left in our outstanding authorization, which includes the additional
$100 million authorized for repurchase by our Board in September,
2009.

-- In September we redeemed $7.0 million of Surplus Notes we acquired in
our transaction with PICA. As previously disclosed, this resulted in a
pre-tax loss of approximately $2.8 million ($1.8 million after-tax).

About ProAssurance
ProAssurance Corporation is the nation's fifth largest writer of medical
professional liability insurance, based on the 2008 writing of its
subsidiaries. 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 three years. ProAssurance is rated "A" by Fitch Ratings and the
ProAssurance Group is rated "A" (Excellent) by A.M. Best.

Conference Call Information
-- Live: Tuesday, November 3, 2009, 10:00 am et. Investors may dial (888)
587-0595 (toll free) or (719) 325-2104. The call will also be webcast
on
our website, www.ProAssurance.com, and on StreetEvents.com.
-- Replay: By telephone, through November 20, 2009 at (888) 203-1112 or
(719) 457-0820, using access code 5246524. The replay will also be
available through November 27, 2009 on our website,
www.ProAssurance.com, and on StreetEvents.com.

-- 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," "may," "optimistic," "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.

The following important factors are among those 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 that 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 collectability 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;
-- the 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."

SOURCE ProAssurance

Frank B. O'Neil, Sr. Vice President, Corporate Communications & Investor
Relations, +1-800-282-6242, +1-205-877-4461, foneil@ProAssurance.com