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| 8-K - OUR FILING ON A CURRENT FORM 8-K DISCLOSING THE RESULTS OF OUR OPERATIONS FOR THE YEAR AND QUARTER ENDED DECEMBER 31, 2012. - PROASSURANCE CORP | bodyoffiling.htm |
NEWS RELEASE
For More information
Frank B. O’Neil
Sr. Vice President, Corporate Communications & Investor Relations
800-282-6242 • 205-877-4461 • foneil@ProAssurance.com
ProAssurance Reports Year-End and Fourth Quarter 2012 Results
BIRMINGHAM, AL – (PRNewswire) – February 19, 2013 – ProAssurance Corporation (NYSE: PRA) reported today that fourth quarter 2012 Net Income was $101.3 million, or $1.64 per diluted share. Fourth quarter 2012 operating Income was $96.6 million, or $1.56 per diluted share. Gross Premiums Written were $107.2 million in the fourth quarter of 2012. At December 31, 2012, Book Value per share was $36.85 and Shareholders’ Equity was $2.3 billion. All per share amounts and share-based results in this release reflect a two-for-one split effected in the form of a stock dividend on December 27, 2012.
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Unaudited Consolidated Financial Summary (in thousands)
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Three Months Ended December 31,
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Year Ended December 31,
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2012
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2011
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2012
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2011
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Gross Premiums Written
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$ | 107,208 | $ | 115,101 | $ | 536,431 | $ | 565,895 | ||||||||
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Net Premiums Written
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$ | 130,621 | $ | 136,815 | $ | 528,298 | $ | 558,507 | ||||||||
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Net Premiums Earned
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$ | 155,615 | $ | 161,649 | $ | 550,664 | $ | 565,415 | ||||||||
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Net Investment Income
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$ | 34,181 | $ | 34,383 | $ | 136,094 | $ | 140,956 | ||||||||
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Equity in Earnings (Loss) of Unconsolidated Subsidiaries
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$ | (2,791 | ) | $ | (3,103 | ) | $ | (6,873 | ) | $ | (9,147 | ) | ||||
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Net Investment Result
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$ | 31,390 | $ | 31,280 | $ | 129,221 | $ | 131,809 | ||||||||
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Net Realized Investment Gains (Losses)
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$ | 6,514 | $ | 11,641 | $ | 28,863 | $ | 5,994 | ||||||||
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Other Income
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$ | 1,901 | $ | 1,822 | $ | 7,106 | $ | 13,566 | ||||||||
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Total Revenues
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$ | 195,420 | $ | 206,392 | $ | 715,854 | $ | 716,784 | ||||||||
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Net Losses and Loss Adjustment Expenses
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$ | 5,008 | $ | (35,664 | ) | $ | 179,913 | $ | 162,287 | |||||||
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Underwriting, Policy Acquisition and Operating Expenses
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$ | 32,550 | $ | 32,887 | $ | 135,631 | $ | 136,421 | ||||||||
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Interest Expense
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$ | 179 | $ | 833 | $ | 2,181 | $ | 3,478 | ||||||||
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Loss on extinguishment of debt
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$ | – | $ | – | $ | 2,163 | $ | – | ||||||||
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Total Expenses
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$ | 37,737 | $ | (1,944 | ) | $ | 319,888 | $ | 302,186 | |||||||
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Tax Expense
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$ | 56,417 | $ | 67,734 | $ | 120,496 | $ | 127,502 | ||||||||
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Net Income
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$ | 101,266 | $ | 140,602 | $ | 275,470 | $ | 287,096 | ||||||||
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Operating Income
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$ | 96,609 | $ | 131,508 | $ | 257,238 | $ | 278,514 | ||||||||
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Net Cash Provided by Operating Activities
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$ | 29,894 | $ | 52,946 | $ | 91,250 | $ | 159,364 | ||||||||
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Earnings per Share
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The number of shares outstanding and per share results reflect
a two-for-one stock split effective December 27, 2012
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Three Months Ended December 31,
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Year Ended December 31,
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2012
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2011
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2012
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2011
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Weighted average number of
common shares outstanding (in 000’s)
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Basic
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61,524 | 61,095 | 61,342 | 61,140 | ||||||||||||
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Diluted
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61,922 | 61,668 | 61,833 | 61,684 | ||||||||||||
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Net Income per share (Basic)
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$ | 1.65 | $ | 2.30 | $ | 4.49 | $ | 4.70 | ||||||||
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Net Income per share (Diluted)
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$ | 1.64 | $ | 2.28 | $ | 4.46 | $ | 4.65 | ||||||||
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Operating Income per share (Diluted)
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$ | 1.56 | $ | 2.13 | $ | 4.16 | $ | 4.52 | ||||||||
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NEWS RELEASE CONTINUES
Non-GAAP Financial Measures
In addition to Net Income we use Operating Income which 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 net effects of confidential settlements, Net Realized Investment (Gains) Losses, Debt Retirement (Gain) or Loss, and Guaranty Fund (Recoupments) Assessments. We believe Operating Income, when considered along with Net Income, presents a useful 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 net effect of confidential settlements, Net Realized Investment (Gains) Losses, Debt Retirement (Gain) or Loss, and Guaranty Fund (Recoupments) Assessments during the periods presented below. The following table reconciles Net Income to Operating Income.
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Reconciliation of Net Income to Operating Income (in thousands, except per share data)
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All share and per share results reflect the effect of a two-for-one stock split effective December 27, 2012
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Three Months Ended December 31,
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Year Ended December 31,
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2012
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2011
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2012
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2011
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Net Income
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$ | 101,266 | $ | 140,602 | $ | 275,470 | $ | 287,096 | ||||||||
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Items Excluded in the Calculation of Operating Income:
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(Gain) loss on extinguishment of debt
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$ | – | $ | – | $ | 2,163 | $ | – | ||||||||
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Net Realized Investment (Gains) Losses
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$ | (6,514 | ) | $ | (11,641 | ) | $ | (28,863 | ) | $ | (5,994 | ) | ||||
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Guaranty Fund (Recoupments) Assessments
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$ | 329 | $ | (107 | ) | $ | 345 | $ | (66 | ) | ||||||
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Effect of Confidential Settlements (Net)
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$ | (980 | ) | $ | (2,243 | ) | $ | (1,694 | ) | $ | (7,143 | ) | ||||
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Pre-Tax Effect of Exclusions
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$ | (7,165 | ) | $ | (13,991 | ) | $ | (28,049 | ) | $ | (13,203 | ) | ||||
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Tax Effect at 35%
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$ | 2,508 | $ | 4,897 | $ | 9,817 | $ | 4,621 | ||||||||
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Operating Income
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$ | 96,609 | $ | 131,508 | $ | 257,238 | $ | 278,514 | ||||||||
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Per Diluted Common Share:
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Net Income
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$ | 1.64 | $ | 2.28 | $ | 4.46 | $ | 4.65 | ||||||||
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Effect of Adjustments
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$ | (0.08 | ) | $ | (0.15 | ) | $ | (0.30 | ) | $ | (0.13 | ) | ||||
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Operating Income Per Diluted Common Share
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$ | 1.56 | $ | 2.13 | $ | 4.16 | $ | 4.52 | ||||||||
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Key Ratios
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Three Months Ended December 31,
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Year Ended December 31,
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2012
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2011
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2012
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2011
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Current Accident Year Loss Ratio
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76.8 | % | 91.5 | % | 82.1 | % | 86.3 | % | ||||||||
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Effect of Prior Accident Years’ Reserve Development
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(73.6 | %) | (113.6 | %) | (49.4 | %) | (57.6 | %) | ||||||||
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Net Loss Ratio
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3.2 | % | (22.1 | %) | 32.7 | % | 28.7 | % | ||||||||
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Expense Ratio
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20.8 | % | 20.1 | % | 24.4 | % | 23.8 | % | ||||||||
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Combined Ratio
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24.0 | % | (2.0 | %) | 57.1 | % | 52.5 | % | ||||||||
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Operating Ratio
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2.0 | % | (23.3 | %) | 32.4 | % | 27.6 | % | ||||||||
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Return on Equity
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17.5 | % | 26.9 | % | 12.4 | % | 14.3 | % | ||||||||
Return on Equity is calculated by dividing annualized Net Income for the period by the average of beginning and ending Shareholders’ Equity.
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Management Commentary
“Our 2012 results reflect our commitment to long-term profitability and a disciplined approach to writing business that meets our underwriting standards and provides a return that ensures our continued financial strength to serve the long-term interests of our shareholders and policyholders. We are succeeding in a competitive market by delivering innovative products that address the emerging liability risks faced by larger facilities and more geographically diverse healthcare delivery systems, while enhancing our commitment to policyholders who practice in more traditional settings,” said W. Stancil Starnes, the Chairman and Chief Executive Officer of ProAssurance. He added, “As we expand our product offerings through our Medmarc acquisition, and further address the evolving liability needs of all facets of healthcare, we are able to continue building our balance sheet to protect our policyholders and deliver real value to our shareholders. In short, we are uniquely positioned to take advantage of the opportunities that will arise from the changing landscape of healthcare.”
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Business Detail
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Net Losses (in millions)
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Three Months Ended December 31,
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Year Ended December 31,
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2012
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2011
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2012
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2011
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Current Accident Year Net Losses
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$ | 119.5 | $ | 147.9 | $ | 452.0 | $ | 488.2 | ||||||||
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Prior Accident Year Net Losses
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$ | (114.5 | ) | $ | (183.6 | ) | $ | (272.0 | ) | $ | (325.9 | ) | ||||
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Net Losses
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$ | 5.0 | $ | (35.7 | ) | $ | 180.0 | $ | 162.3 | |||||||
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Investment Commentary
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Balance Sheet Highlights (in thousands, except per share data)
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December 31, 2012
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December 31, 2011
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Shareholders’ Equity
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$ | 2,270,580 | $ | 2,164,453 | ||||
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Total Investments
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$ | 3,926,902 | $ | 4,090,541 | ||||
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Total Assets
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$ | 4,876,578 | $ | 4,998,878 | ||||
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Policy Liabilities
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$ | 2,334,446 | $ | 2,580,966 | ||||
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Accumulated Other Comprehensive Income (Loss)
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$ | 145,380 | $ | 130,037 | ||||
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Goodwill
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$ | 163,055 | $ | 159,625 | ||||
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Book Value per Share
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$ | 36.85 | $ | 35.42 | ||||
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Book Value per Share reflects a two-for-one stock split effective December 27, 2012
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Capital Management
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Transaction Updates
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About ProAssurance
ProAssurance Corporation is an industry-leading specialty insurance company with extensive expertise in medical professional liability, products liability for life sciences and the medical technology industry 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 six years and is consistently ranked as a top performing property casualty insurer in Moody’s Yearly Statistical Handbook. ProAssurance is rated “A” (Strong) by Fitch Ratings; ProAssurance Group is rated “A” (Excellent) by A.M. Best.
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Conference Call Information
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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.
Risks that could adversely affect the mergers of Medmarc and IND into ProAssurance include, but are not limited to, the following:
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The following important factors are among those that could affect the actual outcome of other future events:
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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.
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