ProAssurance Corporation (PRA)

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ProAssurance Corp. (PRA)

Q4 2008 Earnings Call

February 25, 2009 9:30 am ET


Frank O'Neil – SVP of Corporate Communications & Investor Relations

Stancil Starnes – Chairman & Chief Executive Officer

Edward Rand – Chief Financial Officer

Howard Friedman – Chief Underwriting Officer, Chief Actuary, SVP & Co-President of Professional Liability Group

Darryl Thomas – Senior Vice President & Chief Claims Officer, Co-President of Professional Liability Group

Victor Adamo – President


Mark Hughes – SunTrust Robinson Humphrey

Mike Grasher – Piper Jaffray

David Lewis – Raymond James

Michael Nannizzi – Oppenheimer & Co.



Good day everyone and welcome to the ProAssurance 2008 year end conference call. As a reminder this call is being recorded. Now I would like to turn the call over to Mr. Frank O'Neil. Please go ahead.

Frank O'Neil

Thank you, [Jennifer], and thanks everyone for joining us. The news release we issued yesterday afternoon and our SEC filings, including this morning's 10-K filing, included disclosures with respect to forward-looking statements. In that regard please understand that many of the statements we make today will deal with projections, estimates, expectations and are thus explicitly identified as forward-looking statements subject to various risks. Our actual results could differ materially from current projections or expectations.

Our SEC filings have a listing of risks you should understand about ProAssurance. We will not undertake, and we expressly disclaim, any obligation to update or alter forward-looking statements whether it is a result of new information or future events except as required by law or regulation. The content of this call is accurate only on Wednesday, February 25, 2009, the date of first broadcast. If you happen to be reading a transcript of this call, please note that we did not authorize it, nor have we reviewed it for accuracy. Thus, it may contain errors that could alter the intent or meaning of our statements.

On the call today is our Chairman and CEO, Stan Starnes; our President Vic Adamo; Chief Financial Officer Ned Rand; Chief Underwriting Officer Howard Friedman; and our Chief Claims Officer Darryl Thomas. All will have a part today, but Stan will open our remarks.

Stancil Starnes

I wanted to open the call because I want to highlight our very strong results in a very, very difficult market. By many measurements, 2008 was the strongest year we've ever had. In a year where losses reduced the stockholders' equity of many companies by double digit amounts, we grew stockholders' equity by 13% and increased book value by 10%.

In a year where companies' investment portfolios suffered significant losses, our prudent investment management limited the damage to our investments. The number of cases against our insureds declined as loss trends remained moderate.

And those moderate loss trends were a factor in modest premium declines during the year. We maintained our historic level of reserving because nothing, not even the current malpractice climate, lasts forever and we want to be ready.

Importantly we introduced Treated Fairly in the fourth quarter as the standard by which everything we do will be guided. And I am confident that the applications of the principles embodied by Treated Fairly will result in a continued strengthening of our performance as an organization.

I am emphasizing Treated Fairly because I want everyone our organization touches, and everyone within our organization, to understand how committed we are to the notion that everyone we encounter will be treated with fairness and respect.

Treated Fairly is becoming a way of life at ProAssurance and is gaining traction with our insureds and with our agents. Physicians tell us that they are frustrated with being treated as pawns in today's medical legal system and really welcome our commitment to giving them an explicit voice in the decisions that have such a direct effect on their future.

In 2008 we applied the same sound insurance management that has characterized our operations since our founding. Those principles are the heart of our operations today and set the foundation for success in the years to come.

I've said before and I say again, as excited as I am about our business today, I'm even more excited about the future given our operational discipline and the M&A success we had in 2008. Frank?

Frank O'Neil

Thank you, Stan. Ned, will you walk us through the financial results?

Edward Rand

Happy to, Frank. Thanks. Stan highlighted our operational success and I'll start there before recapping our investment results. Because the operational trends for the fourth quarter of 2008 largely mirror those for the year, my comments will focus on the quarter and comparisons to the same period last year. I'll touch on a few year-to-date comparisons, but for the most part I'll refer you to this morning's 10-K filing for the majority of our yearly numbers.

As with last quarter, we are reporting our results on an operating income and net income basis. We believe operating income results, which exclude the effects of realized gains and losses and the gain from the retirement of our debt, provide a clearer picture of what our core operational strategy accomplishes.

On an operating basis, our bottom line was up 47%, and operating earnings per diluted share of $2.36 was up 53% over last year, a direct result of our operational success in a challenging insurance market and difficult financial environment. The top line was down 11% in the quarter due to the expected decline in premiums. The insurance market continues to be challenging which Howard will address next.

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