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ProAssurance Corporation (PRA)
Q1 2010 Earnings Call
May 6, 2010 10:00 am ET
Frank B. O’Neil – Senior Vice President Corporate Communications and Investor Relations
W. Stancil Starnes, Esq. – Chairman of the Board & Chief Executive Officer
Victor T. Adamo, Esq. – President & Director
Edward L. Rand, Jr. – Chief Financial Officer
Howard H. Friedman – Chief Underwriting Officer & Co-President Professional Liability Group
Darryl K. Thomas – Chief Claims Officer & Co-President Professional Liability Group
[Jose Mourinho] – Piper Jaffray
Michael Nannizzi – Oppenheimer & Co.
Amit Kumar – Macquarie Research Equities
[Jack Sherik] – SunTrust Robinson Humphrey
Elizabeth Malone – Wunderlich Securities, Inc.
Howard Flinker – Flinker & Company
Previous Statements by PRA
» ProAssurance Corporation Q1 2009 Earnings Call Transcript
» ProAssurance Corp. Q4 2008 Earnings Call Transcript
» ProAssurance Corporation Q3 2008 Earnings Call Transcript
Frank B. O’Neil
Thanks for being part of our call today as we discuss the results of first quarter 2010 operations and address recent development and trends in our industry. We issued a news release Wednesday afternoon reporting our results for the first quarter of 2010. That release and our SEC filings including the 10Q filed this morning provide you with important detailed disclosures and information regarding forward looking statements.
We are explicitly identifying statements we make today dealing with projections, estimates, expectations as forward-looking statements subject to various risks. These could cause our actual results to differ materially from current projections or expectations. We will not undertake and expressly disclaim any obligation to update or alter forward-looking statements whether as a result of new information or future events unless required by law or regulation.
The content of this call is accurate only on Thursday, May 6, 2010 the date of first broadcast. If you’re reading a transcript of this call please note that we did not authorize it and have not reviewed it for accuracy. Thus, it could contain factual or transcription errors that could materially alter the intent or meaning of our statements. One final reminder, we’re going to reference non-GAAP items in our call today. Please refer to our recent filings on Form 10Q or on Form 10Q and our recent news release for a reconciliation of these non-GAAP numbers to their GAAP counterparts.
On the call today is our Chairman and CEO Stan Starnes; our President Vic Adamo; Chief Financial Officer Ned Rand; Chief Underwriting Officer and Actuary Howard Friedman; and our Chief Claims Officer Darryl Thomas. Stan will lead off the conversation today with another quarter of excellent results.
W. Stancil Starnes, Esq.
We are pleased to report another solid quarter reflecting strong steady results that are a product of our disciplined long term focus and a continued commitment to all that treated fairly means to our policy holders. Significantly, the first quarter of 2010 did not bring further wholesale softening of the market. We’re excited to discuss the details with you. Frank?
Frank B. O’Neil
Since you mentioned the marketplace why don’t we start with Howard Friedman for comments in that area.
Howard H. Friedman
As Stan said, we didn’t see any wholesale changes in the marketplace. The market is challenging and adding new premium is difficult but we’ve been successful in adding new quality business on two fronts through acquisition and through organic growth. In our historical book of medical professional liability business we wrote $6.3 million of new premiums at rates we believe will allow us to meet our ROE targets.
Jeff Bowlby, our Chief Marketing Officer has been on the road meeting with agents and he reports that the agents that represent us are finding a receptive audience for ProAssurance among physicians looking for more than just the lowest price. Writing new business obviously helps offset what we lose to competition and we do give up business in a soft market but we are retaining our accounts at high levels 88% in our historical NPL business which we calculate on the basis of physician renewals and 91% in PICA’s core medical liability book.
On the subject of PICA, PICA accounted for the vast majority of the $21.3 million in new premium from acquisitions in the quarter. There was some increase in our lawyers line at ProAssurance Midcontinent but the majority was due to PICA. Let me remind you that this is the last quarter in which the PICA transaction will affect our quarter-over-quarter premium comparisons as that transaction closed on April 1, 2009.
We are somewhat encouraged by the pricing on renewals in the quarter. The average renewal pricing on physician policies in our historical medical professional liability business was down 2% in the quarter which compares favorably with a 4% average price reduction in last year’s first quarter. PICA’s renewal pricing on medical professional liability business in Q1 was 5% higher than expiring compared to 2% higher in the same quarter last year.
Our current accident year loss ratio is 84% in line with the first quarter of last year. Net favorable loss reserve development was $25 million in the quarter, $6.5 million better than last year and again reflective of relatively stable long term trends. Severity continues to increase at a more moderate level than anticipated in our prior reserve reviews which leads to the favorable development and in this quarter to a net loss ratio of 64%, almost 2.5 points better than Q1 2009.
Frank B. O’Neil