Alabama-based ProAssurance Corporation reported Net Income of $38.7 million, or $1.33 per diluted share, for 2003, more than triple 2002’s Net Income of $12.2 million. Net Income for the fourth quarter of 2003 was $13.8 million, or $0.47 per diluted share, which is almost $2 million higher than the same quarter last year.
The Professional Liability segment continues to meet the company’s profitability expectations and intermediate goals, and Personal Lines results continue to surpass industry averages. The company reiterated its comfort with current reserve levels after completion of the regular, in-depth review at year end.
According to Chairman A. Derrill Crowe, “By achieving a consolidated combined ratio of 102.4 percent in the fourth quarter we have reached the goal that we established for ourselves in October 2002. We believe we are solidly on the road to more acceptable levels of profitability and expect to report continued improvement throughout 2004 and 2005.”
There was $4.5 million of favorable reserve development in the fourth quarter; $800,000 of that came from prior year Professional Liability reserves, and $3.7 million stemmed from prior year Personal Lines reserves. Total reserve development for the year 2003 was a favorable $10.8 million, all of which came from prior year Personal Lines reserves. For the year, favorable reserve development in Professional Liability in the fourth quarter approximately offset a previous addition to reserves in the second quarter of 2003.
“We are confident in the level of our reserves,” added Victor Adamo, ProAssurance’s president. He noted, “Our independent actuarial review proved the value of our prudent reserving philosophy and gives us confidence that our reserves are adequate, even in light of the unfavorable loss development trends in the industry over the past few years.”
At Dec. 31, 2003, our stockholders equity included net unrealized gains (after-tax) in the investment portfolio of $34.4 million compared to $35.5 million at Dec. 31, 2002. These net unrealized gains are primarily in fixed income securities. For the year, interest expense was $3.4 million, and was $1.2 million in the quarter.
Total Goodwill is $26.4 million. Approximately $18.2 million of that total is related to the consolidation with Professionals Group, and $7.6 million is attributable to the company’s acquisition of the outstanding minority shares of its MEEMIC Holdings subsidiary in the first quarter of 2003. There were no share repurchases in 2003 and none are foreseen in 2004, as the company uses its capital to support the writing of new business.
Professional liability segment
The core companies in ProAssurance’s professional liability segment are The Medical Assurance Company, ProNational Insurance Company, and Red Mountain Casualty Insurance Company. ProAssurance also writes professional liability business through Medical Assurance of West Virginia. Each focuses on the delivery of professional liability insurance to physicians and surgeons, dentists, hospitals, and others involved in the delivery of health care.
“Professional liability results continue the comeback we’ve anticipated based on our heightened underwriting discipline and close attention to adequate pricing,” Crowe continued. “Since 2001 we’ve non-renewed a significant number of policyholders because of their risk profile; while others have left because of our higher pricing. However, we’ve been able to balance that lost business by adding new insureds who pass our underwriting screens. The bottom line is that while policyholder count has been essentially flat, our premiums increased to appropriate levels and our results improved dramatically. Looking ahead, we believe premiums will continue to rise, although probably not at the pace of prior years. At the same time, we expect to begin increasing our policyholder count because of capacity-related retrenching at other companies coupled with the significant uncertainty regarding the financial stability of several competitors.”
Adamo noted that ProAssurance’s performance has also benefited from its clear commitment to its policyholders. He said, “Insureds are reminded almost weekly about the perils of buying insurance from companies that may not be able to meet their long-term commitment. Our ability to make – and keep – that long term promise, coupled with our willingness to aggressively defend non-meritorious claims, makes us a preferred choice in today’s marketplace. We’ve successfully communicated these differences to our insureds and to our agents, who have helped us differentiate our company and our strength.”
Crowe noted that these differences are also important to investors. He said, “The performance of any medical liability insurer is not a quarter-to-quarter sprint. True success is measured over time. Our disciplined approach to this business will allow us to recognize the results of our sound underwriting, pricing and claims-handling decisions.”
Personal lines segment
MEEMIC Insurance Company (MEEMIC), the sole company in ProAssurance’s personal lines segment, principally provides auto and homeowners’ coverages, primarily for educational employees and their families.
“MEEMIC’s performance in 2003 continued a string of successful and profitable years. The importance of MEEMIC’s specialized underwriting in a preferred market cannot be over-emphasized, and the contribution MEEMIC makes to our bottom line certainly can’t be overlooked,” Adamo commented. He highlighted MEEMIC’s combined ratio, which was below 90 percent for the third straight year, and for the fifth year out of the past six.
Crowe looked ahead to growth in 2004 and beyond, noting, “MEEMIC has shown consistent growth in premium per risk, and in the numbers of policyholders within Michigan. Even as we continue our efforts to grow our business in underserved areas of Michigan, we’re evaluating expansion into other states in the region. We expect to begin that expansion within the next 12-18 months.”
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