ProAssurance Casualty Company A+ ProAssurance Indemnity Co Inc. A+ ProAssurance Specialty Ins Co A+ PROASSURANCE GROUP

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1 PROASSURANCE GROUP ProAssurance Casualty Company A+ ProAssurance Indemnity Co Inc. A+ ProAssurance Specialty Ins Co A+ Associated With: ProAssurance Corporation PROASSURANCE GROUP Mailing: P.O. Box , Birmingham, AL Web: Tel: Fax: AMB#: Associated Ultimate Parent#: RATING RATIONALE Rating Rationale: These ratings reflect ProAssurance Group s superior risk-adjusted capitalization, strong operating performance, its specialty expertise and leading business position within the medical professional liability insurance sector, and the financial flexibility afforded by ProAssurance Corporation (PRA) [NYSE: PRA], its publicly traded parent. The ratings also acknowledge the group s solid balance sheet, aggressive claims defense, depth and breadth of risk management expertise, geographical diversification and localized knowledge within the various jurisdictions in which it operates. Partially offsetting these strengths are the inherent market risks associated with the medical professional liability insurance sector as they relate to price competition, legislative (tort) reform, loss cost trends and regulatory challenges. The outlooks are based upon the expectation of continued superior performance through market cycles. The ratings recognize the financial flexibility available to the operating companies that is derived from the parent organization. ProAssurance Corporation s financial leverage is very conservative, interest coverage is strong, and it currently holds a significant amount of cash and short-term investments outside of its insurance subsidiaries that are available for use without regulatory approval. A.M. Best also recognizes the organization s successful growth strategy in expanding its geographic footprint via mergers and acquisitions. These transactions have also strengthened its business profile by expanding its reach into the medical professional liability, lawyer professional liability, and ancillary healthcare lines. The ratings may be upgraded with the continuation of established profitability trends throughout changes in the market cycle, realization of extensive benefits from organic growth, or merger and acquisition activity that significantly enhances the organization s market position or operational results. The ratings could face downward pressure from sudden adverse changes in market conditions across large portions of the book of business, wide-ranging negative effects stemming potentially from national healthcare reform, or extreme shifts in claim severity and/or frequency. The ratings are based on the consolidation of results from the ProAssurance Casualty Company, ProAssurance Indemnity Company, and ProAssurance Specialty Company. Outlook: Stable RATING UNIT MEMBERS ProAssurance Group (AMB# ): Best s AMB# Company FSR ProAssurance Casualty Company A ProAssurance Indemnity Co Inc. A ProAssurance Specialty Ins Co A A.M. Best Company, Oldwick, NJ Printed July 15, Page 1 of 5

2 KEY FINANCIAL INDICATORS ($000) Net Pre-tax Total Policy- Premiums Operating Admitted holders Comb. Year Written Income Assets Surplus Ratio , ,447 3,828,028 1,169, , ,294 3,736,921 1,273, , ,852 3,658,207 1,286, , ,500 3,544,167 1,329, , ,832 3,282,293 1,344, (*) Data reflected within all tables of this report has been compiled through the A.M. Best Consolidation of statutory filings. BUSINESS PROFILE The ProAssurance Group is focused on the medical professional liability insurance market. The group has licenses in all fifty states and the District of Columbia, with the majority of its business written in the Midwestern and Southeastern regions of the United States. The group is the market leader in Alabama, Delaware, District of Columbia, Nevada, and Wisconsin. Independent agents produce twothirds of ProAssurance s business. However, business in Alabama and Florida is produced on a direct basis, and dual distribution is utilized to varying degrees in the District of Columbia and Missouri. Companies within the group are engaged in the delivery of professional liability insurance to physicians and surgeons, dentists, hospitals and others involved in the delivery of health care. In addition, the group maintains a lawyer s professional liability book of business within ProAssurance Casualty. Policy limits range from $250,000 up to $26.0 million per occurrence, with limits in certain jurisdictions designed around state specific provisions, such as patient compensation funds. Higher limits may be obtained with facultative quotes through the company s reinsurance partners. Additional insurance products, such as professional office package, workers compensation and accident and health coverage, are underwritten by other carriers and marketed by ProAssurance to enhance the insurance package available to certain classes of health care providers and are written on a limited basis. Policies are written on claims made forms in all states except Wisconsin, where a small amount of occurrence coverage remains inforce. Prior to the 2006 acquisition of PIC Wisconsin, ProAssurance made an active decision to end occurrence coverage and its last occurrence coverage expired in the third quarter of However, the reporting pattern in Wisconsin and the presence of a state-run fund for losses above $1.0 million mitigates the risk of occurrence exposure in Wisconsin. Thus, any significant occurrence exposure will be to a declining number of policies that are in runoff. ProAssurance Indemnity Company, Inc. (ProAssurance Indemnity) writes medical professional liability insurance for physicians, surgeons, dentists, hospitals, clinics and other health care providers, principally in the East, South and Midwest. Commercial general liability policies are issued to hospitals. Currently, it is the leading provider of medical professional liability insurance in its home state of Alabama. ProAssurance Indemnity is endorsed by the Medical Association of the State of Alabama, the Alabama Dental Association, the Indiana State Medical Association and the Indiana Dental Association. The company was formed as a mutual insurance company, Mutual Assurance Society of Alabama in 1976, to write professional liability insurance for Alabama physicians. The name was later shortened to Mutual Assurance, Inc. The company demutualized in 1991, and later became a subsidiary of Medical Assurance, Inc., an insurance holding company formed in Woodbrook Casualty, a West Virginia medical professional liability writer acquired in 2003, was merged into ProAssurance Indemnity effective December 31, American Physicians Insurance Company, a leading writer of medical professional liability insurance in Texas and surrounding states, was acquired by ProAssurance in late 2010 and was merged into ProAssurance Indemnity effective September 16, The NCRIC Group, the leading writer of medical professional liability policies in the District of Columbia, was acquired by ProAssurance Corporation in 2005 and subsequently renamed ProAssurance National Capital Insurance Company. It was merged into ProAssurance Indemnity effective July 1, ProAssurance Casualty Company (ProAssurance Casualty) provides professional liability coverage for physicians, dentists, hospitals, health care groups, healthcare facilities and other professionals, primarily in Midwestern and Mid-Atlantic states and Florida. The Company s legal professional liability business is primarily in the Midwest and Georgia, with growing markets in the far west and Mid- Atlantic States where MGAs are being used. However, most of the premium volume continues to be generated from the physician book of business. The company was formed in 1980, as Physicians Insurance Company of Michigan before changing its name first to ProNational Insurance Company, and then to ProAssurance Casualty. It is currently among Michigan s leading providers of medical professional liability insurance, with a greater than 20% share of direct premiums written. The company is also well represented in Florida as a result of a 1998 merger with Physicians Protective Trust Fund (PPTF). ProAssurance Casualty is currently endorsed by various county medical societies and specialty organizations in Illinois, Florida and Michigan. Physicians Insurance Company of Wisconsin, the leading writer of medical professional liability insurance in Wisconsin, was acquired by ProAssurance in 2006 and subsequently renamed ProAssurance Wisconsin. It was merged into ProAssurance Casualty effective December 31, ProAssurance Specialty Insurance Company, Inc. s. (ProAssurance Specialty) origins date back to 1994, when ProNational formed a wholly owned subsidiary, PICOM Insurance Company of Illinois to renew a book of physician professional liability insurance formerly written by a physician-owned carrier in that state. This gave the group a significant entry into the Illinois market and broadened the group s spread of underwriting risk. In September 2002, the subsidiary adopted the name of Red Mountain Casualty Insurance Company, Inc., re-domesticated to Alabama and began writing business in several states on an excess and surplus lines basis. The company adopted its current name at the end of 2008, in order to identify better with its parent organization. It is currently authorized in virtually every state, and is active as an excess and surplus lines medical professional liability insurer in a number of jurisdictions. The company maintains a 100% quota share agreement with ProAssurance Casualty, its former parent and current affiliate, which enables it to carry ProAssurance Casualty s rating A.M. Best Company, Oldwick, NJ Printed July 15, Page 2 of 5

3 2012 BY-LINE BUSINESS ($000) Reinsurance Product DPW Prem Assumed Line ($000) (%) ($000) (%) Med Prof Liab CM , Med Prof Liab Occur , Oth Liab CM , All Other , Total , Reinsurance Business Product Prem Ceded NPW Retention Line ($000) (%) ($000) (%) (%) Med Prof Liab CM , , Med Prof Liab Occur , Oth Liab CM , , All Other , Total , , Balance Sheet Admitted Assets ($000) 12/31/2012 % Bonds $2,623, Common stock , Cash & short-term invest , Real estate, investment Other non-affil inv asset , Investments in affiliates , Real estate, offices , Total invested assets $3,038, Premium balances , Accrued interest , All other assets , Total assets $3,282, Liabilities & Surplus ($000) Loss & LAE reserves $1,545, Unearned premiums , Conditional reserve funds , All other liabilities , Total liabilities $1,937, Surplus notes , Capital & assigned surplus , Unassigned surplus , Total policyholders surplus $1,344, Total liabilities & surplus $3,282, A.M. Best Company, Oldwick, NJ Printed July 15, Page 3 of 5

4 FINANCIAL SUMMARY ($000) as of 12/31/2012 Policyholders Surplus $ 1,344,510 Direct Premiums Written $ 445,879 Combined Ratio Net Underwriting Income $ 247,425 Net Investment Income $ 112, A.M. Best Company, Oldwick, NJ Printed July 15, Page 4 of 5

5 Why is this Best s Rating Report important to you? A Rating Report from the A.M. Best Company represents an independent opinion from the leading provider of insurer ratings of a company's financial strength and ability to meet its obligations to policyholders. The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of insurance companies since The Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The rating is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of an insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. A Best's Financial Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. The company information appearing in this pamphlet is an extract from the complete company report prepared by the A.M. Best Company. A Best's Financial Strength Rating is assigned after a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile. Best's Financial Strength Ratings are assigned according to the following scale: Secure Best's Financial Strength Ratings A++ and A Superior A and A Excellent B++ and B Good Vulnerable Best's Financial Strength Ratings B and B Fair C++ and C Marginal C and C Weak D Poor E Under Regulatory Supervision F In Liquidation S Rating Suspended For the latest Best's Financial Strength Ratings and AMB Credit Reports visit the A.M. Best web site at You may also obtain AMB Credit Reports by calling our Customer Service department at , ext To expedite your request, please provide the company's identification number (AMB #) A.M. Best Company, Oldwick, NJ Printed July 15, Page 5 of 5