Best s Rating Report. Associated With: ProAssurance Corporation PROASSURANCE GROUP

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1 PROASSURANCE GROUP Medmarc Casualty Insurance Co A+ Noetic Specialty Insurance Co A+ Podiatry Ins Co of America A+ ProAssurance Casualty Company A+ ProAssurance Indemnity Co Inc. A+ ProAssurance American Mutual 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 are based upon the consolidation of the property/casualty insurance companies indirectly owned or sponsored by ProAssurance Corporation (PRA) [NYSE: PRA], including; ProAs- surance Casualty Company; ProAssurance Indemnity Company; Pro- Assurance Specialty Company; ProAssurance American Mutual, A Risk Retention Group; Medmarc Casualty Insurance Company; Noetic Specialty Insurance Company; and Podiatry Insurance Company of America (collectively referred to as the ProAssurance Group or the group). The ratings reflect the group s supportive balance sheet strength, favorable long-term operating performance and its position as one of the leading providers of medical professional liability (MPL) insurance in the U.S. The positive rating factors are partially offset by the group s concentration of underwriting risk in long-tail lines of business, continued soft market pricing and dynamically changing market conditions in the MPL sector as well as low interest rates, which may put pressure on overall earnings. Printed September 6, Page 1 of 6

2 The ratings acknowledge the group s strong risk-adjusted capitalization, conservative reserve positions, aggressive claims defense, depth and breadth of risk management expertise, geographical diversification and localized knowledge within the various jurisdictions in which it operates. The ratings recognize the financial flexibility available to the operating companies that is derived from the ultimate parent, ProAssurance Corporation, whose 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 the business profile of the overall organization by expanding its reach into the MPL, ancillary healthcare, life sciences/medical technology and workers compensation lines. However, there are inherent market risks associated with the MPL insurance sector as they relate to price competition, legislative (tort) reform, loss cost trends and regulatory challenges. Furthermore, the final outcome of MPL claims may not be known for many years, which adds uncertainty to ultimate accident year performance measures. These concerns are partially mitigated by the long-term stability of the group s management and expertise in this area. Positive rating action in the near to mid-term is not anticipated as the ratings are appropriately positioned at the current level. Negative rating actions could occur if the group experiences materially weaker loss experience, reserve deficiency trends, or significant reductions in riskadjusted capitalization which could be driven by adverse impacts in the MPL market from pricing competition, tort reform or deteriorating claim loss trends. RATING UNIT MEMBERS ProAssurance Group (AMB# ): Best s AMB# Company FSR Medmarc Casualty Insurance Co A Noetic Specialty Insurance Co A Podiatry Ins Co of America A ProAssurance Casualty Company A ProAssurance Indemnity Co Inc. A ProAssurance American Mutual A ProAssurance Specialty Ins Co A+ KEY FINANCIAL INDICATORS ($000) Net Pre-tax Total Policy- Premiums Operating Admitted holders Comb. Year Written Income Assets Surplus Ratio , ,989 3,993,223 1,635, , ,382 3,770,405 1,608, , ,723 3,477,675 1,531, , ,515 3,180,597 1,335, , ,943 3,028,177 1,224, (*) 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 and brokers produce two-thirds 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 health care industry. In addition, through Medmarc Casualty Insurance Company and Noetic Specialty Insurance Company, the group provides product liability and completed operations liability coverage to manufacturers and distributors of medical technology and life science products and for clinical trials of these products, and effective January 1, 2017, housed the limited amount of legal professional liability business written within ProAssurance. In 2015, ProAssurance established Washington D.C. domiciled ProAssurance American Mutual, RRG (PAM) to provide coverage for physician medical professional liability, facility medical professional liability, and related general liability on a claims-made basis. Policy limits range from $250,000 (offered only where mandated by law) 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. Policies are written on claims made forms in all states; a small amount of occurrence coverage is written for physicians in Wisconsin where a state fund bears responsibility for losses greater than $1.0 million. A limited Printed September 6, Page 2 of 6

3 HISTORY ProAssurance Indemnity Company, Inc. 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 Numerous acquisitions of smaller medical professional liability insurers pre-dated the 2001 merger that created ProAssurance Corporation; subsequent to that merger, there have been a number of other transactions. The West Virginia Hospital Insurance Company, a West Virginia medical professional liability writer acquired in 1993, was later renamed Medical Assurance of West Virginia, Inc., then Woodbrook Casualty Insurance, Inc. and 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 Proamount of dental professional liability coverage is also written on an occurrence form. 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 available to insured hospitals and other healthcare entities purchasing liability policies from ProAssurance. 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, and the Indiana State Medical Association. 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 vast majority of the premium volume continues to be generated from the physician book of business. ProAssurance Casualty is endorsed by the Wisconsin State Medical Association. ProAssurance Specialty Insurance Company, Inc. s. (ProAssurance Specialty) allows ProAssurance to capitalize on the growing number of physicians and other healthcare risks that may not meet the tighter underwriting criteria in the standard medical professional liability insurance market, and to write policies for specialized risks that require one-off underwriting and pricing decisions. 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. Most policies issued by PAM have $1 million limits and physician policies have a provision for death, disability, and retirement tail coverage. PAM has engaged PRA Indemnity, its sponsor and reinsurer, to act as the captive manager and third party administrator for its policies under a Program Management Agreement. ProAssurance believes PAM will be a useful tool to have as it evaluates risks and opportunities as healthcare consolidates and large multi-state, multi-specialty risks emerge in the coming years. The company maintains a 95% quota share agreement up to $1 million with ProAssurance Indemnity, which enables it to carry ProAssurance Indemnity s rating. Limits above $1 million are fully reinsured BY-LINE BUSINESS ($000) Reinsurance DPW Prem Assumed Product Line ($000) (%) ($000) (%) Med Prof Liab CM , Oth Liab CM , Med Prof Liab Occur , Prod Liab CM , Reins-Casualty , All Other , Total , , Reinsurance Business Prem Ceded NPW Retention Product Line ($000) (%) ($000) (%) (%) Med Prof Liab CM , , Oth Liab CM , , Med Prof Liab Occur , , Prod Liab CM , , Reins-Casualty , All Other , Total , , Printed September 6, Page 3 of 6

4 Assurance National Capital Insurance Company. It was merged into ProAssurance Indemnity effective July 1, ProAssurance Casualty Company was formed in 1980, as Physicians Insurance Company of Michigan before changing its name first to Pro- National 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 the 1998 merger of Physicians Protective Trust Fund (PPTF) into ProNational. ProAssurance Casualty is currently endorsed by various county medical societies and specialty organizations in Illinois, Florida, Michigan and Wisconsin. 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 before being merged into ProAssurance Casualty effective December 31, Independent Nevada Doctors Insurance Exchange was acquired by ProAssurance in 2012 and was merged into ProAssurance Indemnity effective October 1, 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. Consolidated Balance Sheet Admitted Assets ($000) YE 2016 % Bonds $1,910, Preferred stock , Common stock , Cash and short-term invest , Other non-affil inv asset , Investments in affiliates , Real estate, offices , Total invested assets $2,741, Premium balances , Accrued interest , All other assets , Total assets $3,028, Liabilities & Surplus ($000) Loss & LAE reserves $1,407, Unearned premiums , Conditional reserve funds , All other liabilities , Total liabilities $1,803, Surplus notes , Capital & assigned surplus , Unassigned surplus , Total policyholders surplus $1,224, Total liabilities & surplus $3,028, Printed September 6, Page 4 of 6

5 PROASSURANCE GROUP 1.8 Policyholders' Surplus Years in billions of dollars FINANCIAL SUMMARY ($000) as of YE 2016 Policyholders Surplus $ 1,224,520 Direct Premiums Written $ 510,027 Combined Ratio Net Underwriting Income $ 87,245 Net Investment Income $ 75,343 Printed September 6, Page 5 of 6

6 Why is this Best s Rating Report important to you? 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 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. A Best s Financial Strength Rating (FSR) is an independent opinion of an insurer s financial strength and ability to meet its ongoing insurance policy and contract obligations. An FSR 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 the 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. An FSR is not a recommendation to purchase, hold or terminate any insurance The company information appearing in this pamphlet is an extract from the complete AMB Credit Report. You may obtain the complete report by contacting Customer Service at +1(908) or customer_service@ambest.com. Please reference the company s identification number (AMB#) listed on this rating report. For the latest Best s Financial Strength Ratings along with their definitions and A.M. Best s Terms of Use, please visit Copyright 2017 A.M. Best Company, Inc. and/or its affiliates. All rights reserved. No part of this report may be reproduced, distributed, or stored in a database or retrieval system, or transmitted in any form or by any means without the prior written permission of the A.M. Best Company. While the data in this report was obtained from sources believed to be reliable, its accuracy is not guaranteed. Printed September 6, Page 6 of 6