Good morning, everyone. Welcome to ProAssurance’s Conference Call to discuss the company’s Third Quarter 2018 Results. These results were reported in a news release issued on November 6, 2018 and in the company’s quarterly report on Form 10-Q, which was also filed on November 6. These documents are intended to provide you with important information about the significant risks, uncertainties and other factors that are out of the company’s control and could affect ProAssurance’s business and alter expected results. We also caution you that management expects to make statements on this call dealing with projections, estimates and expectations and explicitly identifies these as forward-looking statements within the meaning of the U.S. federal securities laws and subject to applicable Safe Harbor protections. The content of this call is accurate only on November 7, 2018 and except as required by law or regulation, ProAssurance will not undertake and expressly disclaims any obligation to update or alter information disclosed as part of these forward-looking statements. The management team of ProAssurance also expects to reference non-GAAP items during today’s call. The company’s recent news release provides a reconciliation of these non-GAAP numbers to their GAAP counterparts. Now, as I turn the call over to Mr. Frank O’Neil, I would like to remind you that the call is being recorded and there will be a time for questions after the conclusion of prepared remarks. Frank O’Neil: Thank you, Kate. On our call today are our Chairman and CEO, Stan Starnes; our Chief Operating Officer, Ned Rand; and for the first time, our Chief Financial Officer, Dana Hendricks; Howard Friedman and Mike Boguski, the Presidents of our Healthcare Professional Liability and Workers’ Compensation operations are also on the call. Stan, will you start us off, please?

Thank you, Frank. I will start with a quick welcome to Dana. You will all get to know her in the months ahead and you will understand why we are excited to have her join our executive team. The third quarter of 2018 continued to reinforce our view of the markets we serve. Strong competition across the Board, but our differentiated product offerings allows us to continue to grow our business. We are still wary of early indications of accelerating loss trends in certain sectors of the broad medical professional liability line in keeping with what we have said to you over the last several quarters. While we are encouraged by our results at Lloyd’s in reporting quarter, we expect certain events which Howard will discuss later to produce a loss of approximately $3.2 million in that segment next quarter. We understand investor concern and are aware that we have more work to do to get this operation to an acceptable level of return. However, even with these projected cap losses at Lloyd’s, we expect the fourth quarter results for ProAssurance to look a lot like this quarter, with the usual caveats about the market conduct of competitors and possible changes in the overall insurance and investment markets. We will hear more about all of this as we move through our call, including the addition of our Segregated Portfolio Cell Reinsurance segment reporting the results of our Segregated Portfolio Cells or SPCs within that segment. So let’s start with our Chief Operating Officer, Ned Rand. Ned?

Thank you, Stan. We have updated our segment disclosure to include our Segregated Portfolio Cell business as a separate segment, in keeping with how we are viewing this business internally. Additionally, we believe investors will benefit from this additional disclosure. Now I’d like to focus on our consolidated results. Topline growth was again a highlight for us in the third quarter. All of our operating segments contributed to the increase in gross premiums written of $14.2 million or almost 6% quarter-over-quarter. We will discuss the increases by segment shortly, but I want to highlight our ability to increase premiums in all operating segments while maintaining our underwriting discipline. We are encouraged that we can add business even in this competitive market. We continue to see strong retention across our insurance operations, further underscoring our ability to maintain market share by providing real value to our policyholders. We also see that in the new business we are able to add in the domestic operating segments, $28.6 million in this year’s third quarter versus $20.6 million in Q3 of 2017. The consolidated current accident year loss ratio for the quarter was 82.1%, down 2 points from last year’s third quarter. As you will remember, the 2017 third quarter results reflected the effect of hurricane related losses in our Lloyd’s Syndicate. The quarter-over-quarter improvement in that segment was dramatic, but was offset somewhat by an increase in our Specialty P&C segment that Howard will discuss shortly. There was net favorable loss development in all operating segments in the quarter totaling $21.5 million, down from $32.3 million a year ago. The driver here was continuing caution about the potential for increased loss severity within our medical professional liability lines and we believe that caution will affect reserve development in that line for the foreseeable future. I am going to ask Dana to share some of the highlights of the non-insurance related results for the quarter. Dana?

Thanks, Ned. On a consolidated level, our net investment result rose 2.2% compared to last year, primarily attributable to an increase in earnings from our unconsolidated subsidiaries, partially offset by a slight decline in net investment income due to a smaller investment portfolio. Net realized investment gains totaled $12.4 million, an increase of 59.7% over last year’s quarter, primarily due to changes in the value of our equity trading portfolio. Like last quarter, we had a tax benefit in Q3. It was approximately $200,000 compared to a $6 million tax expense last year. The change being primarily due to lower pretax income, a lower corporate tax rate, a portion of our investment income being tax exempt and the increased utilization of tax credit. In summary, net income for the quarter was $31.2 million or $0.58 per diluted share and non-GAAP operating income for the quarter was $22.4 million or $0.42 per diluted share. At September 30th, we held approximately $214 million in unpledged cash and liquid investments outside our insurance subsidiary, which brings us to capital management. We have not repurchased any shares this year and while our stock is substantially below the 52-week high, we continue to target a payback period of around 36 months or less when considering repurchases above book value, which we believe removes the motion from the decision about repurchases. To be sure, stock repurchase continues to be a part of our carefully thought out and executed capital management strategy, in which we evaluate a variety of potential and sometimes competing uses for our capital, and as I am sure someone will ask, that includes special dividends, which I will remind you are something we have cautioned against taking for granted, even as we have paid them over the past few years. The early changes we are seeing in the loss environment certainly affect our view of capital management. These changes have the potential to increase the volatility of our HCPL business as well as bring about new opportunities for growth. Both of these are reasons for us to hold more capital than we might otherwise. We regularly evaluate our capital position with our Board and we will continue to do so considering such factors as capital requirements imposed by regulators and rating agencies and opportunities to add business as we see potential changes in the market, and that includes adding business through writing new business or through the M&A. Frank? Frank O’Neil: Thanks, Dana. Now we are going to pivot to Howard and Mike for commentary on the operating segments, starting with Howard in Specialty P&C.

Thanks, Frank. I won’t try to sugarcoat the fact that our Specialty P&C segment operated at a loss this quarter, but within the explanation of that loss, I believe there are some positives to consider. First, even in a very competitive environment, we saw an increase in gross premiums written of almost 1%. That gain was driven largely by an increase of $9 million in healthcare facilities premiums, which is a focus for us and reflects continuing consolidation trends. In addition to a 7% price increase on healthcare facilities renewal and retention consistent with the prior year quarter at 82%, we generated $8.9 million in new business. This reaffirms that we are winning in the marketplace and building on our ongoing success in the broker community, which largely controls the facilities business. Physician business declined due to the expected effect of 24-month policy renewals, the shifting of renewal dates on a few large policies and some retention losses. Although, it’s important to note that physician premium retention remains strong at 89%, also in line with the prior year quarter. Importantly, overall renewal pricing was up across all lines of business in Specialty P&C. Physician renewal pricing up 5% and facilities up 7% as previously mentioned. These are levels of rate increases we have not seen in some time. We have talked for several quarters about signs in the overall market that indicates losses are increasing. Although, I will underscore that we still see no evidence of that in our paid losses. However, the fact that we are winning significant new business, retention remains strong and renewal pricing is moving higher points to greater discipline in the market as those increased regulatory scrutiny of the financial condition of some of the smaller companies in the line, in short, there is overall…

Thanks, Frank. The change in reportable segments allows management to focus on the operating results of the Segregated Portfolio Cells within our Cayman Islands reinsurance subsidiaries separately from our traditional workers’ compensation business. The SPCs are dedicated to Workers’ Compensation, Healthcare Professional Liability business or combination of the two. The results of SPCs that assume Workers’ Compensation business were previously reported in what is now the Workers’ Compensation Insurance segment and the results of the SPCs that assume Healthcare Professional Liability business were previously reported in our Specialty P&C segment. Further, the investment results for the SPCs were previously reported in our Corporate segment. With this change, the SPC results now standalone, which provides that greater level of detail. Prior period segment reporting has been recast to conform to the current period’s presentation. Now, we will go to Mike Boguski to comment on the Workers’ Compensation Insurance and Segregated Portfolio Cell Reinsurance segment. Mike?

Thank you, Dana. In the Workers’ Compensation Insurance segment, operating results increased to $1.6 million for the third quarter of 2018, compared to $1.1 million for the same period in 2017. This was driven by an increase in net premiums earned and decreases in the underwriting expense ratio and loss ratio. Gross premiums written increased 9.8% to $65.7 million for the quarter, compared to $59.8 million for the same period last year. This includes new business writings of $11.8 million during the quarter, compared to $9.2 million in the third quarter of 2017. Our third quarter of 2018 production results includes $3.1 million of gross premiums rewritten related to last year’s Great Falls renewal rights transaction and solid production results across our operating territories. Renewal pricing increased 1% in the third quarter compared to renewal price decreases of 5% in 2017. Premium retention was 85%, a solid result in a very competitive market. Audit premium was $1.2 million in the quarter, compared to approximately $650 million -- $650,000 in Q3 of 2017. The decrease in the third quarter 2018 calendar year net loss ratio from 65.2% in 2017 to 64.8% in 2018 reflected favorable trends in prior year claim closing patterns, which resulted in net favorable reserve development of $2.8 million in 2018, compared to approximately $400,000 in 2017, offset by an increase in the current accident year loss ratio. The 2018 net favorable loss reserve development reflected better than expected claim results primarily related to accident years 2015 and 2016. We successfully closed 48.1% of 2017 and prior traditional claims during 2018, including 11.7% in the third quarter. The increase in the current accident year loss ratio from 66.1% to 70.7% during the quarter was due to an increase in severity related claim activity attributable to inexperienced workers hired…

Sure, Frank. Please remember we are reporting on a one quarter lag as we have since the inception of the segment. Gross premiums written were significantly higher in the quarter, up 25.8% to $26.4 million. The increase is due to our increased participation in the operations of Syndicate 1729 from 58% to 62% effective January 1st and our 100% participation in Syndicate 6131, which is the special purpose arrangement writing through Syndicate 1729. Net premiums earned increased $2.7 million to $19 million, an increase of 16.6% over the prior year quarter. This reflected the increased amount of business produced in the open market, where premium is earned over 12 months, as opposed to business written under delegated underwriting authority, where premium is earned over 24 months. Ned mentioned the decrease in the current accident year loss ratio at the start of the call. The ratio was down 68.5 points to 56.1%, primarily due to the effects of the hurricane losses recognized in the third quarter of 2017. We did recognize favorable development in the quarter of approximately $600,000. While expenses continue to grow, the rate of increase slowed, but expenses are still being driven by staffing increases related to the segment’s growth and by higher commissions as we write more business. As Dana mentioned at the outset of the call, we expect the next quarter’s results from the Lloyd’s Syndicate segment to be negatively affected by losses developing out of the Hawaiian Volcano eruption and to a lesser extent recent storms, which is leading Syndicate management to forecast the loss of approximately $3.2 million in next quarter’s results. Frank? Frank O’Neil: Thank you, Howard. And Stan, final comments from you?

Thank you, Frank. I would say to investors as I say all the time that they can be confident we are conducting our business with a long-term view in mind and making decisions that will protect our policyholders now and in the future, while at the same time and just as importantly, creating sustainable long-term value for our shareholders. As Howard said, I don’t want to gloss over the unavoidable realities inevitably presented by the current stage of the cycle in our lines of business. But we do see signs of solid success as a result of our discipline in the market and our ability to offer truly differentiated products and superior service. New business, retention and higher pricing, all speak to that fact, and I am confident that the steps we are taking now will allow us to capitalize on the opportunities that will emerge in the markets we serve. I want to close by again welcoming Dana and thanking her for joining our executive team. We are excited to have her. She has big shoes to fill, but will do a great job and we look forward to her service for many years to come. With that, Frank, let’s take questions. Frank O’Neil: Okay. Kate, if you will open the lines that would be great.

[Operator Instructions] The first question comes from Mark Hughes of SunTrust. Please go ahead.

Yeah. Thank you. Good morning.

Good morning, Mark.

The physicians business being up 5% that sounds like a pretty dynamic pricing environment. Is that still moving, if you look at it month-to-month or if you see what’s happening early in the fourth quarter, is that still trending upward?

Mark, this is Howard. It moves every month and sometimes up at -- sometimes at that level, sometimes lower. 5.5% in the quarter, obviously, we are very pleased with. I expect that we will continue to generate positive price. But I can’t really tell you that it will be at that level or different level. It depends to a great deal on the mix of the business that we have in the quarter, large accounts versus small states where we are moving rates more than others. So other than to say that very pleased with the progress there, it’s hard to predict the next quarter’s results.

Understood. I wonder if you could give a little more granularity to just kind of what you are seeing in the market in terms of the loss severity, I think, you made it clear you are not seeing it in your book, but you are being prudent. Are you still seeing a trend, have you seen recent court decisions that are high dollar, any sense on timing on when you got adequate information to judge whether it’s coming your way or not.

I think in the industry in general, certainly in the press, continue to see significant verdicts being rendered, particularly in some of the hospital Professional Liability areas. I am talking about, in some cases verdicts north of $100 million, now depending on where those get resolved and how is another question, of course. But there does seem to be a more liberal attitude in terms of some of the jury verdicts that we have been seeing. That said, again in our business, we have been, I think, fairly insulated from that, but we are concerned about it and that concern extends to the reserves that we are establishing for cases that have the potential for high damages as always the mix between damages and viability and whether that case ultimately goes to trial or get settled and how it gets resolved, but with the damages aspect up that is the area of concern for us. That said, we have not really seen it on our paid results.

Mark, it’s Stan. The only thing I would add to that is that it’s important to keep in mind sort of the mindset of the plaintiff’s lawyer and the verdicts that you read about in the paper impact his or her, that is the plaintiff’s lawyer’s view of the value of the case he is taking to the courthouse next Monday and if the newspaper headlines proclaim these very large verdicts, then in his or her mind the value of his case just went up. That doesn’t mean that he will realize that value, but it does mean he’s going to be seeking more than you would have thought the week before. That’s obviously just an anecdotal single example, but that’s why an increase in severity ripples back through every open claim you have got. The claims are same. It didn’t change overnight, but the plaintiff’s lawyer’s evaluation of the claim is what’s changed and it’s just very difficult in advance to get any meaningful data on that. As Howard said, our page numbers have not increased, but I remind everybody that we drive down the road with the windshield blacked out looking through the rearview mirror.

All right. And final question, Mike in Workers’ Comp 1% increase in renewal pricing, that’s definitely running counter to the broader trend. How do you get that?

Yeah. Good morning, Mark. Really good question. On the pricing side, in general what we have seen is 3% to 4% increases in our Mid-Atlantic region as a result of loss cost decreases in February of 2018 that went up 6.2%, offset by competitive pressures in all of our other regions. And as a result of Pennsylvania being 50% of our overall premium writings, that’s driven it to a positive number and we are really, really pleased with that result. But that’s been what’s driven it to the plus 1%. We are seeing competitive pressures in all of the other operating territories.

Thank you.

Yeah. You are welcome, Mark.

The next question is from Christopher Campbell of KBW. Please go ahead.

Hi, Chris.

Good morning. I guess just a first question on Workers’ Comp. So I know your part -- that’s the renewal rights transaction. But just looking overall, net written premiums are up 13%, rates are only up 1%, so really large exposure growth. Any potential concerns as economic growth has more work -- has kind of more newer workers entering the economy and the potential impact that could have on frequency or severity?

Yeah. It’s a really good question. First of all, our traditional growth was up about 9.8% for the third quarter. The main transaction with Great Falls generated 4.3% of that, so our -- I am sorry, $3.3 million or 4.3% of that. So our kind of organic growth is around 3% to 4%. In the quarter, it was driven by the positive rate impact and it was also driven by our Eastern Specialty Risk initiative that we started in the first quarter of 2017, which is focused on higher hazard employers and we wrote about $600,000 in that initiative in the quarter as well. From the standpoint of the inexperienced workers, it’s a trend that, when you take a step back, we have the benefit of exposure increases on our renewal book and also premium audit trends that are really, really favorable. But the increases in severity during the economic -- as a result of the economic growth are typically related to hiring of less experienced workers to keep up with the growing business and they tend to be less trained from a safety perspective and what we have seen is from a severity standpoint over the last four years, our claims above $0.5 million have had 40% of those are related to injured workers with less than a year of experience on the job and in 2018 in the accident year roughly 30% of our incurred losses are from less experienced workers. So, it’s a trend we are -- it’s a macro trend obviously that we are looking very closely at. We have some excellent risk management strategies, training and orientation strategies with our customers to get our arms around this. But there was definitely a tick up in the ‘18 accident year on that front. Frank O’Neil: And Mike, will you revisit the specialty risk topic for just a second and explain for some people who might be new on the call, the difference between slightly higher hazard and what most people may think of as high hazard?

Yeah. Sure, Frank. I mean, first of all, just some results on it. We through the third quarter of 2018, since inception of the unit we have written about $9.3 million and we have had favorable loss ratios in that area. Secondly, it’s the hazard level just above what we write today, it’s not the bridge builders and the roofers of the world out there, it’s primarily business written in regional transportation, construction and forestry type operations that we have had some success in historically and we think we can target these businesses to make a nice underwriting margin. Frank O’Neil: Thanks. I just thought that’s an important point.

Yeah. Thank you, Frank. And when you take a look at the performance of that business, we have been really pleased with -- since the inception of Q1 of 2017. Frank O’Neil: Sorry, Chris, go ahead. I didn’t mean to interrupt you.

Oh! No, no, no. Just very helpful. Thanks for all the extra color on there. Just one other question, I guess, how are you thinking about 2019’s participation at Lloyd’s, looks like the Syndicate’s performing better, Lloyd’s is doing a lot of kind of operations to improve quality of the market overall. I guess, just -- how are you thinking about ProAssurance’s participation?

Hey, Chris. Yeah. Thanks for the question. As you may know that’s kind of the planning process for Lloyd’s is just wrapping up for the 2019 plan. We are looking at some ways to potentially mute some of the volatility from the line, but at this point really don’t have any plans to make material changes to our participation. But we are mindful of the volatility that that Lloyd’s has brought into the organization and are potentially looking at some ways if there are some ways that we fund that are cost effective to potentially mute some of that volatility.

Yeah. Well, thanks for all the answers. Best of luck for rest of the year.

[Operator Instructions] The next question comes from Marcos Holanda of Raymond James. Please go ahead.

Hi. Good morning. Thanks for taking my question.

Thank you.

My first question is on the Lloyd’s segment, and it’s around expense ratio that continues to come in higher than previous quarters. So I was just hoping you guys could discuss that and if it’s reasonable to assume that looking forward we get favorable year-over-year comparisons.

Yeah. Marcos, it’s a good question. As we have talked in the past, it has taken us longer to get the scale with the Lloyd’s operation than we had hoped. As a part of the 2019 planning process for Lloyd’s, expenses has been a big focus of that. And so our, I guess, early anticipation is that we will begin to see some improvement in the expenses within the Syndicate. As you may know, we use a third-party service provider to provide a good bid of the back office operations for the Syndicate and we have slowly been bringing employees on and kind of moving away from that third-party provider. That process of bringing resources on and moving away results in some overlap and duplication for a period of time and our expectation is we will continue to use that service provider for the bulk of 2019 and looks to 2020. So when we are more likely to move more fully away. So there will still be some expense pressure, but I think the plan we are working on for 2019 will show some improvements to the expense ratio.

Good. Thank you. And my second question is on Workers’ Comp here again touching on the macro trends you guys were discussing and also been -- if you guys could share, perhaps, your experience in previous rate cycles where we had decrease in Workers’ Comp and this sort of trend of hiring experienced workers kicked in and if that drove prices higher than, so.

Yeah. Thank you. Thank you for the question. Yeah. Typically when we see these frequency trend increases and severity trend increases, it does help us with the pricing. I mean our pricing has been pretty consistent over the last five years despite the market conditions. We are up about 9% on the renewal rate side if you average out the last five years over that time. Although, the recent years, 2017, we were down about 3.4%, ‘16 down about 1% and as you can see, we are moving towards a flat trend this year. It takes a while to work through the bureaus, the NCCI and the state bureaus. As far as those trends, they tend to develop loss costs off of kind of 15 years, 16 years, 17 years. So, but no, we do expect if these increases continue that pricing will follow.

Thank you for the answers.

This concludes our question-and-answer session. I would like to turn the conference back over to Frank O’Neil for any closing remarks. Frank O’Neil: Thank you, Kate. I think we will speak to everybody next in February when we report our year-end and fourth quarter results. Enjoy your holidays and we are signed off.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.