ProAssurance Corp. (PRA) filed Quarterly Report for the period ended 2009-06-30.

Pro Assurance is a leader in developing solutions which serve the liability needs of the evolving needs of the health care industry. ProAssurance is the nation\'s fourth largest writer of medical professional liability insurance and one of the 100 largest writers of personal auto coverage. ProAssurance Corp. has a market cap of $1.72 billion; its shares were traded at around $51.93 with a P/E ratio of 8.8 and P/S ratio of 3. ProAssurance Corp. had an annual average earning growth of 13.1% over the past 10 years.

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We also have other investments, primarily comprised of equity interests in private investment funds (non-public investment partnerships and limited liability companies), $45.8 million of which are accounted for using the equity method and $31.1 million of which are carried at cost. We evaluate these investments for OTTI by considering any declines in fair value below the recorded value. Determining whether there has been a decline in fair value involves assumptions and estimates as there are typically no observable inputs to determine the fair value of these investments.

Each of these FSPs is effective for interim and annual periods ending after June 15, 2009. We adopted the FSPs on the effective date. As of April 1, 2009 our debt securities included non-credit impairment losses previously recognized in earnings of approximately $5.4 million, ($3.5 million after tax) which we recognized (an increase to retained earnings and a decrease to accumulated other comprehensive income) as the cumulative effect of adoption in accordance with the transitions provisions of FSP 115-2.

ProAssurance Corporation is a holding company and is a legal entity separate and distinct from its subsidiaries. Because it has no other business operations, dividends from its operating subsidiaries represent a significant source of funds for its obligations, including debt service. The ability of our insurance subsidiaries to pay dividends is subject to limitation by state insurance regulations. See our discussions under “Regulation of Dividends and Other Payments from Our Operating Subsidiaries” in Part I of our 2008 Form 10K, and in Note 16 of our Notes to the Consolidated Financial Statements included therein, for additional information regarding the ordinary dividends that can be paid by our insurance subsidiaries in 2009. At June 30, 2009 we held cash and investments of approximately $50.4 million outside of our insurance subsidiaries that are available for use without regulatory approval. In July 2009 our insurance subsidiaries paid dividends totaling $23.1 million to an intermediate holding company wholly owned by ProAssurance Corporation. These funds are now also available for use without regulatory approval.

On April 1, 2009 ProAssurance acquired Podiatry Insurance Company of America and subsidiaries (PICA) through a cash sponsored demutualization as a means of expanding our professional liability insurance operations. PICA provides professional liability insurance primarily to podiatric physicians, chiropractors and other healthcare providers throughout the United States and had gross written premium of approximately $96 million in 2008. ProAssurance purchased all of PICA’s outstanding stock created in the demutualization for $135 million in cash, of which $15 million was a surplus contribution to be used to provide premium credits to eligible policyholders over a three year period beginning in 2010.

The principal components of our operating cash flows are the excess of net investment income and premiums collected over net losses paid and operating costs, including income taxes. Timing delays exist between the collection of premiums and the ultimate payment of losses. Premiums are generally collected within the twelve-month period after the policy is written while our claim payments are generally paid over a more extended period of time. Likewise, timing delays exist between the payment of claims and the collection of any associated reinsurance recoveries. Our operating activities, excluding PICA, provided positive cash flows of approximately $13.1 million and $101.5 million for the six months ended June 30, 2009 and 2008, respectively. Cash from operating activities in 2009 reflects cash used by PICA operations (since the date of acquisition, April 1, 2009) of $1.0 million.

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