   PROASSURANCE CORPORATION-----BEGIN PRIVACY-ENHANCED MESSAGE-----
   Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov
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   0000950144-06-001683.hdr.sgml : 20060302 20060301175637 ACCESSION
   NUMBER: 0000950144-06-001683 CONFORMED SUBMISSION TYPE: 10-K PUBLIC
   DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF
   DATE: 20060302 DATE AS OF CHANGE: 20060301 FILER: COMPANY DATA:
   COMPANY CONFORMED NAME: PROASSURANCE CORP CENTRAL INDEX KEY:
   0001127703 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY
   INSURANCE [6331] IRS NUMBER: 631261433 STATE OF INCORPORATION: DE
   FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act
   SEC FILE NUMBER: 001-16533 FILM NUMBER: 06657162 BUSINESS ADDRESS:
   STREET 1: 100 BROOKWOOD PLACE CITY: BIRMINGHAM STATE: AL ZIP: 35209
   BUSINESS PHONE: 2058774400 10-K 1 g99804e10vk.htm PROASSURANCE
   CORPORATION

   [1]Table of Contents

   United States Securities and Exchange CommissionWashington, D.C. 20549FORM
   10-K(Mark One)

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    ž   Annual report pursuant to section 13 or 15(d) of the Securities  
        Exchange Act of 1934 [Fee Required] for the fiscal year ended    
        December 31, 2005, or                                            

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    o   Transition report pursuant to section 13 or 15(d) of the Securities      
        Exchange Act of 1934 [No Fee Required] for the transition period from    
        to .                                                                     

   Commission file number: 001-16533ProAssurance Corporation(Exact name
   of registrant as specified in its charter)

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                    Delaware                                63-1261433             

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    (State of incorporation or organization)   (I.R.S. Employer Identification No.)

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      100 Brookwood Place, Birmingham, AL        35209   

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    (Address of principal executive offices)   (Zip Code)

   (205) 877-4400 (Registrant’s Telephone Number, Including Area Code)Securities
   registered pursuant to Section 12(b) of the Act:

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              Title of Each Class             Name of Each Exchange On Which Registered

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    Common Stock, par value $0.01 per share            New York Stock Exchange         

   Securities registered pursuant to Section 12(g) of the Act: None.Indicate
   by check mark if the registrant is a well-known seasoned issuer, as
   defined in Rule 405 of the Securities Act.     Yes  o     No  žIndicate
   by check mark if the registrant is not required to file reports
   pursuant to Section 13 or Section 15(d) of the Act.      Yes  o     No  žIndicate
   by check mark whether the registrant (1) has filed all reports
   required to be filed by Section 13 or 15(d) of the Securities Exchange
   Act of 1934 during the preceding 12 months (or for such shorter period
   that the registrant was required to file such reports), and (2) has
   been subject to such filing requirements for the past 90 days.   Yes  ž     No  oIndicate
   by check mark if disclosure of delinquent filers pursuant to Item 405
   of Regulation S-K is not contained herein, and will not be contained,
   to the best of registrant’s knowledge, in definitive proxy or
   information statements incorporated by reference in Part III of this
   Form 10-K or any amendment to this Form 10-K.  oIndicate by check mark
   whether the registrant is a large accelerated filer, an accelerated
   filer, or a non-accelerated filer. See definition of “accelerated
   filer and large accelerated filer” in Rule 12b-2 of the Exchange
   Act.   Large Accelerated Filer  ž  Accelerated Filer  o
   Non-Accelerated Filer oIndicate by check mark whether the registrant
   is a shell company (as defined in Rule 12b-2 of the Exchange Act.
     Yes  o     No  žThe aggregate market value of voting stock held by
   non-affiliates of the registrant at June 30, 2005 was $1,227,971,676.As
   of February 15, 2005, the registrant had outstanding approximately
   31,144,642 shares of its common stock.

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   [2]Table of Contents

   Documents incorporated by reference in this Form 10-K

    (i)       The definitive proxy statement for the 2006 Annual Meeting of the         
              Stockholders of ProAssurance Corporation (File No. 001-16533) is          
              incorporated by reference into Part III of this report.                   

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    (ii)      Registration Statement on Form S-4 of MAIC Holdings, Inc. (File           
              No. 33-91508) is incorporated by reference into Part IV of this           
              report.                                                                   

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    (iii)     The MAIC Holdings, Inc. Definitive Proxy Statement for the 1996 Annual    
              Meeting (File No. 0-19439) is incorporated by reference into Part IV      
              of this report.                                                           

   __TOKEN__5__5__

    (iv)      The Registration Statement on Form S-4 of Professionals Group, Inc.       
              (File No. 333-3138) is incorporated by reference into Part IV of this     
              report.                                                                   

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    (v)       The Registration Statement on Form S-4 of ProAssurance Corporation        
              (File No. 333-49378) is incorporated by reference into Part IV of this    
              report.                                                                   

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    (vi)      The ProAssurance Corporation Quarterly Report on Form 10-Q for the        
              quarter ended June 30, 2001 (Commission File No. 001-16533) is            
              incorporated by reference into Part IV of this report.                    

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    (vii)     The ProAssurance Corporation Quarterly Report on Form 10-Q for the        
              quarter ended September 30, 2001 (Commission File No. 001-16533) is       
              incorporated by reference into Part IV of this report.                    

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    (viii)    The ProAssurance Corporation Annual Report on Form 10-K for the year      
              ended December 31, 2001 (Commission File No. 001-16533) is                
              incorporated by reference into Part IV of this report.                    

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    (ix)      The ProAssurance Corporation Quarterly Report on Form 10-Q for the        
              quarter ended June 30, 2002 (Commission File No. 001-16533) is            
              incorporated by reference into Part IV of this report.                    

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    (x)       The Registration Statement on Form S-3 of ProAssurance Corporation        
              (Commission File No. 333-100526) is incorporated by reference into        
              Part IV of this report.                                                   

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    (xi)      The ProAssurance Annual Report on Form 10-K for the year ended            
              December 31, 2002 (File No. 001-16533) is incorporated in Part IV of      
              this report.                                                              

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    (xii)     The ProAssurance Corporation Quarterly Report on Form 10-Q for the        
              quarter ended June 30, 2003 (File No. 001-16533) is incorporated in       
              Part IV of this report.                                                   

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    (xiii)    The Registration Statement on Form S-3 of ProAssurance Corporation        
              (File No. 333-109972) is incorporated by reference in Part IV of this     
              report.                                                                   

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    (xiv)     The ProAssurance Corporation Definitive Proxy Statement filed on          
              April 16, 2004 (File No. 001-16533) is incorporated by reference into     
              Part IV of this report.                                                   

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    (xv)      The ProAssurance Corporation Annual Report on form 10-K for the year      
              ended December 31, 2004 (File No. 001-16533) is incorporated by           
              reference into Part IV of this report.                                    

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    (xvi)     The Registration Statement of Form S-4 of ProAssurance Corporation        
              (File No. 333-124156) is incorporated by reference in Part IV of this     
              report.                                                                   

   2

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   [3]Table of Contents

    (xvii)     The ProAssurance Corporation Current Report on Form 8-K for event       
               occurring on March 31, 2005 (File No. 001-16533) is incorporated by     
               reference into Part IV of this report.                                  

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    (xviii)    The ProAssurance Corporation Current Report on Form 8-K for event       
               occurring on May 18, 2005 (File No. 001-16533) is incorporated by       
               reference into Part IV of this report.                                  

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    (xix)      The ProAssurance Corporation Current Report on Form 8-K for event       
               occurring on January 4, 2006 (File No. 001-16533) is incorporated by    
               reference into Part IV of this report.                                  

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    (xx)       The Registration Statement of form S-4 of ProAssurance Corporation      
               (File No. 333-131874) is incorporated by reference in Parts I and IV    
               of this report.                                                         

   3

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   TABLE OF CONTENTS

   __TOKEN__9__0__

    [1]PART I                                                        
                                                                     
                                                                     
                                                                     
    1. #000                                                          

                                                                      [1]ITEM 1. BUSINESS                                                    
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #001                                                                

                                                                      [1]ITEM 1A. RISK FACTORS                                               
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #002                                                                

                                                                      [1] ITEM 1B.UNRESOLVED STAFF COMMENTS                                  
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #003                                                                

                                                                      [1]ITEM 2. PROPERTIES                                                  
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #004                                                                

                                                                      [1]ITEM 3. LEGAL PROCEEDINGS                                           
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #005                                                                

                                                                      [1]ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS         
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #006                                                                

    [1] PART II                                                      
                                                                     
                                                                     
                                                                     
    1. #007                                                          

                                                                      [1]ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER  
                                                                      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES                      
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #008                                                                

                                                                      [1]ITEM 6. SELECTED FINANCIAL DATA                                     
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #009                                                                

                                                                      [1]ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                                                                      AND RESULTS OF OPERATIONS                                              
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #010                                                                

                                                                      [1]ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #011                                                                

                                                                      [1]ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                 
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #012                                                                

                                                                      [1]ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
                                                                      AND FINANCIAL DISCLOSURE                                               
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #013                                                                

                                                                      [1]ITEM 9A. CONTROLS AND PROCEDURES                                    
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #014                                                                

                                                                      [1]ITEM 9B. OTHER INFORMATION                                          
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #015                                                                

    [1] PART III                                                     
                                                                     
                                                                     
                                                                     
    1. #016                                                          

                                                                      [1]ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT         
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #017                                                                

                                                                      [1]ITEM 11. EXECUTIVE COMPENSATION                                     
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #018                                                                

                                                                      [1]ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND        
                                                                      MANAGEMENT AND RELATED STOCKHOLDER MATTERS                             
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #019                                                                

                                                                      [1]ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS             
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #020                                                                

                                                                      [1]ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                     
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #021                                                                

    [1] PART IV                                                      
                                                                     
                                                                     
                                                                     
    1. #022                                                          

                                                                      [1]ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                 
                                                                                                                                             
                                                                                                                                             
                                                                                                                                             
                                                                      1. #023                                                                

    [1] SIGNATURES                                                   
                                                                     
                                                                     
                                                                     
    1. #024                                                          

    [1]EXHIBIT INDEX                                                 
                                                                     
                                                                     
                                                                     
    1. #025                                                          

    [1]EX-10.4(J) RELEASE AND SEVERANCE AGREEMENT / DARRYL K. THOMAS 
                                                                     
                                                                     
                                                                     
    1. g99804exv10w4xjy.txt                                          

    [1]EX-21.1 SUBSIDIARIES OF THE COMPANY                           
                                                                     
                                                                     
                                                                     
    1. g99804exv21w1.txt                                             

    [1]EX-23.1 CONSENT OF ERNST & YOUNG LLP                          
                                                                     
                                                                     
                                                                     
    1. g99804exv23w1.txt                                             

    [1]EX-31.1 SECTION 302 CERTIFICATION OF THE PEO                  
                                                                     
                                                                     
                                                                     
    1. g99804exv31w1.txt                                             

    [1]EX-31.2 SECTION 302 CERTIFICATION OF THE PFO                  
                                                                     
                                                                     
                                                                     
    1. g99804exv31w2.txt                                             

    [1]EX-32.1 SECTION 906 CERTIFICATION OF THE PEO                  
                                                                     
                                                                     
                                                                     
    1. g99804exv32w1.txt                                             

    [1]EX-32.2 SECTION 906 CERTIFICATION OF THE PFO                  
                                                                     
                                                                     
                                                                     
    1. g99804exv32w2.txt                                             

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   [4]Table of Contents

   PART IITEM 1. BUSINESS.General / Corporate Overview     We are a
   holding company for specialty property and casualty insurance
   companies focused on professional liability insurance. Our executive
   offices are located at 100 Brookwood Place, Birmingham, Alabama 35209
   and our telephone number is (205) 877-4400. Our stock trades on the
   New York Stock Exchange under the symbol “PRA.” Our website is
   www.ProAssurance.com.      The Investor Relations section of our
   website provides many resources for investors seeking to learn more
   about us. Whenever we file a document or report with the Securities
   and Exchange Commission (the SEC) on its EDGAR system, we make the
   document available on our website as soon as reasonably practical.
   This includes our annual report on Form 10K, our quarterly reports on
   Form 10Q and our current reports on Form 8K. We show details about
   stock trading by corporate insiders by providing access to SEC Forms
   3, 4 and 5 when they are filed with the SEC. We maintain access to
   these reports for at least one year after their filing.      In
   addition to federal filings, we make available copies of the financial
   statements we file with state regulators, news releases that we issue,
   and certain investor presentations. We believe these documents provide
   important additional information about our financial condition.
        The Corporate Governance section of our website provides copies
   of the Charters for our Audit Committee, Internal Audit function,
   Compensation Committee and Nominating/Corporate Governance Committee.
   In addition you will find up-to-date copies of documents detailing our
   Code of Ethics and Conduct, Corporate Governance Principles and Share
   Ownership Guidelines for Management and Directors. We also provide
   copies of the Pre-Approval Policy and Procedures for our Audit
   Committee and our Policy Regarding Stockholder-Nominated Director
   Candidates.      Printed copies of our committee charters, Corporate
   Governance Principles, Code of Ethics and Conduct, and our Policy
   Regarding Determination of Director Independence (including
   categorical standards to assist in determining independence) may be
   obtained from Frank O’Neil, Senior Vice President, ProAssurance
   Corporation, either by mail at P.O. Box 590009, Birmingham, Alabama
   35259-0009, or by telephone at (205) 877-4400 or (800) 282-6242.
        Because the insurance business uses certain terms and phrases
   that carry special and specific meaning, we urge you to read the
   Glossary included at the end of Item I prior to reading this report.
   General / Business Overview     We sell professional liability
   insurance primarily to physicians, dentists, other healthcare
   providers and healthcare facilities, principally in the mid-Atlantic,
   Midwest and Southeast. We have a small book of legal professional
   liability business in the Midwest as well.      Our top five states
   represented 68% of gross premiums written for the year ended
   December 31, 2005. The following table shows our gross premiums
   written in these lines and key states for each of the periods
   indicated.

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                        Gross Written Premiums–Years Ended December 31         

                                       ($ in thousands)                        

                                             2005                                 2004(2)        2003(2)  

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    Ohio                $                                               131,102                23  %          $  149,269         26  %    $  123,205         23  % 

    Alabama                                                             111,462                19  %             111,582         19  %       106,437         20  % 

    Florida                                                              61,341                11  %              69,899         12  %        80,549         15  % 

    Michigan                                                             46,741                 8  %              45,578          8  %        54,727         10  % 

    Indiana (1)                                                          41,129                 7  %              32,635          6  %        32,837          6  % 

    All other states                                                    181,185                32  %             164,629         29  %       145,568         26  % 

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    Total               $                                               572,960               100  %          $  573,592        100  %    $  543,323        100  % 

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      (1)    Not a top five state in 2004 and 2003.                               

   __TOKEN__11__1__

      (2)    Missouri was included in the top five states in 2004 and 2003 (gross 
             premiums written of $35,217 and $33,987, respectively).              

        We maintain 16 local claims and/or underwriting offices to ensure
   that we have a local presence in the markets we serve. This emphasis
   on local knowledge allows us to maintain active relationships with our
   customers and be more responsive to their needs.           We believe
   this local knowledge allows us to be more effective in evaluating
   claims because we have a detailed understanding of the medical and
   legal climates of each market. Our insureds value the attention we
   give to each claim and our willingness and ability to defend
   non-meritorious claims is a key factor that differentiates us from our
   competitors.           We rigorously underwrite each application for
   coverage to ensure that we understand the risks we accept, and are
   able to develop an adequate price for that risk. By ensuring that we
   charge an adequate rate, we seek to maintain the strong financial
   position that allows us to protect our customers in the long-term.
             We believe our financial strength, commitment to a local
   market presence and personal service have allowed us to establish a
   leading position in our markets, thus enabling us to effectively
   compete on a basis other than just price. General / Financial Overview          For
   the year ended December 31, 2005, we generated $573.0 million of gross
   premiums written, $543.2 million of net premiums earned and
   $645.3 million of total revenues. As of December 31, 2005, we had cash
   and invested assets of $2.665 billion, total assets of $3.909 billion
   and stockholders’ equity of $765.0 million.           For the year
   ended December 31, 2005, our combined ratio was 97.1%. A combined
   ratio below 100% indicates profitable underwriting prior to the
   consideration of investment income. However, if investment income is
   considered, companies writing professional liability insurance may be
   profitable with combined ratios above 100%. Thus, the combined ratio
   may not always be indicative of our ultimate results because of the
   “long-tail” nature of the professional liability business.
             In order to measure the effect of investment income, we also
   measure our results by calculating our operating ratio. We measure our
   overall results by calculating our Return on Equity.

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   [6]Table of Contents

   Corporate Organization and History     We were incorporated in
   Delaware in June 2001 to serve as the holding company for Medical
   Assurance, Inc. (Medical Assurance) in connection with its acquisition
   of Professionals Group, Inc. (Professionals Group). Our core operating
   subsidiaries are The Medical Assurance Company, Inc., ProNational
   Insurance Company, NCRIC Insurance Company, Inc., and Red Mountain
   Casualty Insurance Company, Inc. We also write a limited amount of
   medical professional liability insurance through Woodbrook Casualty
   Insurance Company, Inc. (formerly Medical Assurance of West Virginia,
   Inc.), which we consider to be a non-core operating subsidiary. We are
   the successor to twelve insurance organizations and much of our growth
   has come through mergers and acquisitions. In each, we retained key
   personnel, allowing us to maintain a local presence and preserve
   important institutional knowledge in claims management and
   underwriting. We believe that this ability to utilize local knowledge
   in claims and underwriting is a critical factor in the operation of
   our companies. Our successful integration of each organization
   demonstrates our ability to grow effectively through acquisitions.
        Our predecessor company, Medical Assurance, was founded by
   physicians as a mutual company in Alabama and wrote its first policy
   in 1977. We demutualized and became a public company in 1991. Medical
   Assurance expanded through internal growth and the acquisition of
   professional liability insurance companies with strong regional
   identities in West Virginia, Indiana and Missouri, along with books of
   business in Ohio and Missouri.      Professionals Group traces its
   roots to the Brown-McNeeley Fund, which was founded by the State of
   Michigan in 1975 to provide medical professional liability insurance
   to physicians. Physicians Insurance Company of Michigan, which
   ultimately became ProNational, was founded in 1980 to assume the
   business of the Fund. That company also expanded through internal
   growth and the acquisition of a book of business in Illinois and the
   acquisition of professional liability insurers in Florida and Indiana.
   Recent Transactions     In 2005 ProAssurance acquired NCRIC Group
   (NCRIC), a Washington, D.C.-based medical professional liability
   insurer in a stock-for-stock transaction. The acquisition of NCRIC
   solidified ProAssurance’s market position in the mid-Atlantic states,
   and provided additional personnel and local expertise to drive growth
   in that region. We issued approximately 1.7 million shares valued at
   $67.1 million for purposes of this transaction. See Note 2 of our
   Consolidated Financial Statements included herein for more information
   regarding the transaction with NCRIC.      In 2005 ProAssurance
   announced the sale of its personal lines subsidiary MEEMIC Insurance
   Company and MEEMIC Agency (the MEEMIC Companies), which provide
   automobile, homeowners and associated coverage to educators and their
   families in Michigan. MEEMIC was sold to Motors Insurance Corporation,
   a subsidiary of GMAC Insurance Holdings, Inc. (GMAC Insurance),
   effective on January 1, 2006. GMAC Insurance paid approximately
   $325 million in cash for the MEEMIC Companies. In addition to
   receiving cash from GMAC Insurance, we retained approximately
   $75 million of MEEMIC’s capital. The results of our former personal
   lines segment are presented as discontinued operations in this report.
   See Note 3 of our Consolidated Financial Statements included herein
   for more information regarding the transaction with Motors Insurance
   Corporation.      In April and May 2004, we received net proceeds of
   $44.9 million from the issuance of $46.4 million of trust preferred
   securities. These trust preferred securities have a 30-year maturity
   and are callable at par in December 2009. The interest rate on these
   securities adjusts quarterly to the 3-month London Interbank Offered
   Rate (LIBOR) plus 385 basis points. In our acquisition of NCRIC, we
   assumed its obligations in connection with $15.0 million of trust
   preferred securities issued in December 2002. These trust preferred
   securities have a 30-year maturity and are callable at par in
   December 2007. The interest rate on these securities adjusts quarterly
   to the 3-month LIBOR plus 400 basis points. Both sets of trust
   preferred securities were issued by specially-created business trusts
   created solely for the sole purpose of issuing the securities.

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   [7]Table of Contents

        In early July 2003 we received $104.6 million from the issuance
   of 3.9% Convertible Debentures, due June 2023, having a face value of
   $107.6 million. We utilized a substantial portion of the net proceeds
   from the sale of the Convertible Debentures to repay our outstanding
   term loan. We are using the balance of the net proceeds from the sale
   of the Convertible Debentures and the trust preferred securities, for
   general corporate purposes, including contributions to the capital of
   our insurance subsidiaries to support the growth in insurance
   operations. See Note 10 to our Consolidated Financial Statements for
   more information regarding the Convertible Debentures and the trust
   preferred securities.      In the fourth quarter of 2002 ProAssurance
   sold 3,025,000 shares of common stock at a price of $16.55 per share
   in an underwritten public offering. ProAssurance received net proceeds
   from the offering in the amount of approximately $46.5 million.
   ProAssurance used the proceeds from the offering to support the growth
   of the professional liability insurance business and for general
   corporate purposes. Proposed Transaction     On December 8, 2005
   ProAssurance Corporation announced that it had signed a definitive
   agreement that will merge Physicians Insurance Company of Wisconsin,
   Inc. into a subsidiary of ProAssurance in an all stock transaction. We
   will issue shares of our common stock having a total value of
   approximately $100 million. ProAssurance has filed a Registration
   Statement on Form S-4 to register the shares to be issued in this
   transaction (SEC File Number 133-131874), which includes detailed
   information regarding this transaction.      Physicians Insurance
   Company of Wisconsin, Inc. is a Wisconsin-domiciled stock insurance
   company; its shares are not registered under the Securities Exchange
   Act of 1934. The transaction must be approved by Physicians Insurance
   Company of Wisconsin, Inc. shareholders, and is subject to required
   regulatory approvals. Products and Services      We sell professional
   liability insurance primarily to physicians, dentists, other
   healthcare providers and healthcare facilities, principally in the
   mid-Atlantic, Midwest and Southeast. We have a small book of legal
   professional liability business in the Midwest as well. We are
   licensed to do business in every state but Connecticut, Maine, New
   Hampshire, New York and Vermont.      Although we generate a majority
   of our premiums from individual and small group practices, we also
   insure major physician groups as well as hospitals. While most of our
   business is written in the standard market, our subsidiary, Red
   Mountain Casualty Insurance Company, Inc., offers medical professional
   liability insurance on an excess and surplus lines basis. We also
   offer professional office package and workers’ compensation insurance
   products in connection with our medical professional liability
   products. Marketing     We believe our size, financial strength and
   flexibility of distribution differentiates us from our competitors.
        We utilize direct marketing and independent agents to write our
   business. In Alabama, we rely solely on direct marketing, and in
   Florida and Missouri, direct marketing accounts for a majority of our
   business. We use independent agents to market our professional
   liability insurance products in other markets. For the year ended
   December 31, 2005, we estimate that approximately 65% of our gross
   premiums written were produced through independent insurance agencies.
   These local agencies usually have one to three producers who
   specialize in professional liability insurance and who we believe are
   able to convey the factors that differentiate our professional
   liability insurance product. No single agent or agency accounts for
   more than 10% of our total direct premiums written.      Our marketing
   is primarily directed to physicians. We generally do not target large
   physician groups or facilities because of the difficulty in
   underwriting the individual risks and because their purchasing
   decision is more focused on price. Our marketing emphasizes:

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      –    excellent claims service and the other services and communications we    
           provide to our customers,                                                

   __TOKEN__12__1__

      –    the sponsorship of risk management education seminars as an accredited   
           provider of continuing medical education,                                

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      –    risk management consultation, loss prevention seminars and other         
           educational programs,                                                    

   __TOKEN__12__5__

      –    legislative oversight and active support of proposed legislation we      
           believe will have a positive effect on liability issues affecting the    
           healthcare industry,                                                     

   __TOKEN__12__7__

      –    the dissemination of newsletters and other printed material with         
           information of interest to the healthcare industry, and                  

   __TOKEN__12__9__

      –    endorsements by, and attendance at meetings of medical societies and     
           related organizations.                                                   

        These communications and services have helped us gain exposure
   among potential insureds and demonstrate our understanding of the
   insurance needs of the healthcare industry and promote a commonality
   of interest among us and our insureds. Underwriting     Our
   underwriting process is driven by individual risk selection rather
   than by the size or other attributes of an account. Our pricing
   decisions are focused on achieving rate adequacy. We assess the
   quality and pricing of the risk, primarily emphasizing loss history,
   practice specialty and location in making our underwriting decision.
   Our underwriters work closely with our local claims departments. This
   includes consulting with staff about claims histories and patterns of
   practice in a particular locale as well as monitoring claims activity.
        Our underwriting focuses on knowledge of local market conditions
   and the legal environment. Through our six regional underwriting
   offices located in Alabama, Florida, Indiana, Missouri, Michigan and
   Washington, D.C., we have established a local presence within our
   targeted markets to obtain better information more quickly.      Our
   underwriters work with our field marketing force to identify business
   that meets these established underwriting standards and to develop
   specific strategies to write the desired business. In performing this
   assessment, our underwriters may also consult with internal actuaries
   regarding loss trends and pricing and utilize loss-rating models to
   assess the projected underwriting results of certain insured risks.
        These underwriters are also assisted by our local medical
   advisory committees that we have established in our key states. These
   committees are comprised of local physicians, dentists and
   representatives of hospitals and healthcare entities and help us
   maintain close ties to the medical communities in these states,
   provide information on the practice of medicine in each state and
   provide guidance on critical underwriting and claims issues. Claims
   Management     We have claims offices in Alabama (2), Delaware,
   Florida (2), Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio
   (2), Pennsylvania, Virginia, Washington, D.C., and West Virginia so
   that we can provide localized and timely attention to claims. Our
   claims department investigates the circumstances surrounding a medical
   incident from which a covered claim arises against an insured. As we
   investigate, our claims department establishes the appropriate case
   reserves for each claim and monitors the level of each case reserve as
   circumstances require.      Upon investigation, and in consultation
   with the insured and appropriate experts, we evaluate the merit of the
   claim and either seek reasonable settlement or aggressively defend the
   claim. If the claim is defended, our claims department manages the
   case, including selecting defense attorneys who specialize in medical
   liability cases, planning the defense and obtaining medical and/or
   other professional experts to assist in the analysis and defense of
   the claim. As part of this evaluation and preparation process we meet
   regularly with medical advisory committees in our key states to
   examine claims, attempt to identify potentially troubling practice
   patterns and make recommendations to our staff.

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        We aggressively defend claims against our insureds that we
   believe have no merit or those we believe cannot be reasonably
   settled. As a result of this policy, many of our claims are litigated,
   and we engage experienced trial attorneys in each venue to handle the
   litigation in defense of our policyholders.      Our aggressive claims
   management approach generally results in increased loss adjustment
   expenses compared to those of other property and casualty lines or
   other companies specializing in professional liability insurance.
   However, we believe that our approach contributes to lower overall
   loss costs and results in greater customer loyalty. The success of
   this claims philosophy is based on our ability to develop
   relationships with attorneys who have significant experience in the
   defense of professional liability claims and who are able to defend
   claims in an aggressive, cost-efficient manner. Investments      Our
   assets are held mainly in the operating insurance companies, but are
   overseen by executives in our holding company to ensure that we apply
   a consistent management strategy to the entire portfolio.      Our
   overall investment strategy is to focus on maximizing current income
   from our investment portfolio while maintaining safety, liquidity,
   duration and portfolio diversification. The portfolio is generally
   managed by professional third party asset managers whose results are
   evaluated periodically by management. The asset managers typically
   have the authority to make investment decisions, subject to investment
   policies, within the asset class they are responsible for managing.
   See Note 4 to our Consolidated Financial Statements for more detail on
   our investments. Rating Agencies      Our claims-paying ability and
   financial strength are regularly evaluated and rated by three major
   rating agencies, A. M. Best, Fitch and Standard & Poor’s. In
   developing their ratings, these agencies evaluate an insurer’s ability
   to meet its obligations to policyholders. While these issues may be of
   concern to shareholders, these are not ratings of securities nor a
   recommendation to buy, hold or sell any security.      The following
   table presents the ratings of our group and our active insurance
   companies as of March 1, 2006:

   __TOKEN__13__0__

                                         Company / Rating

                                                                                                              Red                

                                           ProAssurance       Medical                                    Mountain     Woodbrook

    Rating Agency                             Group          Assurance       NCRIC      ProNational    Casualty     Casualty 

   __TOKEN__13__5__

                                                A-              A-            B++           A-            A-            B    

    A. M. Best (www.ambest.com)            (Excellent)      (Excellent)   (Very Good)   (Excellent)   (Excellent)    (Fair)  

   __TOKEN__13__8__

                                               Not              A-            Not           A-            Not          Not   

    Fitch (www.fitchratings.com)              Rated         (Excellent)      Rated      (Excellent)      Rated        Rated  

   __TOKEN__13__11__

                                                A-              A-            Not           A-            Not          Not   

    Standard & Poor’s (www.sandp.com)        (Strong)        (Strong)        Rated       (Strong)        Rated        Rated  

   __TOKEN__13__14__

        The rating process is dynamic and ratings can change. If you are
   seeking updated information about our ratings, please visit the rating
   agency websites listed in the table. Competition     Competition
   depends on several factors including pricing, size, name recognition,
   service quality, market commitment, breadth and flexibility of
   coverage, method of sale, financial stability and ratings assigned by
   A.M. Best, Standard & Poor’s, and Fitch. Many of these factors, such
   as market conditions, the ratings assigned by rating agencies, and
   regulatory conditions are beyond our control. However, for those
   factors within our control, such as service quality, market

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   commitment, financial strength and stability, we believe we have
   competitive strengths that make us a viable competitor in those states
   where we are currently writing insurance.     We compete with many
   insurance companies and alternative insurance mechanisms such as Risk
   Retention Groups or self-insuring entities. Many of the competitors
   concentrate on a single state and have an extensive knowledge of the
   local markets. We also compete with several large national insurers
   that may have greater financial strength and resources than we do.
        We believe that we have a competitive advantage in the current
   market due to our size, geographic scope and name recognition, as well
   as our heritage as a policyholder-founded company with a long-term
   commitment to the professional liability insurance industry. We have
   achieved these advantages through our balance sheet strength, claims
   defense expertise, strong ratings and ability to deliver a high level
   of service to our insureds and agents. We believe that these
   competitive strengths make us a viable competitor in the states where
   we are currently writing insurance.      Beginning in 1999, insurance
   companies focused on medical professional liability coverage
   experienced higher claim costs on business written in prior years than
   they had reserved for initially. In many cases this resulted in
   significant losses and reduced the capital available to support
   current and future business. This led many professional liability
   carriers focused on medical professional liability coverages to
   withdraw from, or limit new business in, one or more markets.      In
   2002 several medical liability insurance companies were forced from
   the market due to financial difficulties. The St. Paul Companies, then
   the leading writer of medical professional liability insurance,
   withdrew from the market. In 2003 Farmers Insurance Company exited
   medical professional liability insurance and The Reciprocal of America
   was placed under regulatory supervision. We believe these events have
   heightened the sensitivity of our target market to financial strength
   and stability.      From mid-2004 through 2005 several small
   competitors with limited capital have entered different states within
   our business footprint. These smaller companies tend to focus on
   limited pools of risk or geographic areas, but generally try to gain
   market share through lower premiums or less stringent underwriting. We
   have lost some of our business to the competitors, but our market
   position has largely allowed us to attract new customers to offset
   their departure.      In the latter half of 2005 we did see signs that
   established companies were beginning to compete primarily on price, or
   less stringent coverage terms. This has been isolated to more
   competitive markets where we maintain a strong market position, and we
   have been able to renew the vast majority of our policies at premium
   levels we believe will allow us to achieve our Return on Equity
   targets. However, should competitors become less disciplined in their
   pricing, or more permissive in their coverage terms, we would expect
   to lose the business of policyholders who based their buying decisions
   primarily on price. Our strategy is not to compete on price, but to
   demonstrate the value in the coverage we provide. Insurance Regulatory
   Matters     We are subject to regulation under the insurance and
   insurance holding company statutes, of various jurisdictions including
   the domiciliary states of our insurance subsidiaries and other states
   in which our insurance subsidiaries do business. Our operating
   insurance subsidiaries are domiciled in Michigan, Alabama and
   Washington, D.C.      Insurance companies are also affected by a
   variety of state and federal legislative and regulatory measures and
   judicial decisions that define and qualify the risks and benefits for
   which insurance is sought and provided. These include redefinitions of
   risk exposure in such areas as medical liability, product liability,
   environmental damage and workers’ compensation. In addition,
   individual state insurance departments may prevent premium rates for
   some classes of insureds from reflecting the level of risk assumed by
   the insurer for those classes. Although there is limited federal
   regulation of the insurance business, each state has a comprehensive
   system for regulating insurers operating in that state. In addition,
   these insurance regulators periodically examine each insurer’s
   financial condition, adherence to statutory accounting practices, and
   compliance with insurance department rules and regulations.

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        Our operating subsidiaries are required to file detailed annual
   reports with the state insurance regulators in each of the states in
   which they do business. The laws of the various states establish
   supervisory agencies with broad authority to regulate, among other
   things, licenses to transact business, premium rates for certain types
   of coverage, trade practices, agent licensing, policy forms,
   underwriting and claims practices, reserve adequacy, transactions with
   affiliates, and insurer solvency. Many states also regulate investment
   activities on the basis of quality, distribution and other
   quantitative criteria. States have also enacted legislation regulating
   insurance holding company systems, including acquisitions, the payment
   of dividends, the terms of affiliate transactions, and other related
   matters.      Applicable state insurance laws, rather than federal
   bankruptcy laws, apply to the liquidation or reorganization of
   insurance companies. Insurance Regulation Concerning Change or
   Acquisition of Control     The insurance regulatory codes in our
   operating subsidiaries’ respective domiciliary states each contain
   similar provisions (subject to certain variations) to the effect that
   the acquisition of “control” of a domestic insurer or of any person
   that directly or indirectly controls a domestic insurer cannot be
   consummated without the prior approval of the domiciliary insurance
   regulator. In general, a presumption of “control” arises from the
   direct or indirect ownership, control or possession with the power to
   vote or possession of proxies with respect to 10% (5% in Alabama) or
   more of the voting securities of a domestic insurer or of a person
   that controls a domestic insurer. A person seeking to acquire control,
   directly or indirectly, of a domestic insurance company or of any
   person controlling a domestic insurance company must generally file an
   application for approval of the proposed change of control with the
   relevant insurance regulatory authority.      In addition, certain
   state insurance laws contain provisions that require pre-acquisition
   notification to state agencies of a change in control of a
   non-domestic insurance company admitted in that state. While such
   pre-acquisition notification statutes do not authorize the state
   agency to disapprove the change of control, such statutes do authorize
   certain remedies, including the issuance of a cease and desist order
   with respect to the non-domestic admitted insurers doing business in
   the state if certain conditions exist, such as undue market
   concentration. Statutory Accounting and Reporting     Insurance
   companies are required to file detailed annual reports with the state
   insurance regulators in each of the states in which they do business,
   and their business and accounts are subject to examination by such
   regulators at any time. The financial information in these reports is
   prepared in accordance with Statutory Accounting Practices (SAP).
   Insurance regulators periodically examine each insurer’s financial
   condition, adherence to SAP, and compliance with insurance department
   rules and regulations. Regulation of Dividends and Other Payments from
   Our Operating Subsidiaries     We are a legal entity separate and
   distinct from our subsidiaries. As a holding company with no other
   business operations, our primary sources of cash to meet our
   obligations, including principal and interest payments with respect to
   indebtedness, are available dividends and other statutorily permitted
   payments, such as tax allocation payments from our operating
   subsidiaries.      Our operating subsidiaries are subject to various
   state statutory and regulatory restrictions, applicable generally to
   any insurance company in its state of domicile, which limit the amount
   of dividends or distributions an insurance company may pay to its
   stockholders without prior regulatory approval. The restrictions are
   generally based on certain levels or percentages of surplus,
   investment income and operating income, as determined in accordance
   with SAP. Generally, dividends may be paid only out of earned surplus.
   In every case, surplus subsequent to the payment of any dividends must
   be reasonable in relation to an insurance company’s outstanding
   liabilities and must be adequate to meet its financial needs.

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        State insurance holding company acts generally require domestic
   insurers to obtain prior approval of extraordinary dividends. Under
   the insurance holding company acts governing our principal operating
   subsidiaries, a dividend is considered to be extraordinary if the
   combined dividends and distributions to the parent holding company in
   any 12 month period are more than the greater of either the insurer’s
   net income for the prior fiscal year or 10% of its surplus at the end
   of the prior fiscal year. If insurance regulators determine that
   payment of a dividend or any other payments to an affiliate (such as
   payments under a tax-sharing agreement or payments for employee or
   other services) would, because of the financial condition of the
   paying insurance company or otherwise, be a detriment to such
   insurance company’s policyholders, the regulators may prohibit such
   payments that would otherwise be permitted without prior approval.
   Risk-Based Capital     In order to enhance the regulation of insurer
   solvency, the National Association of Insurance Commissioners
   (NAIC) specifies risk-based capital (RBC) requirements for property
   and casualty insurance companies. At December 31, 2005, all of
   ProAssurance’s insurance subsidiaries exceeded the minimum level and,
   as a result, no regulatory response or action was required. Investment
   Regulation     Our operating subsidiaries are subject to state laws
   and regulations that require diversification of investment portfolios
   and that limit the amount of investments in certain investment
   categories. Failure to comply with these laws and regulations may
   cause non-conforming investments to be treated as non-admitted assets
   for purposes of measuring statutory surplus and, in some instances,
   would require divestiture. We believe that our operating subsidiaries
   are in compliance with state investment regulations. Guaranty Funds     Admitted
   insurance companies are required to be members of guaranty
   associations which administer state Guaranty Funds. These associations
   levy assessments (up to prescribed limits) on all member insurers in a
   particular state on the basis of the proportionate share of the
   premiums written by member insurers in the covered lines of business
   in that state. Maximum assessments permitted by law in any one year
   generally vary between 1% and 2% of annual premiums written by a
   member in that state. Some states permit member insurers to recover
   assessments paid through surcharges on policyholders or through full
   or partial premium tax offsets, while other states permit recovery of
   assessments through the rate filing process. Shared Markets     State
   insurance regulations may force us to participate in mandatory
   property and casualty shared market mechanisms or pooling arrangements
   that provide certain insurance coverage to individuals or other
   entities that are otherwise unable to purchase such coverage in the
   commercial insurance marketplace. Our operating subsidiaries’
   participation in such shared markets or pooling mechanisms is not
   material to our business at this time. Legislative and Regulatory
   Changes     In recent years, the insurance industry has been subject
   to increased scrutiny by regulators and legislators. The NAIC and a
   number of state legislatures have considered or adopted legislative
   proposals that alter and, in many cases, increase the authority of
   state agencies to regulate insurance companies and insurance holding
   company systems.      Several of the states in which we operate,
   notably Florida, Illinois, Missouri, Ohio and West Virginia, have
   passed Tort Reform, but these laws have yet to materially affect our
   business. Recent court decisions in West Virginia have struck down the
   Tort Reforms enacted in 1991 and we believe there will be court
   challenges in the remaining states in the coming years. History tells
   us that many of these laws will be invalidated in the appeals process.
   Because we

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   cannot predict with any certainty how appellate courts will rule on
   these laws we do not take them into account in our rate-making
   assumptions, except in Florida where such credit is required by law.     Legislatures
   in other states in which we operate are currently considering, or
   being asked to consider Tort Reform, but we cannot predict in which
   states those efforts will be successful. In certain states, Tort
   Reform may also place limits on the ability of medical liability
   insurers to raise or maintain rates at adequate levels. We continue to
   monitor developments on a state-by-state basis, and make business
   decisions accordingly.      The professional liability market in
   Florida is subject to three constitutional amendments that were
   approved by voters in November 2004. The first amendment places limits
   on fees plaintiff attorneys may collect in medical liability cases,
   but lawyers have been successful in evading these restrictions by
   having plaintiffs waive their constitutional rights to this
   protection. This practice has been challenged, but initial court
   rulings seem likely to permit it to continue. Therefore, we do not
   believe this law will result in fewer malpractice claims being filed.
        The second amendment would take away the license of any physician
   who has three malpractice judgments or adverse findings by a licensing
   review organization. We believe this could cause physicians to demand
   settlements in malpractice cases which could generate more lawsuits
   and drive up costs. The Florida legislature has passed enabling
   legislation that prohibits retroactive application of this law. Thus
   only incidents occurring on or after November 4, 2004 are covered, and
   it’s likely to be at least five years in the future before the effects
   of this law could be felt.      The third amendment gives the public
   greater rights to see previously confidential state complaints filed
   against doctors and institutions, incident reports filed after medical
   errors, and documents from error reviews done by hospitals. Court
   challenges to this law are continuing, but if upheld, this could have
   a detrimental effect on peer review activities      There are also
   Tort Reform proposals being considered at the Federal level. This
   legislation has the backing of the Bush administration and passed the
   House of Representatives again in 2005. The legislation has never been
   approved in the Senate and while there are more Republicans now
   serving in the Senate, we do not believe there are enough votes to
   enact these reforms. As in the states, passage of a federal Tort
   Reform package would likely be subject to judicial challenge and we
   cannot be certain that it would be upheld by the courts.      In
   addition, prior to 2005 several committees of Congress made inquiries
   and conducted hearings as part of a broad study on the regulation of
   insurance companies, and legislation has been introduced in several of
   the past sessions of Congress which, if enacted, could result in the
   federal government assuming some role in the regulation of the
   insurance industry. While we do not have any reason to believe this
   legislation is likely to pass in the coming year, we cannot rule out
   that possibility.      Although the federal government does not
   regulate the business of insurance directly, federal initiatives often
   affect the insurance business. Current and proposed federal measures
   that may significantly affect the insurance business include changes
   in medical patient protection laws such as the “Patients Bill of
   Rights”, Tort Reform and environmental laws. Employees      At
   December 31, 2005, we employed 517 persons in our continuing
   operations. None of our employees are represented by a labor union. We
   consider our employee relations to be good. ITEM 1A. RISK FACTORS.     There
   are a number of factors, many beyond our control, which may cause
   results to differ significantly from our expectations. Some of these
   factors are described below under “Risk Factors,” while others having
   to do with operational, liquidity, interest rate and other variables,
   are described elsewhere in this report (see, for example, Part II,
   Item 7. Management’s Discussion and Analysis of Financial Condition
   and Results of Operations, “Liquidity and Capital Resources and
   Financial Condition” and Part II, Item 7A. Quantitative and
   Qualitative Disclosures about

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   Market Risk). Any factor described in this report could by itself, or
   together with one or more factors, have a negative effect on our
   business, results of operations and/or financial condition. There may
   be factors not described in this report that could also cause results
   to differ from our expectations.Our operating results may be affected
   if actual insured losses differ from our loss reserves.     Significant
   periods of time often elapse between the occurrence of an insured
   loss, the reporting of the loss by the insured and payment of that
   loss. To recognize liabilities for unpaid losses, we establish
   reserves as balance sheet liabilities representing estimates of
   amounts needed to pay reported and unreported losses and the related
   loss adjustment expense. The process of estimating loss reserves is a
   difficult and complex exercise involving many variables and subjective
   judgments. As part of the reserving process, we review historical data
   and consider the impact of various factors such as:

      –    trends in claim frequency and severity;                

   __TOKEN__14__1__

      –    changes in operations;                                 

   __TOKEN__14__3__

      –    emerging economic and social trends;                   

   __TOKEN__14__5__

      –    inflation; and                                         

   __TOKEN__14__7__

      –    changes in the regulatory and litigation environments. 

        This process assumes that past experience, adjusted for the
   effects of current developments and anticipated trends, is an
   appropriate, but not necessarily accurate, basis for predicting future
   events. There is no precise method for evaluating the impact of any
   specific factor on the adequacy of reserves, and actual results are
   likely to differ from original estimates.      Our loss reserves also
   may be affected by court decisions that expand liability on our
   policies after they have been issued and priced. In addition, a
   significant jury award, or series of awards, against one or more of
   our insureds could require us to pay large sums of money in excess of
   our reserved amounts. Our policy to aggressively litigate claims
   against our insureds may increase the risk that we may be required to
   make such payments.      To the extent loss reserves prove to be
   inadequate in the future, we would need to increase our loss reserves
   and incur a charge to earnings in the period the reserves are
   increased, which could have a material adverse impact on our financial
   condition and results of operation and the price of our common stock.
   If we are unable to maintain a favorable financial strength rating, it
   may be more difficult for us to write new business or renew our
   existing business.     Independent rating agencies assess and rate the
   claims-paying ability of insurers based upon criteria established by
   the agencies. Periodically the rating agencies evaluate us to confirm
   that we continue to meet the criteria of previously assigned ratings.
   The financial strength ratings assigned by rating agencies to
   insurance companies represent independent opinions of financial
   strength and ability to meet policyholder obligations and are not
   directed toward the protection of investors. Ratings by rating
   agencies are not ratings of securities or recommendations to buy, hold
   or sell any security.      Our principal operating subsidiaries hold
   favorable financial strength ratings with A.M. Best, Standard &
   Poor’s, Fitch and other rating agencies. Financial strength ratings
   are used by agents and customers as an important means of assessing
   the financial strength and quality of insurers. If our financial
   position deteriorates, we may not maintain our favorable financial
   strength ratings from the rating agencies. A downgrade or withdrawal
   of any such rating could limit or prevent us from writing desirable
   business.

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   We operate in a highly competitive environment.     The property and
   casualty insurance business is highly competitive. We compete with
   large national property and casualty insurance companies,
   locally-based specialty companies, self-insured entities and
   alternative risk transfer arrangements (such as captive insurers and
   risk retention groups) whose activities are directed to limited
   markets. Competitors include companies that have substantially greater
   financial resources than we do, as well as mutual companies and
   similar companies not owned by shareholders whose return on equity
   objectives may be lower than ours.      Competition in the property
   and casualty insurance business is based on many factors, including
   premiums charged and other terms and conditions of coverage, services
   provided, financial ratings assigned by independent rating agencies,
   claims services, reputation, perceived financial strength and the
   experience of the insurance company in the line of insurance to be
   written. Increased competition could adversely affect our ability to
   attract and retain business at current premium levels and reduce the
   profits that would otherwise arise from operations. Our revenues may
   fluctuate with insurance market conditions.     We derive a
   significant portion of our insurance premium revenue from medical
   malpractice risks. Between 2000 and 2004, premium rates increased
   significantly which has improved our operating results. We believe
   competition has increased in the medical malpractice industry with the
   recent increases in premium rates. Should our competitors become less
   disciplined in their pricing, or more permissive in their terms, we
   may lose customers who base their purchasing decisions primarily on
   price because our policy is to charge adequate premiums on risks that
   meet our underwriting standards. We cannot predict whether, when or
   how market conditions will change, or the manner in which, or the
   extent to which any such changes may adversely impact the results of
   our operations. Our revenues may fluctuate with interest rates and
   investment results.     We generally rely on the positive performance
   of our investment portfolio to offset insurance losses and to
   contribute to our profitability. As our investment portfolio is
   primarily comprised of interest-earning assets, prevailing economic
   conditions, particularly changes in market interest rates, may
   significantly affect our operating results. Changes in interest rates
   also can affect the value of our interest-earning assets, which are
   principally comprised of fixed and adjustable-rate investment
   securities. Generally, the values of fixed-rate investment securities
   fluctuate inversely with changes in interest rates. Interest rate
   fluctuations could adversely affect our stockholders’ equity, income
   and/or cash flows. Our total investments at December 31, 2005 were
   $2.631 billion, of which $2.403 billion was invested in fixed
   maturities. Unrealized pre-tax net investment losses on investments in
   fixed maturities were $15.2 million at December 31, 2005.      At
   December 31, 2005, we held equity investments having a fair value of
   $10.0 million in an available-for-sale portfolio and held additional
   equity securities having a fair value of $5.2 million in a trading
   portfolio. The fair value of these securities fluctuates depending
   upon company specific and general market conditions. Any decline in
   the fair value of available-for-sale securities that we determine to
   be other-than-temporary will reduce our net income. Any changes in the
   fair values of trading securities, whether gains or losses, will be
   included in net income in the period changed. Changes in healthcare
   could have a material impact on our operations.     We derive
   substantially all of our medical professional liability insurance
   premiums from physicians and other individual healthcare providers,
   physician groups and smaller healthcare facilities. Significant
   attention has been focused on reforming the healthcare industry at
   both the federal and state levels which could result in changes to how
   health care providers insure their medical malpractice risks. A broad
   range of healthcare reform measures has been suggested, and public
   discussion of such measures will likely continue in the future.
   Proposals have included, among others, spending limits, price
   controls, limiting increases in insurance premiums, limiting

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   the liability of doctors and hospitals for tort claims, imposing
   liability on institutions rather than physicians, and restructuring
   the healthcare insurance system. We cannot predict which, if any,
   reform proposals will be adopted, when they may be adopted or what
   impact they may have on us. The adoption of certain of these proposals
   could materially adversely affect our financial condition or results
   of operations.     In addition to regulatory and legislative efforts,
   there have been significant market driven changes in the healthcare
   environment. In recent years, a number of factors related to the
   emergence of managed care have negatively impacted or threatened to
   impact the medical practice and economic independence of medical
   professionals. Medical professionals have found it more difficult to
   conduct a traditional fee-for-service practice and many have been
   driven to join or contractually affiliate with larger organizations.
   Such change and consolidation may result in the elimination of, or a
   significant decrease in, the role of the physician in the medical
   malpractice insurance purchasing decision. It could also result in
   greater emphasis on the role of professional managers, who may seek to
   purchase insurance on a price competitive basis, and who may favor
   insurance companies that are larger and more highly rated than we are.
   In addition, such change and consolidation could reduce our medical
   malpractice premiums as groups of insurance purchasers generally
   retain more risk or self insure.      The movement from traditional
   fee-for-service practice to the managed care environment may also
   result in an increase in the liability profile of our insureds. The
   majority of our insured physicians practice in primary care
   specialties such as internal medicine, family practice, general
   practice and pediatrics. In the managed care environment, these
   primary care physicians are being required to take on the role of
   “gatekeeper” and restrain the use of specialty care by controlling
   access to specialists and by performing certain procedures that would
   customarily be performed by specialists in a fee-for-service setting.
   These practice changes may result in an increase in the claims
   frequency and severity experienced by primary care physicians and by
   us as their insurance carrier. We are a holding company and are
   dependent on dividends and other payments from our operating
   subsidiaries, which are subject to dividend restrictions.     We are a
   holding company whose principal source of funds is cash dividends and
   other permitted payments from operating subsidiaries. If our
   subsidiaries are unable to make payments to us, or are able to pay
   only limited amounts, we may be unable to make payments on our
   indebtedness. The payment of dividends by these operating subsidiaries
   is subject to restrictions set forth in the insurance laws and
   regulations of their respective states of domicile, as discussed under
   Item 1, “Insurance Regulatory Matters” on page 10.

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   Regulatory requirements could have a material impact on our
   operations.     Our insurance businesses are subject to extensive
   regulation by state insurance authorities in each state in which they
   operate. Regulation is intended for the benefit of policyholders
   rather than shareholders. In addition to the amount of dividends and
   other payments that can be made to a holding company by insurance
   subsidiaries, these regulatory authorities have broad administrative
   and supervisory power relating to:

      –    licensing requirements;               

   __TOKEN__15__1__

      –    trade practices;                      

   __TOKEN__15__3__

      –    capital and surplus requirements;     

   __TOKEN__15__5__

      –    investment practices; and             

   __TOKEN__15__7__

      –    rates charged to insurance customers. 

        These regulations may impede or impose burdensome conditions on
   rate increases or other actions that we may want to take to enhance
   our operating results. In addition, we may incur significant costs in
   the course of complying with regulatory requirements. Most states also
   regulate insurance holding companies like us in a variety of matters
   such as acquisitions, changes of control and the terms of affiliated
   transactions.      Future legislative or regulatory changes may also
   adversely affect our business operations. The unpredictability of
   court decisions could have a material impact on our operations.     The
   financial position of our insurance subsidiaries may also be affected
   by court decisions that expand insurance coverage beyond the intention
   of the insurer at the time it originally issued an insurance policy.
   In addition, a significant jury award, or series of awards, against
   one or more of our insureds could require us to pay large sums of
   money in excess of our reserve amounts. The passage of tort reform or
   other legislation, and the subsequent review of such laws by the
   courts could have a material impact on our operations.     Tort
   reforms generally restrict the ability of a plaintiff to recover
   damages by, among other limitations, eliminating certain claims that
   may be heard in a court, limiting the amount or types of damages,
   changing statutes of limitation or the period of time to make a claim,
   and limiting venue or court selection. A number of states in which we
   do business have enacted, or are considering, tort reform legislation.
   Proposed federal tort reform legislation has failed to win
   Congressional approval to date.      While the effects of tort reform
   would appear to be beneficial to our business generally, there can be
   no assurance that such reforms will be effective or ultimately upheld
   by the courts in the various states. Further, if tort reforms are
   effective, the business of providing professional liability insurance
   may become more attractive, thereby causing an increase in competition
   for us.      In addition, there can be no assurance that the benefits
   of tort reform will not be accompanied by legislation or regulatory
   actions that may be detrimental to our business. For example, various
   states have established or are evaluating their intention to establish
   state sponsored malpractice insurance for their resident physicians
   that may eliminate targeted physicians from the private insurance
   market. Furthermore, insurance regulatory authorities may require
   premium rate limitations and expanded coverage requirements as well as
   other requirements in anticipation of the expected benefits of tort
   reform which may or may not be actually realized. Our geographic
   concentration ties our performance to the economic, regulatory and
   demographic conditions of the mid-Atlantic, Midwest and Southeast
   states.     Our revenues and profitability are subject to prevailing
   economic, regulatory, demographic and other conditions in the states
   in which we write insurance. We currently write professional liability
   insurance in 22 states and the District of Columbia, with
   approximately 68% of gross premiums written in Alabama, Florida,
   Indiana, Michigan and Ohio in 2005. Because our business currently is
   concentrated in a limited number of markets, adverse developments that
   are

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   limited to a geographic area in which we do business may have a
   disproportionately greater affect on us than they would have if we did
   business in markets outside that particular geographic area.Our
   business could be adversely affected by the loss of independent
   agents.     We depend in part on the services of independent agents
   and brokers in the marketing of our insurance products. We face
   competition from other insurance companies for the services and
   allegiance of independent agents and brokers. These agents and brokers
   may choose to direct business to competing insurance companies or may
   direct less desirable risks to us. If market conditions cause
   reinsurance to be more costly or unavailable, we may be required to
   bear increased risks or reduce the level of our underwriting
   commitments.     As part of our overall risk and capacity management
   strategy, we purchase reinsurance for significant amounts of risk
   underwritten by our insurance company subsidiaries. Market conditions
   beyond our control determine the availability and cost of the
   reinsurance, which may affect the level of our business and
   profitability. We may be unable to maintain current reinsurance
   coverage or to obtain other reinsurance coverage in adequate amounts
   and at favorable rates. If we are unable to renew our expiring
   coverage or to obtain new reinsurance coverage, either our net
   exposure to risk would increase or, if we are unwilling to bear an
   increase in net risk exposures, we would have to reduce the amount of
   our underwritten risk. We cannot guarantee that our reinsurers will
   pay in a timely fashion, if at all, and, as a result, we could
   experience losses.     We transfer some of our risks to reinsurance
   companies in exchange for part of the premium we receive in connection
   with the risk. Although reinsurance makes the reinsurer liable to us
   to the extent the risk is transferred, it does not relieve us of our
   liability to our policyholders. If reinsurers fail to pay us or fail
   to pay on a timely basis, our financial results would be adversely
   affected. At December 31, 2005, we had reinsurance recoverables on
   paid and unpaid losses and loss adjustment expenses of approximately
   $327.7 million. The guaranty fund assessments that we are required to
   pay to state guaranty associations may increase and results of
   operations and financial condition could suffer as a result.     Each
   state in which we operate has separate insurance guaranty fund laws
   requiring admitted property and casualty insurance companies doing
   business within their respective jurisdictions to be members of their
   guaranty associations. These associations are organized to pay covered
   claims (as defined and limited by the various guaranty association
   statutes) under insurance policies issued by insolvent insurance
   companies. Most guaranty association laws enable the associations to
   make assessments against member insurers to obtain funds to pay
   covered claims after a member insurer becomes insolvent. These
   associations levy assessments (up to prescribed limits) on all member
   insurers in a particular state on the basis of the proportionate share
   of the premiums written by member insurers in the covered lines of
   business in that state. Maximum assessments permitted by law in any
   one year generally vary between 1% and 2% of annual premiums written
   by a member in that state. Some states permit member insurers to
   recover assessments paid through surcharges on policyholders or
   through full or partial premium tax offsets, while other states permit
   recovery of assessments through the rate filing process.      Property
   and casualty guaranty fund assessments incurred by us totaled $226,000
   and $396,000 for 2005 and 2004, respectively. Our policy is to accrue
   the insurance insolvencies when notified of assessments. We are not
   able to reasonably estimate the liabilities of an insolvent insurer or
   develop a meaningful range of the insolvent insurer’s liabilities
   because of inadequate financial data with respect to the estate of the
   insolvent company as supplied by the guaranty funds.

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   Our business could be adversely affected by the loss of one or more
   key employees.     We are heavily dependent upon our senior management
   and the loss of services of our senior executives could adversely
   affect our business. Our success has been, and will continue to be,
   dependent on our ability to retain the services of existing key
   employees and to attract and retain additional qualified personnel in
   the future. The loss of the services of key employees or senior
   managers, or the inability to identify, hire and retain other highly
   qualified personnel in the future, could adversely affect the quality
   and profitability of our business operations.      Our board of
   directors is in the process of considering succession planning
   relating to our Chief Executive Officer. Dr. Crowe, our current
   Chairman and Chief Executive Officer, has indicated to the board that
   he has no immediate plans for retirement. Provisions in our charter
   documents, Delaware law and state insurance law may impede attempts to
   replace or remove management or impede a takeover, which could
   adversely affect the value of our common stock.     Our certificate of
   incorporation, bylaws and Delaware law contain provisions that may
   have the effect of inhibiting a non-negotiated merger or other
   business combination. Additionally, the board of directors may issue
   preferred stock, which could be used as an anti-takeover device,
   without a further vote of our stockholders. We currently have no
   preferred stock outstanding, and no present intention to issue any
   shares of preferred stock. However, because the rights and preferences
   of any series of preferred stock may be set by the board of directors
   in its sole discretion, the rights and preferences of any such
   preferred stock may be superior to those of our common stock and thus
   may adversely affect the rights of the holders of common stock.
        The voting structure of common stock and other provisions of our
   certificate of incorporation are intended to encourage a person
   interested in acquiring us to negotiate with, and to obtain the
   approval of, the board of directors in connection with a transaction.
   However, certain of these provisions may discourage our future
   acquisition, including an acquisition in which stockholders might
   otherwise receive a premium for their shares. As a result,
   stockholders who might desire to participate in such a transaction may
   not have the opportunity to do so.      In addition, state insurance
   laws provide that no person or entity may directly or indirectly
   acquire control of an insurance company unless that person or entity
   has received approval from the insurance regulator. An acquisition of
   control of our insurance operating subsidiaries generally would be
   presumed if any person or entity acquires 10% (5% in Alabama) or more
   of its outstanding common stock, unless the applicable insurance
   regulator determines otherwise.      These provisions apply even if
   the offer may be considered beneficial by stockholders.      If a
   change in management or a change of control is delayed or prevented,
   the market price of our common stock could decline. ITEM 1B.
   UNRESOLVED STAFF COMMENTS.     None.

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   Forward-Looking Statements          Any written or oral statements
   made in this report may include forward-looking statements that
   reflect our current views with respect to future events and financial
   performance. Forward-looking statements are identified by words such
   as, but not limited to, “believe”, “expect”, “intend”, “anticipate”,
   “estimate”, “project”, “hopeful”, “may”, “optimistic”, “preliminary”,
   “should”, “will” and other analogous expressions. Forward-looking
   statements relating to our business include among other things,
   statements concerning: liquidity and capital requirements, return on
   equity, financial ratios, net income, premiums, losses and loss
   reserves, premium rates and retention of current business, competition
   and market conditions, the expansion of product lines, the development
   or acquisition of business in new geographical areas, the availability
   of acceptable reinsurance, actions by regulators and rating agencies,
   payment or performance of obligations under indebtedness, payment of
   dividends, and other matters.           Risks that could adversely
   affect our operations or cause actual results to differ materially
   from anticipated results include, but are not limited to, the
   following:

      –    general economic conditions, either nationally or in our market area,     
           that are worse than anticipated;                                          

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      –    regulatory and legislative actions or decisions that adversely affect     
           business plans or operations;                                             

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      –    price competition;                                                        

   __TOKEN__16__5__

      –    inflation and changes in the interest rate environment, the               
           performance of financial markets and/or changes in the securities         
           markets that adversely affect the fair value of investments or            
           operations;                                                               

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      –    changes in laws or government regulations affecting medical               
           professional liability insurance and practice management and financial    
           services;                                                                 

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      –    changes to ratings assigned by A.M. Best, S&P, Fitch or other rating      
           agencies;                                                                 

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      –    the effect of managed healthcare;                                         

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      –    uncertainties inherent in the estimate of loss and loss adjustment        
           expense reserves and reinsurance and changes in the availability,         
           cost, quality, or collectibility of reinsurance;                          

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      –    significantly increased competition among insurance providers and         
           related pricing weaknesses in some markets;                               

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      –    changes in accounting policies and practices, as may be adopted by        
           regulatory agencies and the Financial Accounting Standards Board; and     

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      –    changes in our organization, compensation and benefit plans.              

   __TOKEN__16__21__

      –    our ability to achieve continued growth through expansion in other        
           states or through acquisitions or business combinations.                  

   Risks that could adversely affect our proposed merger with PIC
   Wisconsin include but are not limited to the following:

      –    the business of ProAssurance and PIC Wisconsin may not be combined        
           successfully, or such combination may take longer to accomplish than      
           expected;                                                                 

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      –    the cost savings from the merger may not be fully realized or may take    
           longer to realize than expected;                                          

   __TOKEN__17__3__

      –    operating costs, customer loss and business disruption following the      
           merger, including adverse effects on relationships with employees, may    
           be greater than expected;                                                 

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    —    governmental approvals of the merger may not be obtained or adverse     
         regulatory conditions may be imposed in connection with governmental    
         approvals of the merger;                                                

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    —    there may be restrictions on our ability to achieve continued growth    
         through expansion in to other states or through acquisitions or         
         business combinations; and                                              

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    —    the stockholders of PIC wisconsin may fail to approve the merger.       

   Because these forward-looking statements are subject to assumptions
   and uncertainties, actual results may differ materially from those
   expressed or implied by these forward-looking statements, and the
   factors that will determine these results are beyond our ability to
   control or predict. For additional information about factors that
   could cause actual results to differ materially from those described
   in the forward-looking statements, please see “Risk Factors” beginning
   on page 13.

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   GLOSSARY OF SELECTED INSURANCE AND RELATED FINANCIAL TERMSIn an effort
   to help our investors and other interested parties better understand
   our report, we are providing a Glossary of Selected Insurance Terms.
   These definitions are taken from recognized industry sources such as
   A. M. Best and The Insurance Information Institute. This list is
   intended to be informative and explanatory, but we do not represent
   that it is a comprehensive glossary.

   __TOKEN__19__0__

    Accident year                       The accounting period in which an insured event becomes a liability of    
                                        the insurer.                                                              

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    Admitted company; admitted basis    An insurance company licensed and authorized to do business in a          
                                        particular state. An admitted company doing business in a state is        
                                        said to operate on “an admitted basis” and is subject to all state        
                                        insurance laws and regulations pertaining to its operations. (See:        
                                        Non-admitted company)                                                     

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    Adverse selection                   The tendency of those exposed to a higher risk to seek more insurance     
                                        coverage than those at a lower risk. Insurers react either by charging    
                                        higher premiums or not insuring at all, as in the case of floods.         
                                        Adverse selection can be seen as concentrating risk instead of            
                                        spreading it.                                                             

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    Agent                               An individual or firm that represents an insurer under a contractual      
                                        or employment agreement for the purpose of selling insurance. There       
                                        are two types of agents: independent agents, who represent one or more    
                                        insurance companies but are not employed by those companies and are       
                                        paid on commission, and exclusive or captive agents, who by contract      
                                        are required to represent or favor only one insurance company and are     
                                        either salaried or work on commission. Insurance companies that use       
                                        employee or captive agents are called direct writers. Agents are          
                                        compensated by the insurance company whose products they sell. By         
                                        definition, with respect to a given insurer, an agent is not a broker     
                                        (See: Brokers)                                                            

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    Alternative markets                 Mechanisms used to fund self-insurance. This includes captives, which     
                                        are insurers owned by one or more non-insurers to provide owners with     
                                        coverage. Risk-retention groups, formed by members of similar             
                                        professions or businesses to obtain liability insurance, are also a       
                                        form of self-insurance.                                                   

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    Assets; admitted; non-admitted      Property owned, in this case by an insurance company, including           
                                        stocks, bonds, and real estate. Because insurance accounting is           
                                        concerned with solvency and the ability to pay claims, insurance          
                                        regulators require a conservative valuation of assets, prohibiting        
                                        insurance companies from listing assets on their balance sheets whose     
                                        values are uncertain, such as furniture, fixtures, debit balances, and    
                                        accounts receivable that are more than 90 days past due (these are        
                                        non-admitted assets). Admitted assets are those assets that can be        
                                        easily sold in the event of liquidation or borrowed against, and          
                                        receivables for which payment can be reasonably anticipated.              

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    Broker                          An intermediary between a customer and an insurance company. Brokers      
                                    typically search the market for coverage appropriate to their clients     
                                    and they usually sell commercial, not personal, insurance. Brokers are    
                                    compensated by the insureds on whose behalf they are working. With        
                                    respect to a given insurer, a broker is not an agent. (See:               

                                    Agent)                                                                    

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    Bulk reserves                   Reserves for losses that have occurred but have not been reported as      
                                    well as anticipated changes to losses on reported claims. Bulk            
                                    reserves are the difference between (i) the sum of case reserves and      
                                    paid losses and (ii) an actuarially determined estimate of the total      
                                    losses necessary for the ultimate settlement of all reported and          
                                    incurred but not reported claims, including amounts already paid.         
                                    (See: Case Reserves)                                                      

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    Capacity                        For an individual insurer, the maximum amount of premium or risk it       
                                    can underwrite based on its financial condition. The adequacy of an       
                                    insurer’s capital relative to its exposure to loss is an important        
                                    measure of solvency.                                                      

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    Capital                         Stockholder’s equity (for publicly-traded insurance companies) and        
                                    policyholders’ surplus (for mutual insurance companies). Capital          
                                    adequacy is linked to the riskiness of an insurer’s business. (See:       

                                    Risk-Based Capital, Surplus, Solvency)                                    

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    Case reserves                   Reserves for future losses for reported claims as established by an       
                                    insurer’s claims department.                                              

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    Casualty insurance              Insurance which is primarily concerned with the losses caused by          
                                    injuries to third persons (in other words, persons other than the         
                                    policyholder) and the legal liability imposed on the insured resulting    
                                    therefrom. (See: Professional liability insurance, Medical                
                                    professional liability insurance)                                         

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    Catastrophe                     Term used for statistical recording purposes to refer to a single         
                                    incident or a series of closely related incidents causing severe          
                                    insured property losses totaling more than a given amount.                

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    Catastrophe reinsurance         Reinsurance (insurance for insurers) for catastrophic losses.             

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    Cede, cedant; ceding company    When a party reinsures its liability with another, it “cedes” business    
                                    and is referred to as the “cedant” or “ceding company.”                   

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    Claims-made policy; coverage    A form of insurance that pays claims presented to the insurer during      
                                    the term of the policy or within a specific term after its expiration.    
                                    It limits liability insurers’ exposure to unknown future liabilities.     
                                    Under a claims-made policy, an insured event becomes a liability when     
                                    the event is first reported to the insurer.                               

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    Combined ratio                  The sum of the underwriting expense ratio and net loss ratio,             
                                    determined in accordance with either statutory accounting principles      
                                    (SAP) or GAAP.                                                            

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    Commission                               Fee paid to an agent or insurance salesperson as a percentage of the      
                                             policy premium. The percentage varies widely depending on coverage,       
                                             the insurer, and the marketing methods.                                   

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    Direct premiums written                  Premiums charged by an insurer for the policies that it underwrites,      
                                             excluding any premiums that it receives as a reinsurer.                   

   __TOKEN__21__4__

    Direct writer(s)                         Insurance companies that sell directly to the public using exclusive      
                                             agents or their own employees.                                            

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    Domestic insurance company               Term used by a state to refer to any company incorporated there.          

   __TOKEN__21__8__

    Excess & Surplus Lines; Surplus lines    Property/casualty insurance coverage that isn’t generally available       
                                             from insurers licensed in the state (See: Admitted companies) and must    
                                             be purchased from a “non-admitted company”. Examples include risks of     
                                             an unusual nature that require greater flexibility in policy terms and    
                                             conditions than exist in standard forms or where the highest rates        
                                             allowed by state regulators are considered inadequate by admitted         
                                             companies. Laws governing surplus lines vary by state.                    

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    Excess coverage; excess limits           An insurance policy that provides coverage limits above another policy    
                                             with similar coverage terms, or above a self-insured amount.              

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    Extended Reporting Endorsement           Also known as a “tail policy” or “tail premium.” Tail coverage            
                                             provides protection for future claims filed after a claims-made policy    
                                             has lapsed. Typically requires payment of an additional premium, the      
                                             “tail premium.” “Tail coverage” may also be granted if the insured        
                                             becomes disabled, dies or permanently retired from the covered            
                                             occupation (i.e., the practice of medicine in medical liability           
                                             policies.)                                                                

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    Facultative reinsurance                  A generic term describing reinsurance where the reinsurer assumes all     
                                             or a portion of a single risk. Each risk is separately evaluated and      
                                             each contract is separately negotiated by the reinsurer.                  

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    Frequency                                Number of times a loss occurs per unit of risk or exposure. One of the    
                                             criteria used in calculating premium rates.                               

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    Front, fronting                          A procedure in which a primary insurer acts as the insurer of record      
                                             by issuing a policy, but then passes all or virtually all of the risk     
                                             to a reinsurer in exchange for a commission. Often, the fronting          
                                             insurer is licensed to do business in a state or country where the        
                                             risk is located, but the reinsurer is not. The reinsurer in this          
                                             scenario is often a captive or an independent insurance company that      
                                             cannot sell insurance directly in a particular country.                   

   __TOKEN__21__20__

    Gross premiums written                   Total premiums for direct insurance written and assumed reinsurance       
                                             during a given period. The sum of direct and assumed premiums written.    

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    Guaranty Fund; assessment(s)        The mechanism by which solvent insurers ensure that some of the           
                                        policyholder and third party claims against insurance companies that      
                                        fail are paid. Such funds are required in all 50 states, the District     
                                        of Columbia and Puerto Rico, but the type and amount of claim covered     
                                        by the fund varies from state to state.                                   

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    Incurred but not reported (IBNR)    Actuarially estimated reserves for estimated losses that have been        
                                        incurred by insureds and reinsureds but not yet reported to the           
                                        insurer or reinsurer including unknown future developments on losses      
                                        which are known to the insurer or reinsurer. Insurance companies          
                                        regularly adjust reserves for such losses as new information becomes      
                                        available.                                                                

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    Incurred losses                     Losses covered by the insurer within a fixed period, whether or not       
                                        adjusted or paid during the same period, plus changes in the estimated    
                                        value of losses from prior periods.                                       

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    Insolvent; insolvency               Insurer’s inability to pay debts. Typically the first sign of problems    
                                        is inability to pass the financial tests regulators administer as a       
                                        routine procedure. (See: Risk-based capital)                              

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    Investment income                   Income generated by the investment of assets. Insurers have two           
                                        sources of income, underwriting (premiums less claims and expenses)       
                                        and investment income.                                                    

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    Liability insurance                 A line of casualty insurance for amounts a policyholder is legally        
                                        obligated to pay because of bodily injury or property damage caused to    
                                        another person. (See: Casualty insurance, Professional liability          
                                        insurance, Medical professional liability insurance)                      

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    Limits                              Maximum amount of insurance that can be paid for a covered loss.          

   __TOKEN__22__14__

    Long-tail; short-tail               The long period of time between collecting the premium for insuring a     
                                        risk and the ultimate payment of losses. This allows insurance            
                                        companies to invest the premiums until losses are paid, thus producing    
                                        a higher level of invested assets and investment income as compared to    
                                        other lines of property and casualty business. Medical professional       
                                        liability is considered a long tail line of insurance. Personal lines     
                                        is primarily considered a short tail line of insurance due to shorter     
                                        time periods between insuring the risk and the ultimate payment of        
                                        claims. As a result, there is less time to invest premiums collected,     
                                        which makes it necessary to achieve an underwriting profit in order to    
                                        generate a satisfactory return on equity. (See: Medical professional      
                                        liability, Professional liability)                                        

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    Loss adjustment expenses (LAE)      The expenses of settling claims, including legal and other fees and       
                                        the portion of general expenses allocated to claim settlement costs.      

   __TOKEN__22__18__

    Loss costs                          The portion of an insurance rate used to cover claims and the costs of    
                                        adjusting claims. Insurance                                               

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                                                companies typically determine their rates by estimating their future      
                                                loss costs and adding a provision for expenses, profit, and               
                                                contingencies.                                                            

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    Loss ratio                                  Percentage of each premium dollar an insurer spends on claims.            

   __TOKEN__23__4__

    Loss reserves                               Liabilities established by insurers and reinsurers to reflect the         
                                                estimated cost of claims payments and the related expenses that the       
                                                insurer or reinsurer will ultimately be required to pay in respect of     
                                                insurance or reinsurance it has written. They represent a liability on    
                                                the insurer’s balance sheet.                                              

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    Medical professional liability insurance    Insurance against the legal liability of an insured (and against loss,    
                                                damage or expense incidental to a claim of such liability) arising out    
                                                of death, injury or disablement of a person as the result of negligent    
                                                deviation from the standard of care or other misconduct in rendering      
                                                professional service.                                                     

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    NAIC                                        The National Association of Insurance Commissioners is the                
                                                organization of insurance regulators from the 50 states, the District     
                                                of Columbia and the four U.S. territories. The NAIC provides a forum      
                                                for the development of uniform policy when uniformity is appropriate.     

   __TOKEN__23__10__

    Net loss ratio                              The net loss ratio measures the ratio of net losses to earned premiums    
                                                determined in accordance with SAP or GAAP.                                

   __TOKEN__23__12__

    Net premium earned                          The portion of net premium written that is recognized for accounting      
                                                purposes as income during a particular period. Equal to net premiums      
                                                written plus the change in net unearned premiums during the period.       

   __TOKEN__23__14__

    Net premiums written                        Gross premiums written for a given period less premiums ceded to          
                                                reinsurers during such period.                                            

   __TOKEN__23__16__

    Non-admitted company; basis                 Insurers licensed in some states, but not others. States where an         
                                                insurer is not licensed call that insurer “non-admitted.” Non-admitted    
                                                companies sell coverage that is unavailable from licensed insurers        
                                                within a state and are generally exempt from most state laws and          
                                                regulations related to rates and coverages. Policyholders of such         
                                                companies generally do not have the same degree of consumer protection    
                                                and financial recourse as policyholders of admitted companies.            
                                                Non-admitted companies are said to operate on a “non-admitted” basis.     

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    Occurrence policy; coverage                 Insurance that pays claims arising out of incidents that occur during     
                                                the policy term, even if they are filed many years later. Under an        
                                                occurrence policy the insured event becomes a liability when the event    
                                                takes place.                                                              

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    Operating ratio                             The operating ratio is the combined ratio, less the ratio of              
                                                investment income (exclusive of realized gains and losses) to net         
                                                earned premiums, if determined in accordance with GAAP. While the         
                                                combined ratio                                                            

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                                        strictly measures underwriting profitability, the operating ratio         
                                        incorporates the effect of investment income.                             

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    Policy                              A written contract for insurance between an insurance company and         
                                        policyholder stating details of coverage.                                 

   __TOKEN__24__4__

    Premium                             The price of an insurance policy, typically charged annually or           
                                        semiannually.                                                             

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    Premiums written                    The total premiums on all policies written by an insurer during a         
                                        specified period of time, regardless of what portions have been           
                                        earned.                                                                   

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    Premium tax                         A state tax on premiums for policies issued in the state, paid by         
                                        insurers.                                                                 

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    Primary Company                     In a reinsurance transaction, the insurance company that is reinsured.    

   __TOKEN__24__12__

    Professional liability insurance    Covers professionals for negligence and errors or omissions that cause    
                                        injury or economic loss to their clients. (See: Casualty insurance,       
                                        Liability insurance, Medical professional liability insurance)            

   __TOKEN__24__14__

    Property/casualty insurance         Covers damage to or loss of policyholders’ property and legal             
                                        liability for damages caused to other people or their property.           

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    Rate                                The cost of insurance for a specific unit of exposure, such as for one    
                                        physician. Rates are based on historical loss experience for similar      
                                        risks and may be regulated by state insurance offices.                    

   __TOKEN__24__18__

    Rating agencies                     These agencies assess insurers’ financial strength and viability to       
                                        meet claims obligations. Some of the factors considered include           
                                        company earnings, capital adequacy, operating leverage, liquidity,        
                                        investment performance, reinsurance programs, and management ability,     
                                        integrity and experience. A high financial rating is not the same as a    
                                        high consumer satisfaction rating.                                        

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    Reinsurance                         Insurance bought by insurance companies. In a reinsurance contract the    
                                        reinsurer agrees to indemnify another insurance or reinsurance            
                                        company, the ceding company, against all or a portion of the insurance    
                                        or reinsurance risks underwritten by the ceding company under one or      
                                        more policies. Reinsurers may have their own reinsurers, called           
                                        retrocessionaires. Reinsurers don’t pay policyholder claims. Instead,     
                                        they reimburse insurers for claims paid.                                  

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    Reinsured layer; retained layer     The retained layer is the cumulative portion of each loss, on a           
                                        per-claim basis, which is less than an insurer’s reinsurance retention    
                                        for a given coverage year. Likewise, the reinsured layer is the           
                                        cumulative portion of each loss that exceeds the reinsurance              
                                        retention. (See:                                                          

                                        Reinsurance, Retention)                                                   

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    Reserves                            A company’s best estimate of what it will pay, at some point in the       
                                        future, for claims for which it is currently responsible.                 

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    Retention                               The amount or portion of risk that an insurer retains for its own         
                                            account. Losses in excess of the retention level up to the outer          
                                            limit, if any, are paid by the reinsurer. In proportional treaties,       
                                            the retention may be a percentage of the original policy’s limit. In      
                                            excess of loss business, the retention is a dollar amount of loss, a      
                                            loss ratio or a percentage.                                               

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    Return on Equity                        Net Income (or if applicable, Income from Continuing Operations)          
                                            divided by the average of beginning and ending stockholders’ equity.      
                                            This ratio measures a company’s overall after-tax profitability from      
                                            underwriting and investment activity and shows how efficiently            
                                            invested capital is being used.                                           

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    Risk-Based Capital (RBC)                A regulatory measure of the amount of capital required for an             
                                            insurance company, based upon the volume and inherent riskiness of the    
                                            insurance sold, the composition of its investment portfolio and other     
                                            financial risk factors. Higher-risk types of insurance, liability as      
                                            opposed to property business, generally necessitate higher levels of      
                                            capital. The NAIC’s RBC model law stipulates four levels of regulatory    
                                            action with the degree of regulatory intervention increasing as the       
                                            level of surplus falls below a minimum amount as determined under the     
                                            model law. (See: NAIC)                                                    

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    Risk management                         Management of the varied risks to which a business firm or association    
                                            might be subject. It includes analyzing all exposures to gauge the        
                                            likelihood of loss and choosing options to better manage or minimize      
                                            loss. These options typically include reducing and eliminating the        
                                            risk with safety measures, buying insurance, and self-insurance.          

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    Self-insurance                          The concept of assuming a financial risk oneself, instead of paying an    
                                            insurance company to take it on. Every policyholder is a self-insurer     
                                            in terms of paying a deductible and co-payments. Larger policyholders     
                                            often self-insure frequent or predictable losses to avoid insurance       
                                            overhead expenses.                                                        

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    Severity                                The average claim cost, statistically determined by dividing dollars      
                                            of losses by the number of claims.                                        

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    Solvent, solvency                       Insurance companies’ ability to pay the claims of policyholders.          
                                            Regulations to promote solvency include minimum capital and surplus       
                                            requirements, statutory accounting conventions, limits to insurance       
                                            company investment and corporate activities, financial ratio tests,       
                                            and financial data disclosure.                                            

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    Statutory Accounting Principles; SAP    More conservative standards than under GAAP accounting rules, they are    
                                            imposed by state laws that emphasize the present solvency of insurance    
                                            companies. SAP helps ensure that the company will have sufficient         
                                            funds readily available to meet all anticipated insurance obligations     
                                            by recognizing liabilities earlier or at a higher value than GAAP and     
                                            assets later or at a lower value. For example, SAP                        

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                                  requires that selling expenses be recorded immediately rather than        
                                  amortized over the life of the policy. (See: Generally Accepted           
                                  Accounting Principles, Admitted assets)                                   

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    Surplus; statutory surplus    The excess of admitted assets over total liabilities (including loss      
                                  reserves) that protects policyholders in case of unexpectedly high        
                                  claims. “Statutory Surplus” is determined in accordance with Statutory    
                                  Accounting Principles.                                                    

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    Tail                          The period of time that elapses between the occurrence of the loss        
                                  event and the payment in respect thereof.                                 

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    Third-party coverage          Liability coverage purchased by the policyholder as a protection          
                                  against possible lawsuits filed by a third party. The insured and the     
                                  insurer are the first and second parties to the insurance contract.       

   __TOKEN__26__8__

    Treaty reinsurance            The reinsurance of a specified type or category of risks defined in a     
                                  reinsurance agreement (a ''treaty’’) between a primary insurer or         
                                  other reinsured and a reinsurer. Typically, in treaty reinsurance, the    
                                  primary insurer or reinsured is obligated to offer and the reinsurer      
                                  is obligated to accept a specified portion of all such type or            
                                  category of risks originally written by the primary insurer or            
                                  reinsured.                                                                

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    Underwriting                  The insurer’s or reinsurer’s process of reviewing applications            
                                  submitted for insurance coverage, deciding whether to accept all or       
                                  part of the coverage requested and determining the applicable             
                                  premiums.                                                                 

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    Underwriting expense ratio    The ratio of underwriting, acquisition and other insurance expenses       
                                  incurred to net premiums earned (for statutory purposes, the ratio of     
                                  underwriting expenses incurred to net premiums written.)                  

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    Underwriting expenses         The aggregate of policy acquisition costs, including commissions, and     
                                  the portion of administrative, general and other expenses attributable    
                                  to underwriting operations.                                               

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    Underwriting income; loss     The insurer’s profit on the insurance sale after all expenses and         
                                  losses have been paid, before investment income or income taxes. When     
                                  premiums aren’t sufficient to cover claims and expenses, the result is    
                                  an “underwriting loss.”                                                   

   __TOKEN__26__18__

    Underwriting profit           The amount by which net earned premiums exceed Underwriting Income;       
                                  the sum of losses, loss adjustment expenses and underwriting expenses     
                                  (See: Underwriting Income)                                                

   __TOKEN__26__20__

    Unearned premium              The portion of premium that represents the consideration for the          
                                  assumption of risk in the future. Such premium is not yet earned since    
                                  the risk has not yet been assumed. May also be defined as the pro-rata    
                                  portion of written premiums that would be returned to policyholders if    
                                  all policies were terminated by the insurer on a given date.              

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   ITEM 2. PROPERTIES.     We own a 156,000 square foot office building
   located in Birmingham, Alabama where we currently occupy approximately
   78,000 square feet. The remaining office space is leased to
   unaffiliated persons or is available to be leased. We also own a
   53,000 square foot office building in Okemos, Michigan that we fully
   occupy. Both buildings are currently unencumbered. ITEM 3. LEGAL
   PROCEEDINGS.     Our insurance subsidiaries are involved in various
   legal actions, a substantial number of which arise from claims made
   under insurance policies. While the outcome of all legal actions is
   not presently determinable, management and its legal counsel are of
   the opinion that these actions will not have a material adverse effect
   on our financial position or results of operations. See Note 9 to our
   Consolidated Financial Statements included herein. ITEM 4. SUBMISSION
   OF MATTERS TO A VOTE OF SECURITY HOLDERS.     Not applicable.
   EXECUTIVE OFFICERS OF PROASSURANCE CORPORATION     The executive
   officers of ProAssurance serve at the pleasure of the Board of
   Directors.      Our senior management team is led by A. Derrill Crowe,
   M.D., our Chairman and Chief Executive Officer, and Victor T. Adamo,
   Esq., our President and Chief Operating Officer. Dr. Crowe (Age 69)
   has acted as the Chief Executive Officer of Medical Assurance since
   its founding in 1977. He has applied a hands-on management style in
   developing our underwriting and claims strategies and was instrumental
   in establishing us as a leading professional liability specialist.
   Mr. Adamo (Age 58) has held various positions with Professionals Group
   since 1985, becoming its CEO in 1987 and being named President in
   1989. He is largely responsible for building Professionals Group into
   a successful regional professional liability company.      Dr. Crowe
   practiced medicine as his principal occupation for more than 25 years
   and Mr. Adamo was in the private practice of law for 10 years,
   providing them with knowledge of medical and legal issues that are
   critical to our insurance operations. We also have a knowledgeable and
   experienced management team with established track records in building
   and managing successful insurance operations. In total, our senior
   management team has average experience in the insurance industry of
   22 years.      Here are the other executive officers of ProAssurance
   and a brief description of their principal occupation and employment
   during the last five years.

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    Paul R. Butrus        Mr. Butrus has served as our Vice Chairman and a director of              
                          ProAssurance since we began operations in June 2001. Mr. Butrus has       
                          been Executive Vice President and a director of Medical Assurance         
                          since its incorporation in 1995. Mr. Butrus has been employed by          
                          Medical Assurance Company and its subsidiaries since 1977. (Age 65)       

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    Howard H. Friedman    Mr. Friedman is the co-President of our Professional Liability Group      
                          and is also our Chief Underwriting Officer. Mr. Friedman has served in    
                          a number of positions for ProAssurance, most recently as Chief            
                          Financial Officer and Corporate Secretary. He was also the Senior Vice    
                          President, Corporate Development of Medical Assurance. Mr. Friedman is    
                          an Associate of the Casualty Actuarial Society. (Age 47)                  

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    Jeffrey P. Lisenby     Mr. Lisenby was appointed as Corporate Secretary of ProAssurance          
                           Corporation effective January 1, 2006. Mr. Lisenby joined Medical         
                           Assurance, the predecessor to ProAssurance, in 2001 and has served as     
                           Vice-President and head of the corporate Legal Department since the       
                           creation of ProAssurance. Prior to joining Medical Assurance, he was      
                           in private practice in Birmingham, Alabama and served as a judicial       
                           clerk for the United States District Court for the Northern District      
                           of Alabama. Mr. Lisenby is a member of the Alabama State Bar and the      
                           United States Supreme Court Bar and is a Chartered Property Casualty      
                           Underwriter. (Age 37)                                                     

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    James J. Morello       Mr. Morello was appointed as our Senior Vice President, Chief             
                           Accounting Officer and Treasurer in June 2001. Mr. Morello has been       
                           Senior Vice President and Treasurer for Medical Assurance since its       
                           formation in 1995. Mr. Morello has been employed as Treasurer and         
                           Chief Financial Officer of Medical Assurance Company since 1984. He       
                           also serves as a director of Medical Assurance’s insurance                
                           subsidiaries and as treasurer for ProNational. Mr. Morello is a           
                           certified public accountant. (Age 57)                                     

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    Frank B. O’Neil        Mr. O’Neil was appointed as our Senior Vice President of Corporate        
                           Communications and Investor Relations in September 2001. Mr. O’Neil       
                           has been Senior Vice President of Corporate Communications for Medical    
                           Assurance since 1997 and employed by Medical Assurance Company and its    
                           subsidiaries since 1987. (Age 52)                                         

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    Edward L. Rand, Jr.    Mr. Rand was appointed Chief Financial Officer on April 1, 2005,          
                           having joined ProAssurance as our Senior Vice President of Finance in     
                           November 2004. Prior to joining ProAssurance Mr. Rand was the Chief       
                           Accounting Officer and Head of Corporate Finance for PartnerRe Ltd.       
                           Prior to that time Mr. Rand served as the Chief Financial Officer of      
                           Atlantic American Corporation. (Age 39)                                   

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    Darryl K. Thomas       Mr. Thomas is the Co-President of the Professional Liability Group and    
                           serves as our Chief Claims Officer. Prior to the formation of             
                           ProAssurance, Mr. Thomas was Senior Vice President of Claims for          
                           ProNational Insurance Company, one of ProAssurance’s predecessor          
                           companies. Prior to joining ProNational Insurance Company in 1995,        
                           Mr. Thomas was Executive Vice President of a national third-party         
                           administrator of professional liability claims. Mr. Thomas was also       
                           Vice President and Litigation Counsel for the Kentucky Hospital           
                           Association. (Age 48)                                                     

        We have adopted a code of ethics that applies to our directors
   and executive officers, including our principal executive officers,
   principal financial officer, and principal accounting officer. We also
   have share ownership guidelines in place to ensure that management
   maintains a significant portion of their personal investments in the
   stock of ProAssurance. See Item 1 for information regarding the
   availability of the Code of Ethics and the Share ownership Guidelines.

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   PART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
   STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.     At
   February 15, 2006, ProAssurance Corporation (PRA) had 3,628
   stockholders of record and 31,144,642 shares of common stock
   outstanding. ProAssurance’s common stock currently trades on The New
   York Stock Exchange (NYSE) under the symbol “PRA”.

   __TOKEN__29__0__

    Quarter    2005          2004   

               High          Low            High       Low   

    First      $     41.90          $  37.00          $  35.00      $  30.33   

    Second           41.76             36.60             37.42         32.83   

    Third            46.90             41.86             35.20         30.20   

    Fourth           51.88             44.45             40.57         33.48   

        ProAssurance has not paid any cash dividends on its common stock
   and does not currently have a policy to pay regular dividends.
        ProAssurance’s insurance subsidiaries are subject to restrictions
   on the payment of dividends to the parent. Information regarding
   restrictions on the ability of the insurance subsidiaries to pay
   dividends is incorporated by reference from the paragraphs under the
   caption “Insurance Regulatory Matters—Regulation of Dividends and
   Other Payments from Our Operating Subsidiaries” in Item 1 on page 10
   of this 10-K.

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   ITEM 6. SELECTED FINANCIAL DATA.

   __TOKEN__30__0__

                                                                                   Year Ended December 31                  

                                                                                            2005                               2004               2003        2002         2001           

                                                                            (In thousands except per share data)           

    Selected Financial Data (1)                                                                                                                                                                                      

    Gross premiums written (4)                                              $                                       572,960           $    573,592          $    543,323       $       461,715       $    315,698    

    Net premiums written (4)                                                                                        521,343                535,028               497,659               389,901            238,867    

   __TOKEN__30__7__

    Premiums earned (4)                                                                                             596,557                555,524               509,260               412,656            310,222    

    Premiums ceded (4)                                                                                              (53,316  )             (35,627  )            (49,389  )            (78,460  )         (61,208  ) 

    Net premiums earned (4)                                                                                         543,241                519,897               459,871               334,196            249,014    

    Net investment income (4)                                                                                        97,649                 76,346                63,366                66,847             54,779    

    Net realized investment gains (losses) (4)                                                                          912                  7,572                 5,858                (6,099  )           5,441    

    Other income (4)                                                                                                  3,510                  1,341                 4,460                 4,960              3,130    

    Total revenues (4)                                                                                              645,312                605,156               533,555               399,904            312,364    

    Net losses and loss adjustment expenses (4)                                                                     438,201                460,437               439,368               351,320            250,257    

    Income from continuing operations before cumulative effect of                                                    80,026                 43,043                15,345                (8,100  )           5,362    
    accounting change                                                                                                                                                                                                

    Net income (2)                                                                                                  113,457                 72,811                38,703                12,207             12,450    

    Income from continuing operations per share before cumulative effect                                                                                                                                             
    of accounting change: (3)                                                                                                                                                                                        

    Basic                                                                   $                                          2.66           $       1.48          $       0.53       $         (0.31  )    $       0.22    

    Diluted                                                                 $                                          2.52           $       1.44          $       0.53       $         (0.31  )    $       0.22    

    Net income per share: (2) (3)                                                                                                                                                                                    

    Basic                                                                   $                                          3.77           $       2.50          $       1.34       $          0.47       $       0.51    

    Diluted                                                                 $                                          3.54           $       2.37          $       1.33       $          0.46       $       0.51    

    Weighted average number of shares outstanding: (3) Basic                                                         30,049                 29,164                28,956                26,231             24,263    

    Diluted                                                                                                          32,908                 31,984                30,389                26,254             24,267    

   __TOKEN__30__26__

    Balance Sheet Data (as of December 31)                                                                                                                                                                           

    Total investments (4)                                                   $                                     2,630,942           $  2,162,147          $  1,807,285       $     1,461,591       $  1,328,560    

    Total assets from continuing operations                                                                       3,341,600              2,743,295             2,448,088             2,214,564          1,913,606    

    Total assets                                                                                                  3,909,379              3,239,198             2,879,352             2,586,650          2,238,325    

    Reserve for losses and loss adjustment expenses (4)                                                           2,224,436              1,818,636             1,634,749             1,492,140          1,317,980    

    Long-term debt (4)                                                                                              167,240                151,480               104,789                72,500             82,500    

    Total liabilities from continuing operations                                                                  2,806,820              2,333,405             2,074,560             1,854,573          1,622,121    

    Total capital                                                                                                   765,046                611,019               546,305               505,194            413,231    

    Total capital per share of common stock outstanding                     $                                         24.59           $      20.92          $      18.77       $         17.49       $      16.02    

    Common stock outstanding at end of year                                                                          31,109                 29,204                29,105                28,877             25,789    

   __TOKEN__31__0__

    (1)    Includes acquired entities since date of acquisition, only.               
           Professionals Group was acquired on June 27, 2001. NCRIC Corporation      
           was acquired on August 1, 2005.                                           

   __TOKEN__31__2__

    (2)    Net income for the year ended December 31, 2002 was increased by $1.7     
           million due to the adoption of SFAS 141 and 142. See Note 13 to our       
           consolidated financial statements in the 2004 published 10K. In           
           accordance with SFAS 142, we wrote off the unamortized balance of         
           deferred credits that related to business combinations completed prior    
           to July 1, 2001. The cumulative effect increased net income per share     
           (basic and diluted) by $0.07 per share.                                   

   __TOKEN__31__4__

    (3)    Diluted net income per share for 2003 has been restated to reflect        
           implementation of Emerging Issues Task Force 04-8, “The Effect of         
           Contingently Convertible Debt on Diluted Earnings per Share”. The         
           restatement reduced previously reported diluted net income per share      
           by $0.01.                                                                 

   __TOKEN__31__6__

    (4)    Excludes discontinued operations.                                         

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   ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
   AND RESULTS OF OPERATIONS.     The following discussion should be read
   in conjunction with the Consolidated Financial Statements and Notes
   thereto accompanying this report. Throughout the discussion,
   references to ProAssurance, “we,” “us” and “our” refers to
   ProAssurance Corporation and its subsidiaries. The discussion contains
   certain forward-looking information that involves risks and
   uncertainties. As discussed under “Forward-Looking Statements” and
   “Risk Factors,” our actual financial condition and operating results
   could differ significantly from these forward-looking statements.
        In late 2005 we reached an agreement to sell our personal lines
   operations. Accordingly, our Consolidated Financial Statements report
   our personal lines operations, which were formerly reported as a
   separate operating segment, as a component of discontinued operations
   in all periods presented. Critical Accounting Policies      Our
   consolidated financial statements have been prepared in accordance
   with accounting principles generally accepted in the United States of
   America (GAAP). Preparation of these financial statements requires us
   to make estimates and assumptions in certain circumstances that affect
   the amounts reported in our consolidated financial statements and
   related footnotes. We evaluate these estimates and assumptions on an
   on-going basis based on historical developments, market conditions,
   industry trends and other information that we believe to be reasonable
   under the circumstances. There can be no assurance that actual results
   will conform to our estimates and assumptions, and that reported
   results of operations will not be materially affected by changes in
   these estimates and assumptions.      Management considers the
   following accounting policies to be critical because they involve
   significant judgment by management and the effect of those judgments
   could result in a material effect on our financial statements. Reserve
   for Losses and Loss Adjustment Expenses (reserve for losses or
   reserve)     Our reserve for losses represents our estimate of the
   future amounts necessary to pay claims and expenses associated with
   the settlement and investigation of claims. These estimates consist of
   case reserves and bulk reserves. The estimates take into consideration
   our past loss experience, available industry data and projections as
   to future claims frequency, severity, inflationary trends and
   settlement patterns. External actuaries review our reserve for losses
   each year. We consider the views of the external actuaries as well as
   other factors, such as known, anticipated or estimated changes in
   frequency and severity of claims and loss retention levels and premium
   rates, in establishing the amount of our reserve for losses.
   Estimating casualty insurance reserves, and particularly liability
   reserves, is a complex process. These claims are typically resolved
   over an extended period of time, often five years or more, and
   estimating loss costs for these claims requires multiple judgments
   involving many uncertainties. Our reserve estimates may vary
   significantly from the eventual outcome. The assumptions used in
   establishing our reserve for losses are regularly reviewed and updated
   by management as new data becomes available. Any adjustments necessary
   are reflected in then-current operations. Due to the size of our
   reserve for losses, even a small percentage adjustment to these
   estimates could have a material effect on our results of operations
   for the period in which the adjustment is made. Reinsurance     Our
   receivable from reinsurers on unpaid losses and loss adjustment
   expenses represents our estimate of the amount of our reserve for
   losses that will be recoverable from our reinsurers. Our estimate is
   based upon our estimates of the ultimate losses that we expect to
   incur and the portion of those losses that we expect to be allocable
   to reinsurers based upon the terms of our reinsurance agreements. We
   also estimate premiums ceded under reinsurance agreements wherein the
   premium due to the reinsurer, subject to certain maximums and
   minimums, is based on losses reimbursed under the agreement. Our
   estimates of the amounts receivable from and payable to reinsurers are
   regularly reviewed and updated by management as new data becomes
   available. Given the uncertainty of the ultimate amounts of our
   losses, these estimates may vary significantly from the eventual
   outcome. Any adjustments necessary are reflected in then-current
   operations. Due to the size of our reinsurance balances, even a small
   adjustment

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   to these estimates could have a material effect on our results of
   operations for the period in which the adjustment is made.      We
   evaluate each of our ceded reinsurance contracts at its inception to
   determine if there is sufficient risk transfer to allow the contract
   to be accounted for as reinsurance under current accounting guidance.
   At December 31, 2005 all ceded contracts are accounted for as risk
   transferring contracts.      Our assessment of the collectibility of
   the recorded amounts receivable from reinsurers considers both the
   payment history of the reinsurer and publicly available financial and
   rating agency data. At December 31, 2005 we believe all of our
   recorded reinsurance receivables to be collectible. Investments     We
   consider our fixed maturity securities as available-for-sale and our
   equity securities as either available-for-sale or trading portfolio
   securities. Both available-for-sale and trading portfolio securities
   are carried at fair value. Changes in the market value (unrealized
   gains and losses) of available-for-sale securities, whether positive
   or negative, are included, net of the related tax effect, in
   accumulated other comprehensive income, a component of stockholders’
   equity, and are excluded from current period net income. Positive and
   negative changes in the market value of trading portfolio securities
   are included in current period net income as a component of net
   realized investment gains (losses).      We evaluate the securities in
   our available-for-sale investment portfolio on at least a quarterly
   basis for declines in market value below cost for the purpose of
   determining whether these declines represent other than temporary
   declines. Some of the factors we consider in the evaluation of our
   investments are:

      –    the extent to which the market value of the security is less than its  
           cost basis,                                                            

   __TOKEN__32__1__

      –    the length of time for which the market value of the security has been 
           less than its cost basis,                                              

   __TOKEN__32__3__

      –    the financial condition and near-term prospects of the security’s      
           issuer, taking into consideration the economic prospects of the        
           issuer’s industry and geographical region, to the extent that          
           information is publicly available, and                                 

   __TOKEN__32__5__

      –    our ability and intent to hold the investment for a period of time     
           sufficient to allow for any anticipated recovery in market value.      

        A decline in the fair value of an available-for-sale security
   below cost that we judge to be other than temporary is realized as a
   loss in the current period income statement and reduces the cost basis
   of the security. In subsequent periods, we base any measurement of
   gain or loss or decline in value upon the adjusted cost basis of the
   security. Deferred Policy Acquisition Costs     Policy acquisition
   costs, primarily commissions, premium taxes and underwriting salaries,
   vary directly with, and are primarily related to, the acquisition of
   new and renewal premiums. Such costs are capitalized and charged to
   expense as the related premium revenue is recognized. We evaluate the
   recoverability of our deferred policy acquisition costs based on our
   estimates of the profitability of the underlying business and any
   amounts estimated to be unrecoverable are charged to expense in the
   current period. Goodwill     In accordance with Statement of Financial
   Accounting Standards No. 142 “Goodwill and Other Intangible Assets” we
   make an annual assessment as to whether the value of our goodwill
   assets is impaired. We completed such assessments in 2005 and 2004 and
   concluded that the value of our goodwill assets related to continuing
   operations of approximately $29.5 million was not impaired. We use
   both market-based valuation models and a capital asset pricing model
   to estimate the fair value. These models require the use of numerous
   assumptions regarding market perceptions of value as related to our
   consolidated and reporting unit historical and projected operating
   results and those of other economically similar entities. Changes to
   these assumptions could significantly lower our estimates of fair
   value and result in a

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   determination that goodwill has suffered impairment in value. Any
   determined impairment would be reflected as an expense in the period
   identified. Overview     We are an insurance holding company and our
   operating results are almost entirely derived from the operations of
   our insurance subsidiaries. Our core operating subsidiaries are The
   Medical Assurance Company, Inc., ProNational Insurance Company, NCRIC,
   Inc. and Red Mountain Casualty Insurance Company, Inc.; all
   principally write professional liability insurance. We also write a
   limited amount of medical professional liability insurance through
   Woodbrook Casualty Insurance, Inc. (formerly Medical Assurance of West
   Virginia, Inc.). Corporate Strategy     Our goal is to build upon our
   position as a leading writer of professional liability insurance and
   expand principally within the mid-Atlantic, Midwest and Southeast,
   while maintaining our commitment to disciplined underwriting and
   aggressive claims management. According to A.M. Best, based on 2004
   data, we are the fourth largest active medical liability insurance
   writer in the nation, and we believe we are the largest medical
   liability writer in our collective states of operation. We believe
   that our strong reputation in our regional markets, combined with our
   financial strength, strong customer service and proven ability to
   manage claims, should enable us to profitably expand our position in
   select states. We have successfully acquired and integrated companies
   and books of business in the past and believe our financial size and
   strength make us an attractive acquirer. We continually evaluate these
   opportunities to leverage our core underwriting and claims expertise.
        We emphasize disciplined underwriting and do not manage our
   business to achieve a certain level of premium growth or market share.
   We apply our local knowledge to individual risk selection and
   determine the appropriate price based on our assessment of the
   specific characteristics of each risk. In addition to prudent risk
   selection, we seek to control our underwriting results through
   effective claims management. We investigate each claim and have
   fostered a strong culture of aggressively defending claims that we
   believe have no merit. We manage claims at the local level, tailoring
   claims handling to the legal climate of each state, which we believe
   differentiates us from national writers.      Through our regional
   underwriting and claims office structure, we are able to gain a strong
   understanding of local market conditions and efficiently adapt our
   underwriting and claims strategies to regional conditions. Our
   regional presence also allows us to maintain active relationships with
   our customers and be more responsive to their needs. We believe these
   factors allow us to compete on a basis other than just price. We also
   believe that our presence in local markets allows us to monitor and
   understand changes in the liability climate and thus develop better
   business strategies in a more timely manner than our competitors.
        We have sustained our financial stability during difficult market
   conditions through responsible pricing and loss reserving practices.
   We are committed to maintaining prudent operating and financial
   leverage and conservatively investing our assets. We recognize the
   importance that our customers and producers place on the strong
   ratings of our principal insurance subsidiaries and we intend to
   manage our business to protect our financial security.      We measure
   performance in a number of ways, but particularly focus on our
   combined ratio and investment returns, both of which directly affect
   our return on equity (ROE). We target a long-term average ROE of 12%
   to 14%.      We believe that a focus on rate adequacy, selective
   underwriting and effective claims management is required if we are to
   achieve our ROE targets. We closely monitor premium revenues, losses
   and loss adjustment costs, and acquisition, underwriting and insurance
   expenses. Our investment portfolio is managed in order to meet the
   liquidity and profitability needs of each insurance company as well as
   to maximize after-tax investment returns on a consolidated basis. We
   engage in activities that generate other income; however, such
   activities, principally fee generating and agency services, do not
   constitute a significant source of revenues or profits.

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   Growth Opportunities and Outlook     We expect our future growth will
   be supported by controlled expansion in states where we are already
   writing business and into additional states within, or adjacent to,
   our existing business footprint. We also look to expand through the
   acquisition of other companies or books of business; however, such
   expansion is opportunistic and cannot be predicted.      We believe we
   are viewed as a market leader because of our financial strength and
   stability, and our ability to deliver excellent service at the local
   level. There have been several highly publicized insolvencies in our
   industry in recent years, and regulators have taken action against
   former competitors because of financial concerns. Thus, we believe our
   balance sheet strength and financial stability will continue to be a
   differentiating factor in the market.      We have seen an increase in
   competition during the year by both existing professional liability
   insurers as well as new entrants, primarily in the form of risk
   retention groups and other risk pooling mechanisms. While most
   existing competitors appear to be maintaining pricing and underwriting
   discipline, we are seeing an increase in competition, especially on
   price. The new entrants are typically more aggressive in seeking new
   business and are generally more willing to compete on price. As a
   result of these market forces, profitable growth in the coming year
   will be challenging. Nevertheless we will continue to price our
   products at levels that we believe meet our return objectives and we
   will continue to disregard business that does not.      We achieved
   average gross price increases of approximately 11%, 19% and 28%, on
   renewal business (weighted by premium volume) in 2005, 2004 and 2003,
   respectively. In 2006 we expect professional liability pricing to
   increase at a slower pace. The price increases implemented over the
   last several years have brought our pricing to a level that we believe
   is adequate to meet our return objectives. We plan to maintain this
   pricing level by using future rate increases to counteract loss cost
   inflation. Recent Significant Events     On August 3, 2005
   ProAssurance acquired all of the outstanding common stock of NCRIC
   Corporation (NCRIC) in a stock for stock merger. NCRIC’s primary
   business is a single property and casualty insurance company that
   provides medical professional liability insurance in the District of
   Columbia, Delaware, Maryland, Virginia and West Virginia. The primary
   purpose for the transaction was to expand marketing opportunities for
   our professional liability insurance products.      As part of the
   NCRIC merger, we also acquired ConsiCare, a subsidiary which provides
   administrative and financial services to physician practices.
   ConsiCare’s business focus is not consistent with our strategy as a
   specialty insurance company, and we therefore sold ConsiCare for
   $1.7 million on December 28, 2005. The operating results of ConsiCare
   are presented in the accompanying Consolidated Financial Statements as
   a component of discontinued operations. There was no gain or loss on
   the sale because our carrying value for ConsiCare approximated the
   sale price less sale expenses, adjusted for the tax effects of the
   sale.      The following chart summarizes the NCRIC acquisition:

   __TOKEN__33__0__

                                                                        In millions      

    Fair value of 1.7 million ProAssurance common shares issued         $            67.1   

    Other acquisition costs                                                           4.1   

   __TOKEN__33__4__

    Aggregate purchase price                                                         71.2   

    Fair value of net assets acquired                                                46.2   

   __TOKEN__33__7__

    Excess of purchase price over fair value of net assets acquired,    $            25.0   
    recognized as goodwill                                                                  

   __TOKEN__33__9__

        On January 4, 2006 we sold our personal lines operations (the
   MEEMIC companies), effective January 1, 2006. The transaction is worth
   $400 million to us before transaction expenses. Motors Insurance
   Corporation (Motors), a subsidiary of GMAC Insurance Holdings, Inc.,
   paid approximately $325 million in cash for MEEMIC Insurance Company
   and its internal agency, and we retained approximately $75 million of
   the MEEMIC companies’ pre-sale capital. Sale proceeds will support the
   capital

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   requirements of our professional liability insurance subsidiaries and
   other general corporate purposes. Following the sale, our total assets
   will decline by $167.8 million ($567.8 million assets sold less
   proceeds of $400 million) and our liabilities will decline by
   $337.5 million. Our stockholders’ equity will increase by the gain
   recognized on the transaction, which we expect to be approximately
   $110 million after consideration of sale expenses and the tax effects
   of the sale.      Because these operations have been sold, the assets,
   liabilities and operating results of the MEEMIC companies are reported
   as a component of discontinued operations in our accompanying
   Consolidated Financial Statements for all periods presented.
   Previously, we reported our personal lines operations and our
   professional liability operations as separate reportable segments; net
   investment income of the parent holding company and interest expense
   on long-term debt (corporate income) were not allocated to either
   segment. This reporting structure was reflected in prior filings. Our
   continuing operations now represent a single reportable segment and
   combine corporate income with the results of the professional
   liability segment.      Additional information regarding the
   previously described transactions is provided in Note 2 “Acquisition
   of NCRIC” and Note 3, “Discontinued Operations” of the Notes to the
   Consolidated Financial Statements included herein.      On December 8,
   2005, we reached a definitive agreement with Physicians Insurance
   Company of Wisconsin, Inc. (PIC Wisconsin) whereby we agreed to
   acquire PIC Wisconsin in an all-stock merger transaction having an
   estimated value of $100 million.      PIC Wisconsin is a
   Wisconsin-domiciled stock insurance company; its shares are not
   registered under the Securities Exchange Act of 1934. There is no GAAP
   financial data available for PIC Wisconsin. Audited December 31, 2004
   statutory reports for PIC Wisconsin present cash and invested assets
   of $247.3 million, loss and loss adjustment expense reserves of
   $140.8 million, capital and surplus of $89.3 million and 2004 earned
   premiums of $56.5 million. The transaction is subject to approval by
   PIC Wisconsin shareholders and required regulatory approvals. We filed
   a registration statement and a proxy statement/prospectus with the
   Securities and Exchange Commission (SEC) on February 15, 2006 which is
   not yet effective. For more information regarding the proposed merger
   refer to the registration statement, SEC file number 333-131874.
   Liquidity and Capital Resources and Financial Condition     The
   following discussions of changes in our financial condition and
   operating results exclude amounts that are classified as discontinued
   operations in our consolidated financial statements, as discussed
   under the caption “Recent Significant Events” and in Note 3 of our
   Consolidated Financial Statements.      ProAssurance Corporation is a
   legal entity separate and distinct from its subsidiaries. Because the
   parent holding company 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
   those insurance subsidiaries to pay dividends is subject to limitation
   by state insurance regulations. See our discussions under “Regulation
   of Dividends from Our Operating Subsidiaries” in Part I, and in Note
   15 of our Notes to the Consolidated Financial Statements for
   additional information regarding dividend limitations.      Within our
   operating subsidiaries our primary need for liquidity is to pay losses
   and operating expenses in the ordinary course of business. Our
   operating activities provided positive cash flow of $323.6 million for
   the year ended December 31, 2005, which is comparable to cash provided
   by operations of $336.3 million for the year ended December 31, 2004.
   Our December 31, 2005 operating cash flow includes $16.3 million
   generated by NCRIC operating activities from the August 3 purchase
   date forward. The primary sources of our operating cash flows are net
   investment income and the excess of premiums collected over net losses
   paid and operating costs. Timing delays exist between the collection
   of premiums and the payment of losses. A general measure of this
   timing delay is the ratio of paid to incurred losses, which is
   computed by dividing paid losses for the period by incurred losses.
   Our paid to incurred loss ratios for the years ended December 31, 2005
   and 2004 are 51.6% and 46.5%, respectively.

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        The cash flows of the personal lines segment have historically
   not been used to support our professional liability operations. It is
   not expected that the sale of the personal lines segment will have a
   detrimental effect on the liquidity of our continuing operations.
        We believe that rate adequacy is critical to our long-term
   liquidity. We continually review rates and submit requests for rate
   increases to state insurance departments as we consider necessary to
   maintain rate adequacy. We are unable to predict whether we will
   continue to receive approval for our rate filings. In most
   jurisdictions we are required to receive approval of these rate
   increases before we can factor them into the pricing of our products.
        We manage our investment portfolio to ensure that it will have
   sufficient liquidity to meet our obligations, taking into
   consideration the timing of cash flows from our investments as well as
   the expected cash flows to be generated by our operations. At our
   insurance subsidiaries the primary outflow of cash is related to the
   payment of claims and expenses. The payment of individual claims
   cannot be predicted with certainty; therefore, we rely upon the
   history of paid claims in determining the expected future claims
   payments. To the extent that we have an unanticipated shortfall in
   cash we may either liquidate securities held in our investment
   portfolio or borrow funds under previously established borrowing
   arrangements. However, given the significant cash flows being
   generated by our operations and the relatively short duration of our
   investment portfolio we do not foresee any such shortfall.      Cash
   and invested assets increased $482.6 million over the prior year. The
   increase is attributable to the aforementioned operating cash flow as
   well as the addition of NCRIC, which held cash and investments of
   $237.1 million at December 31, 2005. The fair value of our investment
   portfolio decreased $43.2 million as a result of the rising rate
   environment in 2005. We transfer most of the cash generated from
   operations into our investment portfolio. We held cash and cash
   equivalents of approximately $34.5 million at December 31, 2005 and
   $20.7 million at December 31, 2004.      At December 31, 2005 our
   investment in fixed maturity securities is $2.4 billion, representing
   91.4% of our total investments. Substantially all of our fixed
   maturities are either United States government agency obligations or
   investment grade securities as determined by national rating agencies.
   The fixed maturity securities in our investment portfolio have a
   dollar weighted average rating of “AA” at December 31, 2005. Our
   investment policy implements an asset allocation that uses length to
   maturity as one method of managing our long-term rate of return. The
   weighted average effective duration of our fixed maturity securities
   at December 31, 2005 is 3.91 years. Changes in market interest rate
   levels generally affect our net income to the extent that reinvestment
   yields are different than the original yields on maturing securities.
   Additionally, changes in market interest rates also affect the fair
   value of our fixed maturity securities. Bond interest rates have
   increased since December 31, 2004 and as a result average bond market
   values have decreased. On a pre-tax basis, net unrealized gains/losses
   related to our available-for-sale fixed maturity securities decreased
   from a net unrealized gain of $27.3 million at December 31, 2004 to a
   net unrealized loss of $15.2 million at December 31, 2005.      At
   December 31, 2005, available-for-sale and trading portfolio equity
   investments total $15.2 million, representing approximately 0.6% of
   our total investments, and approximately 2.0% of our capital. These
   holdings decreased from $33.6 million at December 31, 2004.      Our
   investment in short-term securities at December 31, 2005 is
   $93.1 million as compared to $37.9 million at December 31, 2004.
   Approximately $17.0 million of this increase is attributable to NCRIC.
   We have elected to hold more funds in short-term securities during
   2005 in order to increase our investment flexibility in a rising rate
   environment. As our investment managers identify investment
   opportunities that are consistent with our longer range investment
   strategy we plan to move funds from short-term securities to longer
   term fixed maturity securities.      For a more detailed discussion of
   the effect of changes in interest rates on our investment portfolio
   see Item 7A, “Quantitative and Qualitative Disclosures about Market
   Risk.”

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        Our long-term debt at December 31, 2005 is comprised of the
   following:

   __TOKEN__34__0__

                                           Due                  Rate                2005             

                                                                                  In thousands         

    Convertible Debentures           June 2023               3.90%, fixed        $             105,381   

    2034 Subordinated Debentures     April — May 2034    8.19%, Libor adjusted                  46,395   

    2032 Subordinated Debentures*    December 2032       8.44%, Libor adjusted                  15,464   

   __TOKEN__34__6__

                                                                                 $             167,240   

   __TOKEN__34__8__

   __TOKEN__35__0__

    *    Assumed in NCRIC transaction 

        We may redeem the Convertible Debentures on or after July 7, 2008
   with notice. Holders may require us to repurchase their debentures on
   June 30 of 2008, 2013, and 2018. Also, holders may convert their
   debentures if the market value of our common stock exceeds the product
   of the conversion price (currently $41.83) multiplied by 120% for 20
   of the 30 trading days ending on the last trading day of the
   immediately preceding quarter. Upon conversion, holders will receive
   23.9037 shares of common stock for each $1,000 principal amount of
   debentures surrendered for conversion. We have the right to deliver,
   in lieu of common stock, cash or a combination of cash and shares of
   common stock.      The 2032 and 2034 Subordinated Debentures may be
   redeemed at our option in December 2007 and April 2009, respectively.
        See Note 10 of our Consolidated Financial Statements for
   additional information regarding our long-term debt.      As a result
   of the acquisition of NCRIC, we assumed the risk of loss for a
   judgment entered against NCRIC on February 20, 2004 by a District of
   Columbia Superior Court in favor of Columbia Hospital for Women
   Medical Center, Inc. (“CHW”) in the amount of $18.2 million (the “CHW
   judgment”). By order of September 30, 2005, the trial court denied all
   post-trial relief sought by NCRIC and NCRIC has appealed the judgment.
   NCRIC posted a $19.5 million appellate bond and associated letter of
   credit to secure payment of the CHW judgment plus interest and costs,
   in the event the judgment is ultimately affirmed and paid. In
   accordance with SFAS 141, we established a liability of $19.5 million
   for this judgment and included the liability as a component of the
   fair value of assets acquired and liabilities assumed in the
   allocation of the NCRIC purchase price. Losses     Losses are the
   largest component of expense for our operations. As discussed in
   critical accounting policies, net losses in any period reflect our
   estimate of net losses related to the premiums earned in that period
   as well as any changes to our estimates of the reserve established for
   net losses of prior periods.      The estimation of medical
   professional liability losses is inherently difficult. Injuries may
   not be discovered until years after an incident, or the claimant may
   delay pursuing the recovery of damages. Ultimate loss costs, even for
   similar events, vary significantly depending upon many factors,
   including but not limited to the nature of the injury and the personal
   situation of the claimant or the claimants’ family, the judicial
   climate where the insured event occurred, general economic conditions
   and the trend of health care costs. Medical liability claims are
   typically resolved over an extended period of time, often five years
   or more. The combination of changing conditions and the extended time
   required for claim resolution results in a loss cost estimation
   process that requires actuarial skill and the application of judgment,
   and such estimates require periodic revision.      In establishing our
   reserve for loss and loss adjustment expenses management considers a
   variety of factors including historical paid and incurred loss
   development trends, the effect of inflation on medical care, general
   economic trends and the legal environment. Given the number of factors
   considered it is neither practical nor meaningful to isolate a
   particular assumption or parameter of the process and calculate the
   impact of changing that single item. We perform an in-depth review of
   our loss reserve on a semi-annual basis. However, management is
   continually reviewing and updating the data

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   underlying the estimation of our loss reserve and we make adjustments
   that we believe the emerging data indicate. Any adjustments necessary
   are reflected in the then-current operations.      As a result of the
   variety of factors that must be considered by management there is a
   significant risk that actual incurred losses will develop differently
   from these estimates. We use a variety of actuarial methodologies in
   performing these analyses. Among the methods that we have used are:

      – Paid development method       

      – Reported development method   

      – Bornhuetter-Ferguson method   

      – Average paid value method     

      – Average reported value method 

      – Backward recursive method     

        Generally, methods such as the Bornheutter-Ferguson method are
   used on more recent accident years where we have less data on which to
   base our analysis. As business seasons and we have an increased amount
   of data for a given accident year we begin to give more confidence to
   the development and average methods as these methods typically rely
   more heavily on our own historical data. Each of these methods treats
   our assumptions differently, and thus provides a different perspective
   on the particular business under review.      The various actuarial
   methods discussed above are applied in a consistent manner from period
   to period. In addition, we perform statistical reviews of claim data
   such as claim counts, average settlement costs and severity trends.
        In performing these analyses we partition our business by type,
   coverage type, geography, layer of coverage and accident year. This
   procedure is intended to balance the use of the most representative
   data for each partition, capturing its unique patterns of development
   and trends. For each partition, the results of the various methods,
   along with the supplementary statistical data regarding such factors
   as the current economic environment, are used to develop a point
   estimate based upon management’s judgment and past experience. The
   process of selecting the point estimate from the set of possible
   outcomes produced by the various actuarial methods is based upon the
   judgment of management and is not driven by formulaic determination.
   For each partition of our business we select a point estimate with due
   regard for the age, characteristics and volatility of the partition of
   the business, the volume of data available for review and past
   experience with respect to the accuracy of estimates for business of a
   similar type. This series of selected point estimates is then combined
   to produce an overall point estimate for ultimate losses.      The
   Company has modeled implied reserve ranges around its single point
   reserve estimates for its professional liability business assuming
   different confidence levels. The ranges have been developed by
   aggregating the expected volatility of losses across partitions of our
   business to obtain a consolidated distribution of potential reserve
   outcomes. The aggregation of this data takes into consideration the
   correlation among the Company’s geographic and specialty mix of
   business. The result of the correlation approach to aggregation is
   that the ranges are narrower than the sum of the ranges determined for
   each partition.      The Company has used this modeled statistical
   distribution to calculate an 80% and 60% confidence interval for the
   potential outcome of our reserves. The high and low end points of the
   ranges are as follows:

   __TOKEN__37__0__

                            Low End Point                    Carried Reserves                   High End Point  

    80% Confidence Level    $1.383 billion   $1.897 billion                   $2.355 billion

    60% Confidence Level    $1.505 billion   $1.897 billion                   $2.128 billion

        The development of a reserve range models the uncertainty of the
   claim environment as well as the limited predictive power of past loss
   data. These uncertainties and limitations are not specific to the
   Company. The ranges represent an estimate of the range of possible
   outcomes and should not be confused with a range of best estimates.
   Any change in our estimate of reserves would be reflected in
   then-current operations. Due to the size of our reserve for losses,
   even a small percentage adjustment to

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   these estimates could have a material effect on our results of
   operations for the period in which the adjustment is made.
             The following table, known as the Loss Reserve Development
   Table, presents information over the preceding ten years regarding the
   payment of our losses as well as changes to (the development of) our
   estimates of losses during that time period. Years prior to 2001
   relate only to the reserves of Medical Assurance. In years 2001 and
   thereafter the table reflects the reserves of ProAssurance, formed in
   2001 in order to merge Medical Assurance and Professionals Group.
   NCRIC reserves are included only in the year 2005 since NCRIC was
   acquired in that year. The table does not include the loss reserves of
   personal lines operations, which are reflected in our financial
   statements as discontinued operations.           The table includes
   losses on both a direct and an assumed basis and is net of reinsurance
   recoverables. The gross liability for losses before reinsurance, as
   shown on the balance sheet, and the reconciliation of that gross
   liability to amounts net of reinsurance are reflected below the table.
   We do not discount our reserves to present value. Information
   presented in the table is cumulative and, accordingly, each amount
   includes the effects of all changes in amounts for prior years. The
   table presents the development of our balance sheet reserves; it does
   not present accident year or policy year development data. Conditions
   and trends that have affected the development of liabilities in the
   past may not necessarily occur in the future. Accordingly, it may not
   be appropriate to extrapolate future redundancies or deficiencies
   based on this table.           The following may be helpful in
   understanding the Loss Reserve Development Table:

      –    The line entitled “Reserve for losses, undiscounted and net of           
           reinsurance recoverables” reflects the Company’s reserve for losses      
           and loss adjustment expense, less the receivables from reinsurers,       
           each as showing in the Company’s consolidated financial statements at    
           the end of each year (the Balance Sheet Reserves).                       

   __TOKEN__38__1__

      –    The section entitled “Cumulative net paid, as of” reflects the           
           cumulative amounts paid as of the end of each succeeding year with       
           respect to the previously recorded Balance Sheet Reserves.               

   __TOKEN__38__3__

      –    The section entitled “Re-estimated net liability as of” reflects the     
           re-estimated amount of the liability previously recorded as Balance      
           Sheet Reserves that includes the cumulative amounts paid and an          
           estimate of additional liability based upon claims experience as of      
           the end of each succeeding year (the Net Re-estimated Liability).        

   __TOKEN__38__5__

      –    The line entitled “Net cumulative redundancy (deficiency)” reflects      
           the difference between the previously recorded Balance Sheet Reserve     
           for each applicable year and the Net Re-estimated Liability relating     
           thereto as of the end of the most recent fiscal year.                    

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   __TOKEN__39__0__

   Analysis of Losses and Loss Reserve Development
   (In thousands)

   __TOKEN__40__0__

                                                                                                                                           December 31,                                                                                                    

                                                                            1995             1996              1997        1998            1999                  2000              2001        2002        2003               2004               2005  

   __TOKEN__40__3__

    Reserve for losses, undiscounted and net of reinsurance recoverables    $     352,521           $   440,040          $   464,122       $              480,741           $   486,279          $   493,457       $     1,009,354           $  1,098,941          $  1,298,458       $  1,544,981       $  1,896,743   

   __TOKEN__40__5__

    Cumulative net paid, as of:                                                                                                                                                                                                                                                                                         

   __TOKEN__40__7__

    One Year Later                                                                 27,532                48,390               67,383                       89,864               133,832              143,892               245,743                224,318               200,314            199,617                      

    Two Years Later                                                                58,769                98,864              128,758                      192,716               239,872              251,855               436,729                393,378               378,036                                         

    Three Years Later                                                              80,061               136,992              194,139                      257,913               313,993              321,957               563,557                528,774                                                               

    Four Years Later                                                              107,005               173,352              227,597                      308,531               358,677              367,810               656,670                                                                                      

    Five Years Later                                                              120,592               191,974              252,015                      331,796               387,040              402,035                                                                                                            

    Six Years Later                                                               129,043               204,013              266,056                      346,623               408,079                                                                                                                                 

    Seven Years Later                                                             135,620               212,282              276,052                      357,148                                                                                                                                                       

    Eight Years Later                                                             138,534               218,919              284,442                                                                                                                                                                                    

    Nine Years Later                                                              140,712               225,722                                                                                                                                                                                                         

    Ten Years Later                                                               142,552                                                                                                                                                                                                                               

   __TOKEN__40__18__

    Re-estimated Net Liability as of:                                                                                                                                                                                                                                                                                   

   __TOKEN__40__20__

    End of Year                                                                   352,521               440,040              464,122                      480,741               486,279              493,457             1,009,354              1,098,941             1,298,458          1,544,981                      

    One Year Later                                                                325,212               393,363              416,814                      427,095               463,779              507,275             1,026,354              1,098,891             1,289,744          1,522,000                      

    Two Years Later                                                               280,518               347,258              364,196                      398,308               469,934              529,698             1,023,582              1,099,292             1,282,920                                         

    Three Years Later                                                             237,280               294,675              333,530                      400,333               488,416              527,085             1,032,571              1,109,692                                                               

    Four Years Later                                                              190,110               264,714              323,202                      414,008               487,366              534,382             1,035,832                                                                                      

    Five Years Later                                                              173,148               259,195              320,888                      415,381               485,719              536,875                                                                                                            

    Six Years Later                                                               168,828               248,698              321,232                      412,130               489,187                                                                                                                                 

    Seven Years Later                                                             160,784               250,927              321,959                      409,501                                                                                                                                                       

    Eight Years Later                                                             161,717               251,584              319,822                                                                                                                                                                                    

    Nine Years Later                                                              158,743               250,397                                                                                                                                                                                                         

    Ten Years Later                                                               158,601                                                                                                                                                                                                                               

   __TOKEN__40__32__

    Net cumulative redundancy (deficiency)                                  $     193,920           $   189,643          $   144,300       $               71,240           $    (2,908  )       $   (43,418  )    $       (26,478  )        $    (10,751  )       $     15,538       $     22,981                      

   __TOKEN__40__34__

   __TOKEN__40__35__

    Original gross liability — end of year                                  $     432,937           $   548,732          $   614,720       $              660,631           $   665,786          $   659,659       $     1,322,871           $  1,494,875          $  1,634,749       $  1,818,635                      

   __TOKEN__40__37__

    Less: reinsurance recoverables                                                (80,416  )           (108,692  )          (150,598  )                  (179,890  )           (179,507  )          (166,202  )           (313,517  )            (395,934  )           (336,291  )        (273,654  )                   

   __TOKEN__40__39__

    Original net liability — end of year                                    $     352,521           $   440,040          $   464,122       $              480,741           $   486,279          $   493,457       $     1,009,354           $  1,098,941          $  1,298,458       $  1,544,981                      

   __TOKEN__40__41__

   __TOKEN__40__42__

    Gross re-estimated liability — latest                                   $     182,719           $   295,748          $   416,432       $              519,779           $   600,769          $   638,452       $     1,281,424           $  1,398,922          $  1,573,377       $  1,797,409                      

   __TOKEN__40__44__

    Re-estimated reinsurance recoverables                                         (24,118  )            (45,351  )           (96,610  )                  (110,278  )           (111,582  )          (101,577  )           (245,592  )            (289,230  )           (290,457  )        (275,409  )                   

   __TOKEN__40__46__

    Net re-estimated liability — latest                                     $     158,601           $   250,397          $   319,822       $              409,501           $   489,187          $   536,875       $     1,035,832           $  1,109,692          $  1,282,920       $  1,522,000                      

   __TOKEN__40__48__

   __TOKEN__40__49__

    Gross cumulative redundancy (deficiency)                                $     250,218           $   252,984          $   198,288       $              140,852           $    65,017          $    21,207       $        41,447           $     95,953          $     61,372       $     21,226                      

   __TOKEN__40__51__

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             In each year reflected in the table, we have utilized the
   actuarial methodologies discussed previously to estimate reserves.
   These techniques are applied to the data in a consistent manner and
   the resulting projections are evaluated by management to establish the
   estimate of reserves.           Factors that have contributed to the
   variation in loss development include the following:

      –    Our volume of business and the corresponding data in the late 1980’s      
           and early 1990’s, while substantial, was not of a sufficient size to      
           fully support the actuarial projection process without the use of         
           industry-based data. Substantially all of our business was derived        
           from medical professional liability insurance written in Alabama until    
           we began to geographically expand our business in the mid to late         
           1990s. We utilized a rigorous and disciplined approach to                 
           investigating, managing and defending claims. This philosophy             
           generally produced results in Alabama that were better than industry      
           averages in terms of loss payments and the proportion of claims closed    
           without indemnity payment. Ultimately, actual results proved better       
           than the industry data, creating redundancies.                            

   __TOKEN__41__1__

      –    Our reserves established in the late 1980’s and early 1990’s were         
           strongly influenced by the dramatically increased frequency and           
           severity that we, and the industry as a whole, experienced during the     
           mid-1980s. Some of these trends moderated, and in some cases,             
           reversed, by the late 1980s or early 1990s. However, the ability to       
           recognize the improved environment was delayed due to the extended        
           time required for claims resolution. When these negative trends           
           moderated, the reserves we established during those periods proved to     
           be redundant.                                                             

   __TOKEN__41__3__

      –    The professional liability legal environment deteriorated once again      
           in the late 1990’s. Beginning in 2000, we recognized adverse trends in    
           claim severity causing increased estimates of certain loss                
           liabilities. As a result, favorable development of prior year loss        
           reserves slowed in 2000 and reversed in 2001 and 2002. We have            
           addressed these trends through increased rates, stricter underwriting     
           and modifications to claims handling procedures.                          

   __TOKEN__41__5__

      –    During 2004 and 2005 we recognized favorable development related to       
           our previously established reserves, primarily to reflect reductions      
           in our estimates of claim severity.                                       

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        At December 31, 2005 our reserve for losses, net of the
   receivable from reinsurers, is $1.9 billion, an increase of
   $351.8 million over net reserves at December 31, 2004, which includes
   NCRIC net reserves acquired in August of $139.7 million. Our
   receivable from reinsurers at December 31, 2005 is $327.7 million, of
   which $41.3 million is attributable to NCRIC. Our reserve for losses
   continues to grow given the generally long-tailed nature of
   professional liability lines of business. Several years can pass
   between the initial recognition of a claim and the ultimate settlement
   of that claim. This, coupled with the growth in the number of policies
   we issue has resulted in an increase in loss reserve. Activity in the
   net reserve for losses during 2005, 2004 and 2003 is summarized below:

   __TOKEN__43__0__

                                                                          Year Ended December 31           

                                                                                   2005                        2004               2003  

   __TOKEN__43__3__

                                                                               In thousands                

    Balance, beginning of year                                            $                       1,818,636           $  1,634,749          $  1,494,875    

    Less receivable from reinsurers                                                                 273,654                336,291               395,934    

   __TOKEN__43__7__

   __TOKEN__43__8__

    Net balance, beginning of year                                                                1,544,982              1,298,458             1,098,941    

   __TOKEN__43__10__

    Reserves acquired from NCRIC, net of receivable from reinsurers of                              139,672                      —                     —    
    $43.5 million                                                                                                                                           

   __TOKEN__43__12__

    Incurred related to:                                                                                                                                    

    Current year                                                                                    461,182                469,151               439,418    

    Prior years                                                                                     (22,981  )              (8,714  )                (50  ) 

   __TOKEN__43__16__

    Total incurred                                                                                  438,201                460,437               439,368    

   __TOKEN__43__18__

    Paid related to:                                                                                                                                        

    Current year                                                                                    (26,495  )             (13,599  )            (15,533  ) 

    Prior years                                                                                    (199,617  )            (200,314  )           (224,318  ) 

   __TOKEN__43__22__

    Total paid                                                                                     (226,112  )            (213,913  )           (239,851  ) 

   __TOKEN__43__24__

    Net balance, end of year                                                                      1,896,743              1,544,982             1,298,458    

    Plus receivable from reinsurers                                                                 327,693                273,654               336,291    

   __TOKEN__43__27__

   __TOKEN__43__28__

    Balance, end of year                                                  $                       2,224,436           $  1,818,636          $  1,634,749    

   __TOKEN__43__30__

        At December 31, 2005 our gross loss reserves included case
   reserves of approximately $1.240 billion and IBNR reserves of
   approximately $984 million. Our insurance subsidiaries had
   consolidated reserves for losses on a GAAP basis that exceeded those
   on a statutory basis by approximately $29.6 million, which is
   principally due to the portion of GAAP reserves that are reflected for
   statutory accounting purposes as unearned premiums. These unearned
   premiums are applicable to extended reporting endorsements (“tail”
   coverage) issued without a premium charge upon death, disability, or
   retirement of an insured. Reinsurance     We use reinsurance to
   provide capacity to write large limits of liability, to reduce losses
   of a catastrophic nature and to stabilize underwriting results in
   those years in which such losses occur. The purchase of reinsurance
   does not relieve us from the ultimate risk on our policies, but it
   does provide reimbursement from the reinsurer for certain losses paid
   by us.      We reinsure professional liability risks under treaties
   pursuant to which the reinsurer agrees to assume all or a portion of
   all risks that we insure above our individual risk retention of $1
   million per claim, up to the maximum individual limit offered
   (currently $16 million). Historically, per claim retention levels have
   varied between the first $200,000 and the first $2 million depending
   on the coverage year and the state in which business was written.
   Periodically, we provide insurance to policyholders above the maximum
   limits of our primary reinsurance treaties. In those situations, we
   reinsure the excess risk above the limits of our reinsurance treaties
   on a facultative basis, whereby the reinsurer agrees to insure a
   particular risk up to a designated limit.      Our risk retention
   level is dependent upon numerous factors including our risk appetite
   and the capital we have to support it, the price and availability of
   reinsurance, volume of business, level of

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   experience and our analysis of the potential underwriting results
   within each state. Our 2005-2006 reinsurance treaties renewed with
   minimal change in terms or conditions from the prior year.      The
   effective transfer of risk is dependent on the credit-worthiness of
   the reinsurer. We purchase reinsurance from a number of companies to
   mitigate concentrations of credit risk. Our reinsurance broker assists
   us in the analysis of the credit quality of our reinsurers. We base
   our reinsurance buying decisions on an evaluation of the then-current
   financial strength, rating and stability of prospective reinsurers.
   However, the financial strength of our reinsurers, and their
   corresponding ability to pay us, may change in the future due to
   forces or events we cannot control or anticipate.      We have not
   experienced any significant difficulties in collecting amounts due
   from reinsurers due to the financial condition of the reinsurer.
   Should future events lead us to believe that any reinsurer is unable
   to meet its obligations to us, adjustments to the amounts recoverable
   would be reflected in the results of current operations.      At
   December 31, 2005 our receivable from reinsurers approximated
   $328 million. The following table identifies our reinsurers from which
   our recoverables (net of amounts due to the reinsurer) are $10 million
   or more as of December 31, 2005:

   __TOKEN__44__0__

                                      A. M. Best        Net Amounts Due

    Reinsurer                       Company Rating      From Reinsurer 

                                                                            In thousands

   __TOKEN__44__4__

    Hannover Ruckversicherung AG                      A                                $  59,682   

   __TOKEN__44__6__

    General Reinsurance Corp                        A++                                $  28,700   

   __TOKEN__44__8__

    PMA Re                                           B+                                $  20,087   

   __TOKEN__44__10__

    AXA Re                                            A                                $  18,872   

   __TOKEN__44__12__

    Lloyd’s Syndicate 2791                            A                                $  14,928   

   __TOKEN__44__14__

    Lloyds Syndicate 435                              A                                $  12,192   

   __TOKEN__44__16__

    Transatlantic Reins Co                           A+                                $  11,656   

   Off Balance Sheet Arrangements/Guarantees     As discussed in Note 10
   to our Consolidated Financial Statements, our 2032 and 2034 Debentures
   are held by, and are the sole assets of, related business trusts. The
   NCRIC Trust purchased the 2032 Debentures and the PRA Trusts purchased
   the 2034 Debentures with proceeds from related trust preferred stock
   (TPS) issued and sold by each trust. The terms and maturities of the
   2032 and 2034 Subordinated Debentures mirror those of the related TPS.
   The NCRIC and PRA Trusts will use the debenture interest and principal
   payments we pay into each trust to meet their TPS obligations. In
   accordance with the guidance given in Financial Accounting Standards
   Board Interpretation No. 46R, “Variable Interest Entities,” (FIN 46R)
   the NCRIC and PRA Trusts are not included in our consolidated
   financial statements because we are not the primary beneficiary of
   either trust.      NCRIC and ProAssurance have issued guarantees that
   amounts paid to the NCRIC and PRA Trusts related to the 2032 and 2034
   Subordinated Debentures will subsequently be remitted to the holders
   of the related TPS. The amounts guaranteed are not expected to at any
   time exceed our obligations under the 2032 and 2034 Subordinated
   Debentures, and we have not recorded any additional liability related
   to the guarantee.

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   Contractual Obligations     A schedule of our non-cancelable
   contractual obligations at December 31, 2005 follows:

   __TOKEN__45__0__

                                         Payments due by period

                                                                                                                                                  Less than          More than

                                                 Total                     1 year   1-3 years          3-5 years     5 years   

                                                                                                                       In thousands                                                 

   __TOKEN__45__5__

    Loss and loss adjustment expenses                         $  2,224,436                    $  487,212                          $  833,759              $  520,711               $  382,754   

    Interest on long-term debt                                     220,371                         9,372                              18,744                  18,744                  173,511   

    Long-term debt obligations                                     169,459                             —                                   —                       —                  169,459   

    Operating lease obligations                                      6,594                         2,866                               3,063                     662                        3   

   __TOKEN__45__10__

   __TOKEN__45__11__

    Total                                                     $  2,620,860                    $  499,450                          $  855,566              $  540,117               $  725,727   

   __TOKEN__45__13__

        All long-term debt is assumed to be settled at its contractual
   maturity. Interest on long-term debt is calculated using interest
   rates in effect at December 31, 2005 for variable rate debt. For more
   information see Note 10 to our Consolidated Financial Statements. The
   anticipated payout of loss and loss adjustment expenses is based upon
   our historical payout patterns. Both the timing and amount of these
   payments may vary from the payments indicated. Our operating lease
   obligations are primarily for the rental of office space, office
   equipment, and communications lines and equipment.

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   Results of Operations — Year Ended December 31, 2005 Compared to Year
   Ended December 31, 2004     Selected consolidated financial data for
   each period is summarized in the table below.

   __TOKEN__46__0__

                                                             Year Ended December 31

                                                                                                                                    Increase

                                                                      2005                   2004     (Decrease)  

                                                                                                      $ in thousands                        

   __TOKEN__46__5__

    Revenues:                                                                                                                                            

    Gross premiums written                                                        $  572,960                       $  573,592              $     (632  ) 

   __TOKEN__46__8__

    Net premiums written                                                          $  521,343                       $  535,028              $  (13,685  ) 

   __TOKEN__46__10__

   __TOKEN__46__11__

    Premiums earned                                                               $  596,557                       $  555,524              $   41,033    

    Premiums ceded                                                                   (53,316  )                       (35,627  )              (17,689  ) 

   __TOKEN__46__14__

    Net premiums earned                                                              543,241                          519,897                  23,344    

    Net investment income                                                             97,649                           76,346                  21,303    

    Net realized investment gains (losses)                                               912                            7,572                  (6,660  ) 

    Other income                                                                       3,510                            1,341                   2,169    

   __TOKEN__46__19__

   __TOKEN__46__20__

    Total revenues                                                                   645,312                          605,156                  40,156    

   __TOKEN__46__22__

   __TOKEN__46__23__

    Expenses:                                                                                                                                            

    Losses and loss adjustment expenses                                              479,300                          447,521                  31,779    

    Reinsurance recoveries                                                           (41,099  )                        12,916                 (54,015  ) 

   __TOKEN__46__27__

    Net losses and loss adjustment expenses                                          438,201                          460,437                 (22,236  ) 

    Underwriting, acquisition and insurance expenses                                  89,319                           84,383                   4,936    

    Interest expense                                                                   8,929                            6,515                   2,414    

   __TOKEN__46__31__

   __TOKEN__46__32__

    Total expenses                                                                   536,449                          551,335                 (14,886  ) 

   __TOKEN__46__34__

   __TOKEN__46__35__

    Income from continuing operations before income taxes                            108,863                           53,821                  55,042    

   __TOKEN__46__37__

    Income taxes                                                                      28,837                           10,778                  18,059    

   __TOKEN__46__39__

   __TOKEN__46__40__

    Income from continuing operations                                                 80,026                           43,043                  36,983    

    Income from discontinued operations, net of tax                                   33,431                           29,768                   3,663    

   __TOKEN__46__43__

   __TOKEN__46__44__

    Net Income                                                                    $  113,457                       $   72,811              $   40,646    

   __TOKEN__46__46__

   __TOKEN__46__47__

    Net loss ratio                                                                      80.7  %                          88.6  %                 (7.9  ) 

    Underwriting expense ratio                                                          16.4  %                          16.2  %                  0.2    

   __TOKEN__46__50__

    Combined ratio                                                                      97.1  %                         104.8  %                 (7.7  ) 

   __TOKEN__46__52__

    Operating ratio                                                                     79.1  %                          90.1  %                (11.0  ) 

   __TOKEN__46__54__

   __TOKEN__46__55__

    Return on equity                                                                    11.6  %                           7.4  %                  4.2    

   __TOKEN__46__57__

        The 2005 increases in our annualized ROE and our operating
   results for the year are primarily attributable to our success in
   reducing our net loss ratio. In addition, we held more invested assets
   while market interest rates were increasing, which generated
   additional investment income.

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   Effect of Acquisition of NCRIC     We acquired NCRIC on August 3, 2005
   and our results for the year ended December 31, 2005 include NCRIC
   results since the date of acquisition only. In the following tables,
   in order to facilitate an understanding of the effect of NCRIC, we
   have segregated results attributable to NCRIC in a separate line item
   titled “NCRIC”. The designation “PRA, prior” refers to ProAssurance’s
   results excluding NCRIC. Unless otherwise indicated, our discussions
   of variances between operating periods are presented exclusive of the
   amounts attributed to NCRIC operations. Premiums     Premiums written
   changed in 2005 as a result of competition, selective underwriting,
   the reduced need for rate increases and the acquisition of NCRIC. This
   acquisition is consistent with our stated strategy to grow premiums
   both organically and through selective acquisitions.

   __TOKEN__47__0__

                             Gross Premiums Written

                             Year Ended December 31

                                                                                                   Increase

                                      2005                   2004     (Decrease)  

                                                                      $ in thousands                       

   __TOKEN__47__6__

    PRA, prior                                    $  548,078                       $  573,592             $  (25,514  )      (4.4  %) 

    NCRIC                                             24,882                                —                 24,882          n/a     

   __TOKEN__47__9__

    Continuing operations                         $  572,960                       $  573,592             $     (632  )      (0.1  %) 

   __TOKEN__47__11__

        Premiums written vary from period to period for a number of
   reasons. Some of the more common differences result from changes to
   premium rates, changes in the coverages chosen by our insureds, the
   volume of new business written during the period, the loss of business
   to competitors or due to our own underwriting decisions, and the
   percentage of our policies that renew, which may also affect the level
   of tail premiums written. Changes in the markets in which we operate,
   such as the entry or exit of a competitor in a given market and
   changes in the rate structures of our competitors, also affect written
   premiums from period to period. The effect of any of these changes
   also varies by the proportion of policies written or renewed during
   each period in the various geographical regions and classes of
   business in which we operate.      Approximately $16.0 million of the
   2005 decrease in premiums written, excluding NCRIC, represents a
   decrease in physician premiums for non-tail coverages, which is our
   principal insurance product, comprising 84% of our total 2005 written
   premiums. In 2005, rates on our renewed policies averaged 11% higher
   than the expiring premiums. However, the beneficial effect of the rate
   increases and new business was offset by the effect of policies that
   did not renew. In addition, some insureds chose to take lower limits
   of coverage, and in some cases we decided to move away from volatile
   jurisdictions where rates are higher toward stable states where rates
   may be lower. Our retention rate averaged 85% in 2005, as compared to
   83% in 2004, but increased price competition in several states reduced
   the volume of new business that we were able to write. We remain
   committed to an adequate rate structure and have forgone business that
   we believed could not be written at profitable rates.      Tail
   policies are offered to insureds that are discontinuing their
   claims-made coverage with us, and the amount of tail premium written
   in any annual period can and does vary widely. Tail premiums
   represented approximately 5% of total written premiums in 2005 and
   approximately 6% of total written premiums in 2004. Tail premiums
   declined by approximately $7.7 million in 2005 as compared to 2004.
   While we offer tail coverage to departing insureds as an obligation
   under our policy provisions, our preference is to sell less rather
   than more of this coverage since it represents a long-term liability
   with increased pricing risk.      Hospital premiums, which comprise 7%
   of our premiums written in 2005 and 2004, declined by approximately
   $1.9 million as compared to 2004. Such business is highly price
   sensitive. As in all our lines, we choose not to compete primarily on
   price because our focus is on maintaining adequate margins on the
   policies we sell. Thus, our hospital premiums fluctuate based on
   competitive forces largely beyond our control.

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   __TOKEN__48__0__

                                Premiums Earned    

                             Year Ended December 31

                                                                                                   Increase

                                      2005                   2004     (Decrease)  

                                                                      $ in thousands                       

   __TOKEN__48__6__

    PRA, prior                                    $  562,339                       $  555,524             $   6,815        1.2  % 

    NCRIC                                             34,218                                —                34,218        n/a    

   __TOKEN__48__9__

    Continuing operations                         $  596,557                       $  555,524             $  41,033        7.4  % 

   __TOKEN__48__11__

        Because premiums are generally earned pro rata over the entire
   policy period after the policy is written, fluctuations in premiums
   earned tend to lag those of premiums written. Policies generally carry
   a term of one year. Professional liability tail policies are 100%
   earned in the period written because the policies are non-cancelable
   and insure only incidents that occurred in prior periods.      The
   increase in 2005 earned premiums reflects on a pro rata basis the
   changes in written premiums that occurred during both 2005 and late
   2004, reduced by lower tail premiums written in 2005 as discussed in
   the section on premiums written.

   __TOKEN__49__0__

                                 Premiums Ceded    

                             Year Ended December 31

                                                                                                 Increase

                                      2005                  2004     (Decrease)  

                                                                     $ in thousands                      

   __TOKEN__49__6__

    PRA, prior                                    $  47,729                       $  35,627             $  12,102        34.0  % 

    NCRIC                                             5,587                               —                 5,587         n/a    

   __TOKEN__49__9__

    Continuing operations                         $  53,316                       $  35,627             $  17,689        49.7  % 

   __TOKEN__49__11__

        Premiums ceded represent the portion of earned premiums that we
   must ultimately pay to our reinsurers for their assumption of a
   portion of our losses.      We reduced ceded premiums by $8.9 million
   in 2004 to reflect changes in our estimates of the amount of
   reinsurance premiums due for certain prior accident years, based on
   the provisions of the reinsurance contracts and our estimates of the
   reinsured losses for those prior accident years. We also reduced ceded
   premiums in 2004 by approximately $1.6 million due to the commutation
   of certain reinsurance contracts. After consideration of the effect of
   these adjustments, there is little change in 2005 ceded premiums as
   compared to 2004. Losses and Loss Adjustment Expenses     The
   estimation of medical professional liability losses is inherently
   difficult. Injuries may not be discovered until years after an
   incident, or the claimant may delay pursuing the recovery of damages.
   Ultimate loss costs, even for similar events, vary significantly
   depending upon many factors, including but not limited to the nature
   of the injury and the personal situation of the claimant or the
   claimant’s family, the judicial climate where the insured event
   occurred, general economic conditions and the trend of health care
   costs. Medical liability claims are typically resolved over an
   extended period of time, often five years or more. The combination of
   changing conditions and the extended time required for claim
   resolution results in a loss cost estimation process that requires
   actuarial skill and the application of judgment, and such estimates
   require periodic revision.      Calendar year losses may be divided
   into three components: (i) actuarial evaluation of incurred losses for
   the current accident year; (ii) actuarial re-evaluation of incurred
   losses for prior accident years; and (iii) actuarial re-evaluation of
   the reserve for the death, disability and retirement provision
   (DDR) in our claims-made policies.      Accident year refers to the
   accounting period in which the insured event becomes a liability of
   the insurer. For occurrence policies the insured event becomes a
   liability when the event takes place; for claims-made policies the
   insured event becomes a liability when the event is first reported to
   the insurer. We believe that measuring losses on an accident year
   basis is the most indicative measure of the underlying profitability
   of the premiums earned in that period since it associates policy
   premiums earned with our estimate of the losses incurred related to
   those policy premiums. Calendar year results include

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   the operating results for the current accident year and, as discussed
   in critical accounting policies, any changes in estimates related to
   prior accident years.      The following tables summarize net losses
   and net loss ratios for the years ended December 31, 2005 and 2004 by
   separating losses between the current accident year and all prior
   accident years.

   __TOKEN__50__0__

                                   Net Losses                   Net Loss Ratios*   

                             Year Ended December 31          Year Ended December 31

                                                                                                                       Increase                                               Increase

                                      2005                            2004             (Decrease)           2005     2004            (Decrease)

                                                                                        In thousands                                                                                       

   __TOKEN__50__6__

    Calendar Year                                                                                                                                                                                    

    PRA, prior                                    $  408,779                                       $  460,437                 $  (51,658  )                79.4  %       88.6  %             (9.2  ) 

    NCRIC                                             29,422                                                —                     29,422                  102.8  %          —                 n/a    

   __TOKEN__50__10__

    Continuing operations                            438,201                                          460,437                    (22,236  )                80.7  %       88.6  %             (7.9  ) 

   __TOKEN__50__12__

   __TOKEN__50__13__

    Current Accident Year                                                                                                                                                                            

    PRA, prior                                       431,760                                          469,151                    (37,391  )                83.9  %       90.2  %             (6.3  ) 

    NCRIC                                             29,422                                                —                     29,422                  102.8  %          —                 n/a    

   __TOKEN__50__17__

    Continuing operations                            461,182                                          469,151                     (7,969  )                84.9  %       90.2  %             (5.3  ) 

   __TOKEN__50__19__

   __TOKEN__50__20__

    Prior Accident Year                                                                                                                                                                              

    PRA, prior                                    $  (22,981  )                                    $   (8,714  )              $  (14,267  )                (4.5  %)      (1.6  %)            (2.9  ) 

   __TOKEN__50__23__

   __TOKEN__51__0__

    * Net losses as specified divided by net premiums earned. 

        Current accident year net loss ratios are lower in 2005 as
   compared to 2004 due to several factors. We have focused for several
   years on developing and maintaining adequate rates. As rate adequacy
   has improved, loss ratios have decreased. Also, our expected loss
   ratios vary based upon geographic location, coverage type and coverage
   limits. In 2005 as compared to 2004, changes in the mix of insured
   risks reduced overall expected loss ratios. During 2005 we recognized
   favorable development of $23.0 million related to our previously
   established reserves, primarily to reflect reductions in our estimates
   of claim severity. The most significant reduction was seen in the 2003
   accident year; however, favorable development was also seen in
   accident years 2002 and prior.      Assumptions used in establishing
   our reserve are regularly reviewed and updated by management as new
   data becomes available. Any adjustments necessary are reflected in
   current operations. Due to the size of our reserve, even a small
   percentage adjustment to the assumptions can have a material effect on
   our results of operations for the period in which the change is made.

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   Gross Losses and Reinsurance Recoveries     The effect of adjustments
   made to reinsured losses is mitigated by the corresponding adjustment
   that is made to insurance recoveries. Thus, in any given year, we may
   make significant adjustments to gross losses that have a less
   significant effect on our net losses. The following table reflects our
   losses on both a gross and a net basis.

   __TOKEN__52__0__

                               Gross and Net Losses 

                              Year Ended December 31

                                                                                                   Increase

                                       2005                   2004    (Decrease) 

                                                                       In thousands                        

    Gross Losses                                                                                                        

    PRA, prior                                     $  448,630                     $  447,521              $    1,109    

    NCRIC                                              30,670                              —                  30,670    

   __TOKEN__52__9__

    Consolidated                                      479,300                        447,521                  31,779    

   __TOKEN__52__11__

    Reinsurance Recoveries                                                                                              

    PRA, prior                                         39,851                        (12,916  )               52,767    

    NCRIC                                               1,248                              —                   1,248    

   __TOKEN__52__15__

    Consolidated                                       41,099                        (12,916  )               54,015    

   __TOKEN__52__17__

    Net Losses                                                                                                          

    PRA, prior                                        408,779                        460,437                 (51,658  ) 

    NCRIC                                              29,422                              —                  29,422    

   __TOKEN__52__21__

    Consolidated                                   $  438,201                     $  460,437              $  (22,236  ) 

   __TOKEN__52__23__

        When discussing losses that are reinsured and losses that are
   retained, it is common to refer to “layers” of loss. The retained
   layer is the cumulative portion of each loss, on a per-claim basis,
   which is less than our reinsurance retention for a given coverage
   year. Likewise, the reinsured layer is the cumulative portion of each
   loss that exceeds the reinsurance retention.      Our 2005 actuarial
   analysis of our reserve indicated that our claims severity had
   continued to increase as expected in our retained layers, but not to
   the degree anticipated in our original reserve estimates. This was
   also true in our reinsured layers, but the variance between our
   original estimates and the 2005 actuarial estimate was smaller.
   Accordingly, we reduced our estimates of prior accident year gross
   losses by $24.6 million and reduced the prior accident year
   reinsurance recoveries by $1.6 million, for a net adjustment to prior
   year losses of $23.0 million.      Our 2004 actuarial analysis of our
   reserve indicated that our claims severity had continued to increase
   as expected in risk retained by ProAssurance. However, in risks ceded
   to our reinsurers actual loss experience proved to be lower than we
   originally anticipated and for which we established our reserve.
   Accordingly, we reduced our estimates of prior accident year gross
   losses by approximately $60.4 million and reduced the corresponding
   reinsurance recoveries by $51.7 million, for a net adjustment to prior
   year losses of $8.7 million. The decrease to reinsurance recoveries
   for prior accident years more than offset reinsurance recoveries for
   current accident years resulting in a non-traditional relationship
   between gross losses and recoveries for the year ended December 31,
   2004.

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   Net Investment Income and Net Realized Investment Gains (Losses)     Net
   investment income is primarily derived from the interest income earned
   by our fixed maturity securities and includes interest income from
   short-term and cash equivalent investments, dividend income from
   equity securities, earnings from limited partnerships, increases in
   the cash surrender value of business owned executive life insurance
   contracts, and rental income earned by our commercial real estate
   holdings. Investment fees and expenses and real estate expenses are
   deducted from investment income.

   __TOKEN__53__0__

                             Net Investment Income 

                             Year Ended December 31

                                                                                                 Increase

                                      2005                  2004     (Decrease)  

                                                                     $ in thousands                      

   __TOKEN__53__6__

    PRA, prior                                    $  93,887                       $  76,346             $  17,541        23.0  % 

    NCRIC                                             3,762                               —                 3,762         n/a    

   __TOKEN__53__9__

   __TOKEN__53__10__

    Continuing operations                         $  97,649                       $  76,346             $  21,303        27.9  % 

   __TOKEN__53__12__

        The increase in net investment income is principally due to
   higher average invested funds during 2005. The positive cash flow
   generated by our insurance operations significantly increased our
   average invested funds. Rising market interest rates also contributed
   to the improvement in net investment income. Rates began to increase
   in mid-2004, allowing new and maturing funds to be invested at higher
   rates. Our average income yield, on a consolidated basis, excluding
   NCRIC, was 4.2% for 2005 as compared to 4.0% for 2004. Our average tax
   equivalent income yield on a consolidated basis, excluding NCRIC, was
   4.8% for the year ended December 31, 2005 as compared to 4.4% for the
   year ended December 31, 2004. We increased the proportion of the
   portfolio that is invested in tax-exempt securities because of the
   higher after-tax yields available on these securities; therefore, our
   average after-tax equivalent income yield improved more than our
   average income yield.      The components of net realized investment
   gains (losses) are shown in the following table.

   __TOKEN__54__0__

                                              Year Ended December 31

                                                       2005                 2004

                                                   In thousands     

    Net gains (losses) from sales                                  $  1,567          $  5,285    

   __TOKEN__54__5__

    Other-than-temporary impairment losses                             (768  )           (611  ) 

   __TOKEN__54__7__

    Trading portfolio gains (losses)                                    113             2,898    

   __TOKEN__54__9__

   __TOKEN__54__10__

    Net realized investment gains (losses)                         $    912          $  7,572    

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   Underwriting, Acquisition and Insurance Expenses     Underwriting,
   acquisition and insurance expenses are comprised of variable costs,
   such as commissions and premium taxes that are directly related to
   premiums earned, and fixed costs that have an indirect relationship to
   premium volume, such as salaries, benefits, and facility expenses.
        Our 2005 underwriting, acquisition and insurance expenses reflect
   higher compensation and benefit costs offset by a decrease in variable
   costs due to lower premium volume. The slight upward shift of the
   expense ratio as compared to 2004 is principally due to the increase
   in compensation costs.

   __TOKEN__55__0__

                             Underwriting, Acquisition                                

                              and Insurance Expenses               Expense Ratio     

                              Year Ended December 31           Year Ended December 31

                                                                                                                                  Increase                                                Increase

                                       2005                             2004          (Decrease)                         2005           2004        (Decrease)

                                                                                                    $ in thousands                                                                                                  

   __TOKEN__55__7__

    PRA, prior                                       $  84,767                                                   $  84,383                     $    384                  0.5  %      16.5  %             16.2  %      0.3   

    NCRIC                                                4,552                                                           —                        4,552                  n/a         15.9  %                —         n/a   

   __TOKEN__55__10__

    Continuing operations                            $  89,319                                                   $  84,383                     $  4,936                  5.8  %      16.4  %             16.2  %      0.2   

   __TOKEN__55__12__

        Guaranty fund assessments were approximately $226,000 for the
   year ended December 31, 2005 as compared to approximately $396,000 for
   the year ended December 31, 2004. Interest Expense     Interest
   expense increased in 2005 as compared to 2004 primarily because the
   average amount of debt outstanding was higher in 2005 and because
   interest rates increased in 2005. In the early part of 2004, our only
   outstanding debt was our Convertible Debentures. In April and May of
   2004 we issued our 2034 Subordinated Debentures of $46.4 million; we
   added the 2032 Debentures of $15.5 million in August 2005 as a part of
   the NCRIC transaction. Our Convertible Debentures have a fixed
   interest rate; our Subordinated Debentures have variable rates. Taxes     Our
   effective tax rate for each period is significantly lower than the 35%
   statutory rate because a considerable portion of our net investment
   income is tax-exempt. The effect of tax-exempt income on our effective
   tax rate is shown in the table below:

   __TOKEN__56__0__

                                       Year Ended December 31

                                                2005              2004

    Statutory rate                                             35  %          35  %  

    Tax-exempt income                                          (9  %)        (11  %) 

    Resolution of tax contingencies                             —             (3  %) 

    Other                                                       —             (1  %) 

   __TOKEN__56__7__

    Effective tax rate                                         26  %          20  %  

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   Recent Accounting Pronouncements and Guidance     On December 16, 2004
   the Financial Accounting Standards Board (FASB) issued SFAS 123
   (revised 2004), Share-Based Payment, hereafter referred to as SFAS
   123(R), which is a revision of SFAS 123, Accounting for Stock-Based
   Compensation (SFAS 123), which superseded APB 25, Accounting for Stock
   Issued to Employees and amends SFAS 95, Statement of Cash Flows. The
   provisions of SFAS 123(R) require all share-based payments to
   employees, including grants of employee stock options, to be
   recognized in the financial statements based on their fair values.
   SFAS 123(R) also requires that the benefits of tax deductions in
   excess of recognized compensation cost to be reported as a financing
   cash flow, rather than as an operating cash flow as required under
   current literature. We plan to adopt SFAS 123(R) on January 1, 2006,
   the required effective date, using the “modified prospective” method
   permitted by the statement and will value future grants of stock
   options using the Black Scholes valuation method.      Under the
   “modified prospective” method stock-based compensation is recognized
   under the requirements of SFAS 123(R) for all share-based payments
   granted after the effective date of SFAS 123(R) and for the non-vested
   portion of share-based payments granted prior to the adoption of SFAS
   123(R). Under SFAS 123(R) compensation for non-vested share-based
   payments granted prior to adoption shall continue to be calculated as
   disclosed under SFAS 123, except that the effect of forfeitures is
   required to be estimated rather than considered as forfeitures occur.
        As permitted by SFAS 123, we currently value employee stock-based
   payments using APB 25’s intrinsic value method. Accordingly, we
   generally recognize no compensation cost related to such payments but
   do provide pro forma disclosure of the effect on net income and
   earnings per share of applying the fair value provisions of SFAS 123
   to such payments granted.      Had our SFAS 123 pro forma disclosures
   been prepared in accordance with the provisions of SFAS 123(R) the
   effect would have been different; however, the effect that SFAS 123(R)
   would have had on prior periods is not readily determinable. SFAS
   123(R) provides more extensive guidance than does SFAS 123 with regard
   to factors that should be considered in valuing share-based payments.
   Under SFAS 123, we utilized a single set of valuation assumptions for
   all employees. Under SFAS 123(R), entities are required to “aggregate
   individual awards into relatively homogeneous groups with respect to
   exercise and post-vesting employment termination behaviors.” In order
   to appropriately reflect differing exercise and post-vesting employee
   termination behaviors, we anticipate aggregating prospective awards
   into groups consisting of senior executives, likely to exercise
   shortly after vesting, other senior executives and other employees.
   Additionally, under SFAS 123(R), fully vested awards granted to
   directors and awards that vest upon retirement granted to employees
   who are eligible for retirement will be expensed on the date of grant.
   Under SFAS 123, we calculated compensation expense (for pro forma
   disclosure) without consideration of expected forfeitures. Unlike SFAS
   123, which permitted companies to reflect forfeitures as they
   occurred, SFAS 123(R) requires companies to estimate forfeitures in
   determining the amount of compensation cost to recognize each period.
   As a result, we will develop estimates of forfeitures during the
   requisite service periods and revise previous SFAS 123 calculations
   for known and expected forfeitures related to grants prior to the
   adoption of SFAS 123(R). Our own history with regard to the expected
   terms of employee stock awards is not sufficient to allow such
   assumptions to be developed statistically for most employee groups.
   Accordingly, for such groups, through December 31, 2007, we will apply
   the “simplified” method consistent with the guidance of SEC Staff
   Accounting Bulletin 107, i.e., expected term = (vesting term +
   original contractual term) / 2). We are in the process of finalizing
   these assumptions; however, the selection of all assumptions is not
   complete.      Presently, we estimate that the recognition of
   compensation cost, net of tax effects, for the non-vested portion of
   share-based payments granted prior to the adoption of SFAS 123(R) will
   approximate $1.3 million, net of related tax effects, during fiscal
   2006. The further effect of adoption of SFAS 123(R) on future
   operating results will depend on the levels of share-based payments
   granted in the future, the groups of employees to whom the awards are
   granted, the number of awards granted to employees who are eligible
   for retirement, the terms of any future awards, as well as the final
   methods and assumptions used to determine the fair value of those
   share-based payments.      The FASB issued SFAS 154, Accounting
   Changes and Error Corrections, in May 2005 as a replacement of APB 20,
   Accounting Changes, and SFAS 3, Reporting Accounting Changes in
   Interim Financial Statements. SFAS 154 applies to voluntary changes in
   accounting principle and changes the

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   requirements for accounting for and reporting of a change in
   accounting principle and is effective for accounting changes and
   corrections of errors made in fiscal years beginning after
   December 15, 2005. ProAssurance expects to adopt SFAS 154 on its
   effective date.

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   Results of Operations — Year Ended December 31, 2004 Compared to Year
   Ended December 31, 2003     Selected consolidated financial data for
   each period is summarized in the table below.

   __TOKEN__57__0__

                                                             Year Ended December 31

                                                                                                                                Increase

                                                                      2004                   2003   (Decrease)

                                                                 $ in thousands    

    Revenues:                                                                                                                                        

    Gross premiums written                                                        $  573,592                   $  543,323              $   30,269    

   __TOKEN__57__7__

    Net premiums written                                                          $  535,028                   $  497,659              $   37,369    

   __TOKEN__57__9__

   __TOKEN__57__10__

    Premiums earned                                                               $  555,524                   $  509,260              $   46,264    

    Premiums ceded                                                                   (35,627  )                   (49,389  )               13,762    

   __TOKEN__57__13__

    Net premiums earned                                                              519,897                      459,871                  60,026    

    Net investment income                                                             76,346                       63,366                  12,980    

    Net realized investment gains (losses)                                             7,572                        5,858                   1,714    

    Other income                                                                       1,341                        4,460                  (3,119  ) 

   __TOKEN__57__18__

   __TOKEN__57__19__

    Total revenues                                                                   605,156                      533,555                  71,601    

   __TOKEN__57__21__

   __TOKEN__57__22__

    Expenses:                                                                                                                                        

    Losses and loss adjustment expenses                                              447,521                      414,828                  32,693    

    Reinsurance recoveries                                                            12,916                       24,540                 (11,624  ) 

   __TOKEN__57__26__

    Net losses and loss adjustment expenses                                          460,437                      439,368                  21,069    

    Underwriting, acquisition and insurance expenses                                  84,383                       73,263                  11,120    

    Loss on early extinguishment of debt                                                   —                          305                    (305  ) 

    Interest expense                                                                   6,515                        3,409                   3,106    

   __TOKEN__57__31__

   __TOKEN__57__32__

    Total expenses                                                                   551,335                      516,345                  34,990    

   __TOKEN__57__34__

   __TOKEN__57__35__

    Income from continuing operations before income taxes                             53,821                       17,210                  36,611    

   __TOKEN__57__37__

    Income taxes                                                                      10,778                        1,865                   8,913    

   __TOKEN__57__39__

   __TOKEN__57__40__

    Income from continuing operations                                                 43,043                       15,345                  27,698    

    Income from discontinued operations, net of tax                                   29,768                       23,358                   6,410    

   __TOKEN__57__43__

   __TOKEN__57__44__

    Net Income                                                                    $   72,811                   $   38,703              $   34,108    

   __TOKEN__57__46__

   __TOKEN__57__47__

    Net loss ratio                                                                      88.6  %                      95.5  %                 (6.9  ) 

    Underwriting expense ratio                                                          16.2  %                      15.9  %                  0.3    

   __TOKEN__57__50__

    Combined ratio                                                                     104.8  %                     111.4  %                 (6.6  ) 

   __TOKEN__57__52__

    Operating ratio                                                                     90.1  %                      97.6  %                 (7.5  ) 

   __TOKEN__57__54__

   __TOKEN__57__55__

    Return on equity                                                                     7.4  %                       2.9  %                  4.5    

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   Premiums Written     Premiums exhibited strong growth in 2004;
   however, the growth was at a slower pace than in 2003 primarily
   because we implemented smaller rate increases in 2004 as compared to
   2003. Our rates are based on our expected losses for the coverages
   provided; the cumulative effect of the rate increases we obtained in
   the past several years allowed us to pursue lower rate increases in
   some states in 2004. On average, renewals during the year ended
   December 31, 2004 were at rates that are approximately 19% higher than
   expiring rates. Rate increases on 2003 renewals, on average, were at
   rates that were 28% higher than expiring rates. New business written
   in 2004 was largely offset by business that did not renew, including
   business that we selectively chose not to renew.      Virtually all of
   the growth that we experienced in 2004 was related to physician
   coverages. This growth included an increase of approximately
   $5.0 million related to physician tail policies. Premiums written for
   this coverage can vary significantly from year to year. Earned     Premiums
   are earned pro rata over the entire policy period (generally one year)
   after the policy is written. Thus the increase in 2004 earned premiums
   reflects on a pro rata basis the changes in written premiums that
   occurred during both 2004 and 2003. Ceded     Premiums ceded represent
   the portion of earned premiums that we must ultimately pay to our
   reinsurers for their assumption of a portion of our losses.      In
   both 2004 and 2003, we reduced our estimates of prior year gross
   losses. As a result of the features of our reinsurance contracts, we
   also reduced our estimates of ultimate ceded premiums. The reduction
   was $8.9 million in 2004 and $5.4 million in 2003. Premiums ceded were
   also reduced by $1.6 million in 2004 due to the commutation of certain
   reinsurance contracts. Also, insureds have purchased policies with
   coverage limits below our reinsurance attachment point. We do not cede
   these premiums, and as a result, premiums ceded declined. Losses and
   Loss Adjustment Expenses     The following table summarizes net losses
   and net loss ratios for the years ended December 31, 2004 and 2003 by
   separating losses between the current accident year and all prior
   accident years. The net loss ratios shown are calculated by dividing
   the applicable net losses by calendar year net premiums earned.

   __TOKEN__58__0__

                                   Net Losses                      Net Loss Ratios*      

                             Year Ended December 31             Year Ended December 31   

                                                                                                                   Increase                                                      Increase  

                                      2004                               2003                      (Decrease)              2004       2003           (Decrease)  

                                  In thousands                                                                                                      

    Calendar year            $                       460,437                             $  439,368                $         21,069             88.6  %                 95.5  %               (6.9  ) 

    Current accident year    $                       469,151                             $  439,418                $         29,733             90.2  %                 95.6  %               (5.4  ) 

    Prior accident year      $                        (8,714  )                          $      (50  )             $         (8,664  )          (1.6  %)                (0.1  %)              (1.5  ) 

   __TOKEN__59__0__

    *    Net losses as specified divided by net premiums earned. 

        During 2004, we continued to see an increase in loss severity,
   which increased loss costs. Current accident year net loss ratios are
   lower in 2004 than in 2003 primarily because loss costs increased at a
   slower pace than premium rates. Loss ratios have also improved because
   we converted our occurrence policies to claims-made coverage.
   Generally, loss ratios associated with claims-made coverage are
   initially lower than those associated with occurrence coverage.

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        We decreased our estimate of prior year net losses by
   $8.7 million in 2004 and $50,000 in 2003. The 2004 amount represents
   0.7% of 2003 net reserves. These adjustments were in response to
   actuarial evaluations of loss reserves performed during the period. No
   change was made to our estimates of the reserves required for death,
   disability and retirement during 2004 or 2003. Gross Losses and
   Reinsurance Recoveries     The following table reflects our losses on
   both a gross and a net basis.

   __TOKEN__60__0__

                               Gross and Net Losses          

                              Year Ended December 31         

                                                                                                  Increase        

                                       2004                      2003             (Decrease)  

                                   In thousands              

    Gross losses              $                       447,521           $  414,828                $         32,693   

    Reinsurance recoveries    $                       (12,916  )        $  (24,540  )             $         11,624   

    Net losses                $                       460,437           $  439,368                $         21,069   

        In 2004, as was also the case in 2003, our actuarial analysis of
   our reserves indicated that our claims severity had continued to
   increase as expected in our retained layers. However, we did not
   experience the high level of losses in our reinsured layers that we
   originally anticipated and for which we established reserves.
   Accordingly, we reduced our estimates of prior accident year gross
   losses by approximately $60.4 million during the year ended
   December 31, 2004 and $74.2 million during the year ended December 31,
   2003. These losses were heavily reinsured; therefore, we reduced
   expected reinsurance recoveries by $51.7 million in 2004 and
   $74.1 million in 2003. As previously discussed, these changes to prior
   year estimates reduced net losses by $8.7 million in 2004 and
   nominally reduced net losses in 2003. In both 2004 and 2003, the
   decrease to reinsurance recoveries for prior accident years more than
   offset reinsurance recoveries for current accident years resulting in
   a non-traditional relationship between gross losses and recoveries.
        Assumptions used in establishing our reserves are regularly
   reviewed and updated by management as new data becomes available. Any
   adjustments necessary are reflected in current operations. Due to the
   size of our reserves, even a small percentage adjustment to the
   assumptions can have a material effect on our results of operations
   for the period in which the change is made. Net Investment Income and
   Net Realized Investment Gains (Losses)     The increase in our net
   investment income in 2004 as compared to 2003 is due to higher average
   invested funds in 2004, offset by a slight decline in the yield of our
   fixed maturity securities. While prevailing market interest rates have
   remained historically low, changes in the duration and asset mix of
   the portfolio have helped to stabilize the yield of the portfolio. We
   increased the weighted average duration of the portfolio from
   3.5 years at December 31, 2003 to 3.9 years at December 31, 2004 in
   order to take advantage of improved yields on certain longer term
   securities. We have also increased the proportion of the portfolio
   that is invested in tax-exempt securities because of the higher
   after-tax yields available on these securities. However, we continued
   to see some decline in our income yields as older, higher yielding
   securities matured or were sold. Our average income yield, on a
   consolidated basis, was 4.0% for the year ended December 31, 2004 as
   compared to 4.5% for the year ended December 31, 2003. Our average tax
   equivalent income yield on a consolidated basis was 4.4% for the year
   ended December 31, 2004 as compared to 4.9% for the year ended
   December 31, 2003.

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        The components of net realized investment gains are shown in the
   following table.

   __TOKEN__61__0__

                                              Year Ended December 31

                                                       2004                 2003

                                                   In thousands     

    Net gains (losses) from sales                                  $  5,285          $  5,857    

    Other-than-temporary impairment losses                             (611  )           (322  ) 

    Trading portfolio gains (losses)                                  2,898               323    

   __TOKEN__61__7__

   __TOKEN__61__8__

    Net realized investment gains (losses)                         $  7,572          $  5,858    

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   Underwriting, Acquisition and Insurance Expenses     Underwriting,
   acquisition and insurance expenses are comprised of variable costs,
   such as commissions and premium taxes that are directly related to
   premiums earned, and fixed costs that have an indirect relationship to
   premium volume, such as salaries, benefits, and facility costs
   assessments. Underwriting, acquisition and insurance expenses
   increased in 2004 principally due to additional commission expense
   incurred as a result of premium growth. Changes in the mix of premiums
   by state and coverage type also increased commission expense. We also
   experienced increases in costs for salaries, benefits and professional
   fees, most significantly those fees related to Sarbanes-Oxley
   compliance.      The expense ratio (underwriting, acquisition and
   insurance expenses divided by net premiums earned) increased slightly
   in 2004 to 16.2% as compared to 15.9% in 2003. The increase is
   principally attributable to higher commission costs.      Guaranty
   fund assessments were approximately $396,000 for the year ended
   December 31, 2004 as compared to approximately $100,000 for the year
   ended December 31, 2003. Interest Expense     Interest expense
   increased in 2004 as compared to 2003 primarily because the average
   amount of debt outstanding was higher in 2004 but also because
   interest was paid at a higher rate in the first half of 2004 as
   compared to the first half of 2003. In the first half of 2003 our only
   debt was an outstanding bank term loan. In July 2003 we issued
   $107.6 million of Convertible Debentures at a fixed rate of 3.9% and
   repaid a $67.5 million bank term loan which carried a variable rate.
   We increased our debt again in April and May of 2004, when we issued
   Subordinated Debentures of $46.5 million. Taxes     Our effective tax
   rate for each period is significantly lower than the 35% statutory
   rate because a considerable portion of our net investment income is
   from tax-exempt interest and dividends. The effect of tax-exempt
   income on our effective tax rate is shown in the table below:

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                                       Year Ended December 31

                                                2004               2003

    Statutory rate                                              35  %          35  %  

    Tax-exempt income                                          (11  %)        (24  %) 

    Resolution of tax contingencies                             (3  %)          —     

    Other                                                       (1  %)          —     

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    Effective tax rate                                          20  %          11  %  

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   ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.     We
   believe that we are principally exposed to three types of market risk
   related to our investment operations. These risks are interest rate
   risk, credit risk and equity price risk.      The term market risk
   refers to the risk of loss arising from adverse changes in market
   rates and prices, such as interest rates, equity prices and foreign
   currency exchange rates.      As of December 31, 2005, our fair value
   investment in fixed maturity securities was $2.403 billion. These
   securities are subject primarily to interest rate risk and credit
   risk. We have not and currently do not intend to enter into derivative
   transactions. Interest Rate Risk     Our fixed maturities portfolio is
   exposed to interest rate risk. Fluctuations in interest rates have a
   direct impact on the market valuation of these securities. As interest
   rates rise, market values of fixed income portfolios fall and vice
   versa. We believe we are in a position to keep our fixed income
   investments until maturity as we do not invest in fixed maturity
   securities for trading purposes.

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                                 2005               2004      

                               Portfolio          Change in          Effective     Portfolio     Effective       

                                 Value              Value            Duration        Value       Duration        

    Interest Rates             Millions           Millions             Years       Millions        Years         

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    200 basis point rise       $          2,218               $  (185  )                   4.07      $          1,819        4.20   

    100 basis point rise       $          2,310               $   (93  )                   4.02      $          1,898        4.11   

    Current rate *             $          2,403               $     —                      3.91      $          1,977        3.93   

    100 basis point decline    $          2,498               $    95                      3.82      $          2,055        3.83   

    200 basis point decline    $          2,595               $   192                      3.59      $          2,137        3.92   

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    *    Current rates are as of December 31, 2005 and 2004 

        At December 31, 2005, the fair value of our investment in
   preferred stocks was $2.0 million, including net unrealized gains of
   $25 thousand. Preferred stocks are primarily subject to interest rate
   risk because they bear a fixed rate of return. The investments in the
   above table do not include preferred stocks.      Computations of
   prospective effects of hypothetical interest rate changes are based on
   numerous assumptions, including the maintenance of the existing level
   and composition of fixed income security assets, and should not be
   relied on as indicative of future results.      Certain shortcomings
   are inherent in the method of analysis presented in the computation of
   the fair value of fixed rate instruments. Actual values may differ
   from those projections presented should market conditions vary from
   assumptions used in the calculation of the fair value of individual
   securities, including non-parallel shifts in the term structure of
   interest rates and changing individual issuer credit spreads.
        ProAssurance’s cash and short-term investment portfolio at
   December 31, 2005 was on a cost basis which approximates its fair
   value. This portfolio lacks significant interest rate sensitivity due
   to its short duration.

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   Credit Risk     We have exposure to credit risk primarily as a holder
   of fixed income securities. We control this exposure by emphasizing
   investment grade credit quality in the fixed income securities we
   purchase.      As of December 31, 2005, 98.4% of our fixed income
   portfolio consisted of securities rated investment grade. We believe
   that this concentration in investment grade securities reduces our
   exposure to credit risk on these fixed income investments to an
   acceptable level. However, in the current environment even investment
   grade securities can rapidly deteriorate and result in significant
   losses. Equity Price Risk      At December 31, 2005 the fair value of
   our investment in common stocks was $13.2 million. These securities
   are subject to equity price risk, which is defined as the potential
   for loss in market value due to a decline in equity prices. The
   weighted average Beta of this group of securities is 0.95. Beta
   measures the price sensitivity of an equity security or group of
   equity securities to a change in the broader equity market, in this
   case the S&P 500 Index. If the value of the S&P 500 Index increased by
   10%, the fair value of these securities would be expected to increase
   by 9.5% to $14.4 million. Conversely, a 10% decrease in the S&P 500
   Index would imply a decrease of 9.5% in the fair value of these
   securities to $11.9 million. The selected hypothetical changes of plus
   or minus 10% do not reflect what could be considered the best or worst
   case scenarios and are used for illustrative purposes only. ITEM 8.
   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.     The Consolidated
   Financial Statements and Financial Statement Schedules of ProAssurance
   Corporation and subsidiaries listed in Item 15(a) have been included
   herein beginning on page 70. The Supplementary Financial Information
   required by Item 302 of Regulation S-K is included in Note 17 of the
   Notes to Consolidated Financial Statements of ProAssurance and its
   subsidiaries.

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    ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
               FINANCIAL DISCLOSURE.                                           

        Not Applicable. ITEM 9A. CONTROLS AND PROCEDURES.Disclosure
   Controls     Under the supervision and with the participation of
   management, including the Chief Executive Officer and Chief Financial
   Officer, the Company has evaluated the effectiveness of the design and
   operation of our disclosure controls and procedures as of the end of
   the fiscal year ended December 31, 2005. Based on that evaluation, the
   Chief Executive Officer and Chief Financial Officer have concluded
   that these controls and procedures are effective.      Disclosure
   controls and procedures are defined in Exchange Act Rule 13a-15(e) and
   include the Company’s controls and other procedures that are designed
   to ensure that information, required to be disclosed by the Company in
   the reports that it files or submits under the Exchange Act, is
   accumulated and communicated to management, including the Chief
   Executive Officer and Chief Financial Officer, as appropriate, to
   allow timely decisions regarding required disclosure. Management’s
   Report on Internal Control over Financial Reporting     Our management
   is responsible for establishing and maintaining adequate internal
   control over financial reporting, as such term is defined in Exchange
   Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the
   participation of our management, including our Chief Executive Officer
   and Chief Financial Officer, we conducted an evaluation of the
   effectiveness of our internal control over financial reporting as of
   December 31, 2005 based on the framework in Internal
   Control–Integrated Framework issued by the Committee of Sponsoring
   Organizations of the Treadway Commission (COSO). Based on that
   evaluation, our management concluded that our internal control over
   financial reporting was effective as of December 31, 2005 and that
   there was no change in the Company’s internal controls during the

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   fiscal quarter then ended that has materially effected, or is
   reasonably likely to materially affect, the Company’s internal control
   over financial reporting, other than as described below. Our
   management excluded NCRIC’s systems and processes from the scope of
   our assessment of internal control over financial reporting as of
   December 31, 2005 in reliance on the guidance set forth in Question 3
   of a “Frequently Asked Questions” interpretive release issued by the
   staff of the Securities and Exchange Commission’s Office of the Chief
   Accountant and the Division of Corporation Finance in June 2004 (and
   revised on October 6, 2004). We are excluding NCRIC from that scope
   because we expect substantially all of its significant systems and
   processes to be converted to those ProAssurance during 2006. At
   December 31, 2005 NCRIC represented $298 million or 8.9% of total
   assets from continuing operations, and $32.4 million or 5.0% of total
   revenues for the year then ended.      Management’s assessment of the
   effectiveness of our internal control over financial reporting as of
   December 31, 2005 has been audited by Ernst & Young LLP, an
   independent registered public accounting firm, as stated in their
   report which is included elsewhere herein. ITEM 9B. OTHER INFORMATION.     None.

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   Report of Independent Registered Public Accounting Firm on
   Internal Control over Financial ReportingThe Board of Directors and
   Shareholders of ProAssurance Corporation     We have audited
   management’s assessment, included in the accompanying Management’s
   Annual Report on Internal Control over Financial Reporting, that
   ProAssurance Corporation and subsidiaries maintained effective
   internal control over financial reporting as of December 31, 2005,
   based on criteria established in Internal Control—Integrated Framework
   issued by the Committee of Sponsoring Organizations of the Treadway
   Commission (the COSO criteria). ProAssurance Corporation’s management
   is responsible for maintaining effective internal control over
   financial reporting and for its assessment of the effectiveness of
   internal control over financial reporting. Our responsibility is to
   express an opinion on management’s assessment and an opinion on the
   effectiveness of the company’s internal control over financial
   reporting based on our audit.      We conducted our audit in
   accordance with the standards of the Public Company Accounting
   Oversight Board (United States). Those standards require that we plan
   and perform the audit to obtain reasonable assurance about whether
   effective internal control over financial reporting was maintained in
   all material respects. Our audit included obtaining an understanding
   of internal control over financial reporting, evaluating management’s
   assessment, testing and evaluating the design and operating
   effectiveness of internal control, and performing such other
   procedures as we considered necessary in the circumstances. We believe
   that our audit provides a reasonable basis for our opinion.      A
   company’s internal control over financial reporting is a process
   designed to provide reasonable assurance regarding the reliability of
   financial reporting and the preparation of financial statements for
   external purposes in accordance with generally accepted accounting
   principles. A company’s internal control over financial reporting
   includes those policies and procedures that (1) pertain to the
   maintenance of records that, in reasonable detail, accurately and
   fairly reflect the transactions and dispositions of the assets of the
   company; (2) provide reasonable assurance that transactions are
   recorded as necessary to permit preparation of financial statements in
   accordance with generally accepted accounting principles, and that
   receipts and expenditures of the company are being made only in
   accordance with authorizations of management and directors of the
   company; and (3) provide reasonable assurance regarding prevention or
   timely detection of unauthorized acquisition, use, or disposition of
   the company’s assets that could have a material effect on the
   financial statements.      Because of its inherent limitations,
   internal control over financial reporting may not prevent or detect
   misstatements. Also, projections of any evaluation of effectiveness to
   future periods are subject to the risk that controls may become
   inadequate because of changes in conditions, or that the degree of
   compliance with the policies or procedures may deteriorate.      As
   indicated in the accompanying Management’s Annual Report on Internal
   Control over Financial Reporting, management’s assessment of and
   conclusion on the effectiveness of internal control over financial
   reporting did not include the internal controls of NCRIC Corp. and
   subsidiaries (NCRIC). NCRIC was acquired August 3, 2005 and has been
   included in the consolidated financial statements of ProAssurance
   Corporation since that date. NCRIC constituted approximately 8.9% of
   total assets from continuing operations as of December 31, 2005 and
   approximately 5.0% of total revenues for the year then ended. Our
   audit of internal control over financial reporting of ProAssurance
   Corporation also did not include an evaluation of the internal control
   over financing reporting of NCRIC Corp. and subsidiaries.      In our
   opinion, management’s assessment that ProAssurance Corporation and
   subsidiaries maintained effective internal control over financial
   reporting as of December 31, 2005, is fairly stated, in all material
   respects, based on the COSO criteria. Also, in our opinion,
   ProAssurance Corporation and subsidiaries maintained, in all material
   respects, effective internal control over financial reporting as of
   December 31, 2005, based on the COSO criteria.     We also have
   audited, in accordance with the standards of the Public Company
   Accounting Oversight Board (United States), the consolidated balance
   sheets of ProAssurance Corporation and subsidiaries as of December 31,
   2005 and 2004, and the related consolidated statements of income,
   changes in capital and cash flow for each of the three years in the
   period ended December 31, 2005, and our report dated February 27, 2006
   expressed an unqualified opinion thereon. Ernst & Young LLP
   Birmingham, Alabama
   February 27, 2006

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   PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.     The
   information required by this Item regarding executive officers is
   included in Part I of the Form 10K (Pages 30 and 31) in accordance
   with Instruction 3 of the Instructions to Paragraph (b) of Item 401 of
   Regulation S-K.      The information required by this Item regarding
   directors is incorporated by reference pursuant to General Instruction
   G (3) of Form 10K from ProAssurance’s definitive proxy statement for
   the 2006 Annual Meeting of its Stockholders to be filed with the
   Securities and Exchange Commission pursuant to Regulation 14A on or
   before April 18, 2006. ITEM 11. EXECUTIVE COMPENSATION.     The
   information required by this Item is incorporated by reference
   pursuant to General Instruction G (3) of Form 10K from ProAssurance’s
   definitive proxy statement for the 2006 Annual Meeting of its
   Stockholders to be filed with the Securities and Exchange Commission
   pursuant to Regulation 14A on or before April 18, 2006.

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    ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND 
                RELATED STOCKHOLDER MATTERS.                                       

        The information required by this Item is incorporated by
   reference pursuant to General Instruction G (3) of Form 10K from
   ProAssurance’s definitive proxy statement for the 2006 Annual Meeting
   of its Stockholders to be filed with the Securities and Exchange
   Commission pursuant to Regulation 14A on or before April 18, 2006.
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.     The
   information required by this Item is incorporated by reference
   pursuant to General Instruction G (3) of Form 10K from ProAssurance’s
   definitive proxy statement for the 2006 Annual Meeting of its
   Stockholders to be filed with the Securities and Exchange Commission
   pursuant to Regulation 14A on or before April 18, 2006. ITEM 14.
   PRINCIPAL ACCOUNTANT FEES AND SERVICES.     The information required
   by this Item is incorporated by reference pursuant to General
   Instruction G (3) of Form 10K from ProAssurance’s definitive proxy
   statement for the 2006 Annual Meeting of its Stockholders to be filed
   with the Securities and Exchange Commission pursuant to Regulation 14A
   on or before April 18, 2006.

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   PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

    (a)    Financial Statements. The following consolidated financial statements  
           of ProAssurance Corporation and subsidiaries are included herein in    
           accordance with Item 8 of Part II of this report.                      

   Report of Independent Auditors Consolidated Balance Sheets –
   December 31, 2005 and 2004 Consolidated Statements of Changes in
   Capital – years ended December 31, 2005, 2004 and 2003 Consolidated
   Statements of Income – years ended December 31, 2005, 2004 and 2003
   Consolidated Statements of Cash Flows – years ended December 31, 2005,
   2004 and 2003 Notes to Consolidated Financial Statements Financial
   Statement Schedules. The following consolidated financial statement
   schedules of ProAssurance Corporation and subsidiaries are included
   herein in accordance with Item 14(d): Schedule I – Summary of
   Investments – Other than Investments in Related Parties Schedule II –
   Condensed Financial Information of ProAssurance Corporation
   (Registrant Only) Schedule III – Supplementary Insurance Information
   Schedule IV – Reinsurance Schedule VI – Supplementary Property and
   Casualty Insurance Information All other schedules to the consolidated
   financial statements required by Article 7 of Regulation S-X are not
   required under the related instructions or are inapplicable and
   therefore have been omitted.

    (b)    The exhibits required to be filed by Item 15(b) are listed herein in 
           the Exhibit Index.                                                   

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   SIGNATURESPursuant to the requirements of Section 13 of 15(d) of the
   Securities Exchange Act of 1934, the Registrant has duly caused this
   report to be signed on its behalf by the undersigned, thereunto duly
   authorized, on this the 28th day of February 2006.

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        PROASSURANCE CORPORATION 

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        By:                         /s/    A. Derrill Crowe, M.D.     

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                                           A. Derrill Crowe, M.D.     

   Pursuant to the requirements of the Securities Exchange Act of 1934,
   this report has been signed below by the following persons on behalf
   of the Registrant and in the capacities and on the dates indicated.

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    Name                                                              Title                                                                     Date              

   __TOKEN__70__2__

    /s/A. Derrill Crowe, M.D. A. Derrill Crowe, M.D.                  Chairman of the Board and Chief Executive Officer (Principal Executive    February 28, 2006 
                                                                      Officer) and Director                                                                       

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    /s/Edward L. Rand, Jr. Edward L. Rand, Jr.                        Chief Financial Officer                                                   February 28, 2006 

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    /s/James J. Morello James J. Morello                              Chief Accounting Officer                                                  February 28, 2006 

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    /s/Victor T. Adamo, Esq. Victor T. Adamo, Esq.                    Director                                                                  February 28, 2006 

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    /s/Paul R. Butrus Paul R. Butrus                                  Director                                                                  February 28, 2006 

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    /s/Lucian F. Bloodworth Lucian F. Bloodworth                      Director                                                                  February 28, 2006 

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    /s/Robert E. Flowers, M.D. Robert E. Flowers, M.D.                Director                                                                  February 28, 2006 

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    /s/John J. McMahon, Jr., Esq. John J. McMahon, Jr., Esq.          Director                                                                  February 28, 2006 

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    /s/John P. North, Jr. John P. North, Jr.                          Director                                                                  February 28, 2006 

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    /s/Ann F. Putallaz, Ph.D. Ann F. Putallaz, Ph.D.                  Director                                                                  February 28, 2006 

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    /s/William H. Woodhams, M.D. William H. Woodhams, M.D.            Director                                                                  February 28, 2006 

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    /s/Wilfred W. Yeargan, Jr., M.D. Wilfred W. Yeargan, Jr., M.D.    Director                                                                  February 28, 2006 

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   ProAssurance Corporation and Subsidiaries
   Consolidated Financial Statements
   Years ended December 31, 2005, 2004 and 2003 Table of Contents

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    Report of Independent Registered Public Accounting Firm      69   

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    Audited Consolidated Financial Statements                         

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    Consolidated Balance Sheets                                  70   

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    Consolidated Statements of Changes in Capital                72   

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    Consolidated Statements of Income                            73   

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    Consolidated Statements of Cash Flow                         74   

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    Notes to Consolidated Financial Statements                   76   

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   Report of Independent Registered Public Accounting Firm
   on Consolidated Financial StatementsTo the Board of Directors and
   Shareholders of
   ProAssurance Corporation      We have audited the accompanying
   consolidated balance sheets of ProAssurance Corporation and
   subsidiaries as of December 31, 2005 and 2004, and the related
   consolidated statements of changes in capital, income and cash flow
   for each of the three years in the period ended December 31, 2005. Our
   audits also included the financial statement schedules listed in the
   Index at Item 15(a). These financial statements and schedules are the
   responsibility of the Company’s management. Our responsibility is to
   express an opinion on these financial statements and schedules based
   on our audits.      We conducted our audits in accordance with the
   standards of the Public Company Accounting Oversight Board (United
   States). Those standards require that we plan and perform the audit to
   obtain reasonable assurance about whether the financial statements are
   free of material misstatement. An audit includes examining, on a test
   basis, evidence supporting the amounts and disclosures in the
   financial statements. An audit also includes assessing the accounting
   principles used and significant estimates made by management, as well
   as evaluating the overall financial statement presentation. We believe
   that our audits provide a reasonable basis for our opinion.      In
   our opinion, the financial statements referred to above present
   fairly, in all material respects, the consolidated financial position
   of ProAssurance Corporation and subsidiaries at December 31, 2005 and
   2004, and the consolidated results of their operations and their cash
   flows for each of the three years in the period ended December 31,
   2005, in conformity with U.S. generally accepted accounting
   principles. Also, in our opinion, the related financial statement
   schedules, when considered in relation to the basic financial
   statements taken as a whole, present fairly in all material respects
   the information set forth therein.      We also have audited, in
   accordance with the standards of the Public Company Accounting
   Oversight Board (United States), the effectiveness of ProAssurance
   Corporation’s internal control over financial reporting as of
   December 31, 2005, based on criteria established in Internal
   Control—Integrated Framework issued by the Committee of Sponsoring
   Organizations of the Treadway Commission and our report dated
   February 27, 2006 expressed an unqualified opinion thereon. Ernst &
   Young LLP Birmingham, Alabama
   February 27, 2006

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   ProAssurance Corporation and Subsidiaries
   Consolidated Balance Sheets
   (In thousands, except share data)

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                                                                       December 31              December 31   

                                                                          2005                     2004       

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    Assets                                                                                                                   

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    Investments:                                                                                                             

    Fixed maturities available for sale, at fair value                 $            2,403,450                 $  1,977,093   

    Equity securities available for sale, at fair value                                10,018                       29,404   

    Equity securities, trading portfolio, at fair value                                 5,181                        4,150   

    Real estate, net                                                                   16,623                       16,538   

    Short-term investments                                                             93,066                       37,941   

    Business owned life insurance                                                      56,436                       54,138   

    Other                                                                              46,168                       42,883   

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    Total investments                                                               2,630,942                    2,162,147   

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    Cash and cash equivalents                                                          34,506                       20,698   

    Premiums receivable                                                               106,549                      117,259   

    Receivable from reinsurers on unpaid losses and loss adjustment                   327,693                      273,654   
    expenses                                                                                                                 

    Prepaid reinsurance premiums                                                       20,379                       18,888   

    Deferred taxes                                                                    103,935                       69,630   

    Other assets                                                                      117,596                       81,019   

    Assets of discontinued operations                                                 567,779                      495,903   

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                                                                       $            3,909,379                 $  3,239,198   

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   See accompanying notes.

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   ProAssurance Corporation and Subsidiaries
   Consolidated Balance Sheets
   (In thousands, except share data)

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                                                                              December 31               December 31   

                                                                                 2005                      2004       

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    Liabilities and Stockholders’ Equity                                                                                              

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    Liabilities:                                                                                                                      

    Policy liabilities and accruals:                                                                                                  

    Reserve for losses and loss adjustment expenses                           $            2,224,436                  $  1,818,636    

    Unearned premiums                                                                        264,258                       248,539    

    Reinsurance premiums payable                                                              83,314                        67,459    

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    Total policy liabilities                                                               2,572,008                     2,134,634    

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    Other liabilities                                                                         67,572                        47,291    

    Long-term debt                                                                           167,240                       151,480    

    Liabilities of discontinued operations                                                   337,513                       294,774    

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    Total liabilities                                                                      3,144,333                     2,628,179    

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    Commitments and contingencies                                                                  —                             —    

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    Stockholders’ Equity:                                                                                                             

    Common stock, par value $0.01 per share 100,000,000 shares authorized;                       312                           293    
    31,230,647 and 29,326,228 shares issued, respectively                                                                             

    Additional paid-in capital                                                               387,739                       313,957    

    Accumulated other comprehensive income (loss), net of deferred tax                        (8,834  )                     24,397    
    expense (benefit) of $(4,755) and $13,139, respectively                                                                           

    Retained earnings                                                                        385,885                       272,428    

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                                                                                             765,102                       611,075    

    Less treasury stock, at cost, 121,765 shares                                                 (56  )                        (56  ) 

   __TOKEN__73__32__

   __TOKEN__73__33__

    Total stockholders’ equity                                                               765,046                       611,019    

   __TOKEN__73__35__

                                                                              $            3,909,379                  $  3,239,198    

   __TOKEN__73__37__

   See accompanying notes.

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   ProAssurance Corporation and Subsidiaries
   Consolidated Statements of Changes in Capital
   (In thousands)

   __TOKEN__74__0__

                                                                                   Additional                         Accumulated Other                                                   

                                                           Common        Paid-in                      Comprehensive                       Retained      Treasury                    

                                                           Stock         Capital                      Income (Loss)                       Earnings       Stock              Total   

   __TOKEN__74__4__

    Balance at January 1, 2003                             $       290             $           308,501                                    $    35,545       $         160,914           $  (56  )    $  505,194   

    Common stock issued for compensation                             —                           1,061                                              —                       —                —            1,061   

    Stock options exercised                                          2                           2,468                                              —                       —                —            2,470   

    Repurchase of minority interest                                  —                               —                                            886                       —                —              886   

    Comprehensive income:                                                                                                                                                                                         

    Other comprehensive income (loss) (see Note 11):                                                                                                                                                              

    Continuing operations                                            —                               —                                         (3,539  )                    —                —                —   

    Discontinued operations                                          —                               —                                          1,530                       —                —                —   

    Income from continuing operations                                —                               —                                              —                  15,345                —                —   

    Income from discontinued operations                              —                               —                                              —                  23,358                —                —   

    Total comprehensive income, continuing operations                —                               —                                              —                       —                —           11,806   

    Total comprehensive income, discontinued operations              —                               —                                              —                       —                —           24,888   

   __TOKEN__74__17__

    Balance at December 31, 2003                                   292                         312,030                                         34,422                 199,617              (56  )       546,305   

    Common stock issued for compensation                             1                           1,710                                              —                       —                —            1,711   

    Stock options exercised                                          —                             217                                              —                       —                —              217   

    Comprehensive income:                                                                                                                                                                                         

    Other comprehensive income (loss) (see Note 11):                                                                                                                                                              

    Continuing operations                                            —                               —                                         (8,608  )                    —                —                —   

    Discontinued operations                                          —                               —                                         (1,417  )                    —                —                —   

    Income from continuing operations                                —                               —                                              —                  43,043                —                —   

    Income from discontinued operations                              —                               —                                              —                  29,768                —                —   

    Total comprehensive income, continuing operations                —                               —                                              —                       —                —           34,435   

    Total comprehensive income, discontinued operations              —                               —                                              —                       —                —           28,351   

   __TOKEN__74__29__

    Balance at December 31, 2004                                   293                         313,957                                         24,397                 272,428              (56  )       611,019   

    Common stock issued for compensation                             —                           2,270                                              —                       —                —            2,270   

    Equity issued in purchase transaction:                                                                                                                                                                        

    Common stock issued                                             17                          67,049                                              —                       —                —           67,066   

    Fair value of options assumed                                    —                             192                                              —                       —                —              192   

    Stock options exercised                                          2                           4,271                                              —                       —                —            4,273   

    Comprehensive income:                                                                                                                                                                                         

    Other comprehensive income (loss) (see Note 11):                                                                                                                                                              

    Continuing operations                                            —                               —                                        (28,063  )                    —                —                —   

    Discontinued operations                                          —                               —                                         (5,168  )                    —                —                —   

    Income from continuing operations                                —                               —                                              —                  80,026                —                —   

    Income from discontinued operations                              —                               —                                              —                  33,431                —                —   

    Total comprehensive income, continuing operations                —                               —                                              —                       —                —           51,963   

    Total comprehensive income, discontinued operations              —                               —                                              —                       —                —           28,263   

   __TOKEN__74__44__

    Balance at December 31, 2005                           $       312             $           387,739                                    $    (8,834  )    $         385,885           $  (56  )    $  765,046   

   __TOKEN__74__46__

   See accompanying notes.

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   [73]Table of Contents

   ProAssurance Corporation and Subsidiaries
   Consolidated Statements of Income
   (In thousands, except per share data)

   __TOKEN__75__0__

                                                             Year Ended December 31         

                                                                      2005                      2004             2003  

   __TOKEN__75__3__

    Revenues:                                                                                                                            

    Gross premiums written                                   $                       572,960           $  573,592          $  543,323    

   __TOKEN__75__6__

   __TOKEN__75__7__

    Net premiums written                                     $                       521,343           $  535,028          $  497,659    

   __TOKEN__75__9__

   __TOKEN__75__10__

    Premiums earned                                          $                       596,557           $  555,524          $  509,260    

    Premiums ceded                                                                   (53,316  )           (35,627  )          (49,389  ) 

   __TOKEN__75__13__

    Net premiums earned                                                              543,241              519,897             459,871    

    Net investment income                                                             97,649               76,346              63,366    

    Net realized investment gains (losses)                                               912                7,572               5,858    

    Other income                                                                       3,510                1,341               4,460    

   __TOKEN__75__18__

   __TOKEN__75__19__

    Total revenues                                                                   645,312              605,156             533,555    

   __TOKEN__75__21__

    Expenses:                                                                                                                            

    Losses and loss adjustment expenses                                              479,300              447,521             414,828    

    Reinsurance recoveries                                                           (41,099  )            12,916              24,540    

   __TOKEN__75__25__

    Net losses and loss adjustment expenses                                          438,201              460,437             439,368    

    Underwriting, acquisition and insurance expenses                                  89,319               84,383              73,263    

    Loss on early extinguishment of debt                                                   —                    —                 305    

    Interest expense                                                                   8,929                6,515               3,409    

   __TOKEN__75__30__

   __TOKEN__75__31__

    Total expenses                                                                   536,449              551,335             516,345    

   __TOKEN__75__33__

   __TOKEN__75__34__

    Income from continuing operations before income taxes                            108,863               53,821              17,210    

   __TOKEN__75__36__

    Provision for income taxes:                                                                                                          

    Current expense (benefit)                                                         28,130               10,244               2,840    

    Deferred expense (benefit)                                                           707                  534                (975  ) 

   __TOKEN__75__40__

                                                                                      28,837               10,778               1,865    

   __TOKEN__75__42__

   __TOKEN__75__43__

    Income from continuing operations                                                 80,026               43,043              15,345    

   __TOKEN__75__45__

    Income from discontinued operations, net of tax                                   33,431               29,768              23,358    

   __TOKEN__75__47__

   __TOKEN__75__48__

    Net income                                               $                       113,457           $   72,811          $   38,703    

   __TOKEN__75__50__

   __TOKEN__75__51__

    Basic earnings per share:                                                                                                            

    Income from continuing operations                        $                          2.66           $     1.48          $     0.53    

    Income from discontinued operations                                                 1.11                 1.02                0.81    

   __TOKEN__75__55__

    Net income                                               $                          3.77           $     2.50          $     1.34    

   __TOKEN__75__57__

   __TOKEN__75__58__

    Diluted earnings per share:                                                                                                          

    Income from continuing operations                        $                          2.52           $     1.44          $     0.53    

    Income from discontinued operations                                                 1.02                 0.93                0.80    

   __TOKEN__75__62__

    Net income                                               $                          3.54           $     2.37          $     1.33    

   __TOKEN__75__64__

   __TOKEN__75__65__

    Weighted average number of common shares outstanding                                                                                 

    Basic                                                                             30,049               29,164              28,956    

   __TOKEN__75__68__

    Diluted                                                                           32,908               31,984              29,144    

   __TOKEN__75__70__

   See accompanying notes.

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   ProAssurance Corporation and Subsidiaries
   Consolidated Statements of Cash Flow
   (In thousands)

   __TOKEN__76__0__

                                                                             Year Ended December 31          

                                                                                      2005                       2004                2003  

   __TOKEN__76__3__

    Continuing Operations:                                                                                                                                      

   __TOKEN__76__5__

    Operating Activities                                                                                                                                        

    Income from continuing operations                                        $                         80,026           $      43,043          $      15,345    

    Adjustments to reconcile income to net cash provided by operating                                                                                           
    activities:                                                                                                                                                 

    Amortization                                                                                       20,274                  21,452                 18,204    

    Depreciation                                                                                        3,727                   3,387                  2,927    

    Increase in cash surrender value of business owned life insurance                                  (2,298  )               (2,432  )              (1,706  ) 

    Net realized investment (gains) losses                                                               (912  )               (7,572  )              (5,858  ) 

    Deferred income taxes                                                                                 707                     534                   (975  ) 

    Policy acquisition costs deferred, net of related amortization                                     (1,002  )               (3,352  )                  99    

    Other                                                                                                (701  )                 (622  )                (598  ) 

    Changes in assets and liabilities:                                                                                                                          

    Trading portfolio securities, excluding net holding gains (losses)                                   (917  )                4,610                 (5,540  ) 

    Premiums receivable                                                                                19,104                   1,857                (18,952  ) 

    Receivable from reinsurers                                                                        (10,553  )               62,637                 59,673    

    Prepaid reinsurance premiums                                                                        1,119                  (1,237  )               3,643    

    Other assets                                                                                       (1,272  )               (1,237  )              (5,823  ) 

    Reserve for losses and loss adjustment expenses                                                   222,643                 183,887                142,610    

    Unearned premiums                                                                                 (23,514  )               18,097                 34,063    

    Reinsurance premiums payable                                                                       14,182                   1,933                  6,645    

    Other liabilities                                                                                   2,977                  11,302                 (1,861  ) 

   __TOKEN__76__26__

    Net cash provided by operating activities of continuing operations                                323,590                 336,287                241,896    

   __TOKEN__76__28__

   __TOKEN__76__29__

    Investing Activities                                                                                                                                        

    Purchases of:                                                                                                                                               

    Fixed maturities available for sale                                                              (900,481  )           (1,133,391  )          (1,008,007  ) 

    Equity securities available for sale                                                                 (777  )                 (856  )              (3,019  ) 

    Other investments                                                                                  (2,386  )               (4,205  )             (19,110  ) 

    Business owned life insurance                                                                           —                       —                (50,000  ) 

    Proceeds from sale or maturities of:                                                                                                                        

    Fixed maturities available for sale                                                               597,472                 677,009                574,686    

    Equity securities available for sale                                                               44,773                   8,854                 26,296    

    Net (increase) decrease in short-term investments                                                 (51,903  )               69,737                142,199    

    Cash proceeds from sale of discontinued operations                                                    848                       —                      —    

    Cash acquired in purchase transaction net of cash used in transaction                               1,681                       —                      —    
    of $2,684                                                                                                                                                   

    Other                                                                                              (2,653  )               (9,144  )              (6,615  ) 

   __TOKEN__76__43__

    Net cash used by investing activities of continuing operations                                   (313,426  )             (391,996  )            (343,570  ) 

   __TOKEN__76__45__

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    Financing Activities                                                                                                                                        

    Net proceeds from long-term debt                                                                        —                  44,907                104,641    

    Repayment of debt                                                                                       —                       —                (72,500  ) 

    Other                                                                                               3,644                      35                  1,852    

   __TOKEN__76__51__

    Net cash provided by financing activities of continuing operations                                  3,644                  44,942                 33,993    

   __TOKEN__76__53__

   __TOKEN__76__54__

    Increase (decrease) in cash and cash equivalents                                                   13,808                 (10,767  )             (67,681  ) 

    Cash and cash equivalents at beginning at period                                                   20,698                  31,465                 99,146    

   __TOKEN__76__57__

    Cash and cash equivalents at end of period                               $                         34,506           $      20,698          $      31,465    

   __TOKEN__76__59__

   See accompanying notes.

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   ProAssurance Corporation and Subsidiaries
   Consolidated Statements of Cash Flow
   (In thousands)

   __TOKEN__77__0__

                                                                           Year Ended December 31        

                                                                                    2005                    2004             2003  

   __TOKEN__77__3__

   __TOKEN__77__4__

    Discontinued Operations:                                                                                                                         

   __TOKEN__77__6__

    Net cash provided by (used in) operating activities of discontinued    $                       40,920          $   37,252          $   40,906    
    operations                                                                                                                                       

    Net cash provided by (used in) investing activities of discontinued                             2,415             (38,446  )          (41,174  ) 
    operations                                                                                                                                       

    Net cash provided by (used in) financing activities of discontinued                                 —                   —             (33,312  ) 
    operations                                                                                                                                       

   __TOKEN__77__10__

   __TOKEN__77__11__

    Increase (decrease) in cash and cash equivalents                                               43,335              (1,194  )          (33,580  ) 

    Cash and cash equivalents at beginning of period                                                9,386              10,580              44,160    

   __TOKEN__77__14__

    Cash and cash equivalents at end of period                             $                       52,721          $    9,386          $   10,580    

   __TOKEN__77__16__

   __TOKEN__77__17__

    Supplemental Disclosure of Cash Flow Information:                                                                                                

   __TOKEN__77__19__

    Net cash paid (received) during the year for income taxes:                                                                                       

    Continuing operations                                                  $                       25,998          $    7,165          $    6,527    

   __TOKEN__77__22__

    Discontinued operations                                                $                       15,528          $   15,916          $    7,785    

   __TOKEN__77__24__

    Cash paid during the year for interest:                                                                                                          

    Continuing operations                                                  $                        8,034          $    5,501          $    3,136    

   __TOKEN__77__27__

    Discontinued operations                                                $                            —          $        —          $        —    

   __TOKEN__77__29__

   __TOKEN__77__30__

    Significant non-cash transactions:                                                                                                               

   __TOKEN__77__32__

    Common stock issued in acquisition                                     $                       67,066          $        —          $        —    

   __TOKEN__77__34__

   See accompanying notes.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting PoliciesOrganization and Nature of
   Business     ProAssurance Corporation (ProAssurance), a Delaware
   corporation, is an insurance holding company for specialty property
   and casualty insurance companies that principally provides
   professional liability insurance for providers of health care
   services, and to a lesser extent, providers of legal services.
   ProAssurance operates in the United States of America (U.S.),
   principally in the mid-Atlantic, Midwest and Southeast. After giving
   consideration to the disposal of the personal lines segment (see
   below), ProAssurance’s operations are in a single reportable segment,
   the professional liability segment. Segment Information / Discontinued
   Operations     In the first quarter of 2006 ProAssurance sold its
   Personal Lines Division consisting of its wholly owned subsidiaries,
   MEEMIC Insurance Company, Inc. and MEEMIC Insurance Services
   (collectively, the MEEMIC Companies). The MEEMIC Companies are the
   only active entities of ProAssurance’s personal lines operations,
   which were formerly considered as a separate reportable industry
   segment. In accordance with Statement of Financial Accounting Standard
   (SFAS) No. 144 Accounting for the Impairment or Disposal of Long-lived
   Assets, ProAssurance’s personal lines operations have been classified
   in this report as discontinued operations in all periods presented.
   See Note 3 for further discussion of discontinued operations.
   Principles of Consolidation     The accompanying consolidated
   financial statements include the accounts of ProAssurance Corporation
   and its subsidiaries. All significant intercompany accounts and
   transactions between consolidated companies have been eliminated.
   Basis of Presentation     The preparation of financial statements in
   accordance with accounting principles generally accepted in the United
   States (GAAP) requires management to make estimates and assumptions
   that affect the reported amounts of assets and liabilities and
   disclosure of contingent assets and liabilities at the date of the
   financial statements and the reported amounts of revenues and expenses
   during the reporting period. Actual results could differ from those
   estimates. Reclassifications     The benefit of ceding commission on
   certain reinsurance contracts has been reclassified in the prior year
   financial statements to conform to the current year presentation. The
   reclassification decreased premiums ceded and increased underwriting,
   acquisition and insurance expenses by $7.3 million for 2004 and
   $6.7 million for 2003, and had no impact on income from continuing
   operations in either period. Critical Accounting Policies     The
   significant accounting policies followed by ProAssurance that
   materially affect financial reporting are summarized in these notes to
   the consolidated financial statements.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting Policies (continued)InvestmentsFixed
   Maturities and Equity Securities Available for Sale     ProAssurance
   considers all fixed maturity securities as available-for-sale. Equity
   securities are considered as either available-for-sale or trading
   portfolio securities. Available-for-sale securities are carried at
   fair value, and unrealized gains and losses on such available-for-sale
   securities are excluded from earnings and included, net of related tax
   effects, in stockholders’ equity as “Accumulated other comprehensive
   income (loss)” until realized.      Fair values for fixed maturity and
   equity securities are based on quoted market prices, where available.
   For fixed maturity and equity securities not actively traded, fair
   values are estimated using values obtained from independent pricing
   services.      Investment income includes amortization of premium and
   accretion of discount related to debt securities acquired at other
   than par value. Debt securities and mandatorily redeemable preferred
   stock with maturities beyond one year when purchased are classified as
   fixed maturities. Equity Securities, Trading Portfolio     ProAssurance
   has designated certain equity security purchases as trading portfolio
   securities. A trading portfolio is carried at fair value with the
   holding gains and losses included in realized investment gains and
   losses in the current period. Fair values are based on quoted market
   prices. Real Estate     Real estate properties are classified as
   investment real estate. All balances are reported at cost, less
   allowances for depreciation. Depreciation is computed over the
   estimated useful lives of the related property using the straight-line
   method. Rental income and expenses are included in net investment
   income. Short-term Investments     Short-term investments, which have
   an original maturity of one year or less, are primarily comprised of
   investments in U.S. Treasury obligations and commercial paper. All
   balances are reported at cost, which approximates fair value. Other
   Investments     Other investments are primarily comprised of equity
   interests in non-public investment partnerships/limited liability
   companies. Interests where ProAssurance has virtually no influence
   over the operating and financial policies of the entity and for which
   there is no readily determinable fair value are accounted for using
   the cost method. Interests where ProAssurance has a greater than minor
   interest in the entity are accounted for using the equity method.
   Business Owned Life Insurance (BOLI)     ProAssurance owns life
   insurance contracts on certain key management employees. The life
   insurance contracts are carried at their current cash surrender value.
   Changes in the cash surrender value are included in income in the
   current period as investment income. Death proceeds from the contracts
   are recorded when the proceeds become payable under the policy terms.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting Policies (continued)Cash and Cash
   Equivalents     For purposes of the consolidated balance sheets and
   statements of cash flow, ProAssurance considers all demand deposits
   and overnight investments to be cash equivalents. Realized Gains and
   Losses     Realized gains and losses on sales of investments are
   recognized on the specific identification basis. Other-than-temporary
   Impairments     In accordance with SFAS No. 115, “Accounting for
   Certain Investments in Debt and Equity Securities,” ProAssurance
   evaluates its investment securities on at least a quarterly basis for
   declines in market value below cost for the purpose of determining
   whether these declines represent other than temporary declines. A
   decline in the fair value of a security below cost judged to be other
   than temporary is recognized as a loss in the then current period and
   reduces the cost basis of the security. In subsequent periods,
   ProAssurance measures any gain or loss or decline in value against the
   adjusted cost basis of the security. The following factors are
   considered in determining whether an investment’s decline is other
   than temporary:

    –    the extent to which the market value of the security is less than its  
         cost basis,                                                            

   __TOKEN__78__1__

    –    the length of time for which the market value of the security has been 
         less than its cost basis,                                              

   __TOKEN__78__3__

    –    the financial condition and near-term prospects of the security’s      
         issuer, taking into consideration the economic prospects of the        
         issuer’s industry and geographical region, to the extent that          
         information is publicly available, and                                 

   __TOKEN__78__5__

    –    ProAssurance’s ability and intent to hold the investment for a period  
         of time sufficient to allow for any anticipated recovery in market     
         value.                                                                 

   Reinsurance     ProAssurance enters into reinsurance agreements
   whereby other insurance entities agree to assume a portion of the risk
   associated with the policies issued by ProAssurance. In return,
   ProAssurance agrees to pay a premium to the reinsurer. ProAssurance
   purchases (cedes) reinsurance to provide for greater diversification
   of business, allow management to control exposure to potential losses
   arising from large risks, and provide additional capacity for growth.
        Receivable from reinsurers is the estimated amount of future loss
   payments that will be recoverable from reinsurers. Reinsurance
   recoveries are the portion of losses incurred during the period that
   are estimated to be allocable to reinsurers. Premiums ceded are the
   estimated premiums that will be due to reinsurers with respect to
   premiums earned and losses incurred during the period.      These
   estimates are based upon management’s estimates of ultimate losses and
   the portion of those losses that are allocable to reinsurers under the
   terms of the related reinsurance agreements. Given the uncertainty of
   the ultimate amounts of losses, these estimates may vary significantly
   from the eventual outcome. Management regularly reviews these
   estimates and any adjustments necessary are reflected in the period in
   which the estimate is changed. Due to the size of the receivable from
   reinsurers, even a small adjustment to the estimates could have a
   material effect on ProAssurance’s results of operations for the period
   in which the change is made.      Reinsurance contracts do not relieve
   ProAssurance from its obligations to policyholders. ProAssurance
   continually monitors its reinsurers to minimize its exposure to
   significant losses from reinsurer insolvencies. Any amount found to be
   uncollectible is written off in the period in which the uncollectible
   amount is identified.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting Policies (continued)Goodwill     Intangible
   assets consist primarily of the excess of cost over the fair value of
   net assets acquired (i.e., goodwill). In accordance with SFAS No. 142,
   “Goodwill and Other Intangible Assets”, goodwill is not amortized.
   Goodwill is tested annually for impairment. ProAssurance regularly
   reviews its goodwill and other intangibles to determine if any adverse
   conditions exist that could indicate impairment. Conditions that could
   trigger impairment include, but are not limited to, a significant
   adverse change in legal factors or business climate that could affect
   the value of an asset or an adverse action or assessment by a
   regulator. ProAssurance does not believe that any of its recorded
   goodwill or intangible assets has suffered impairment. Goodwill is
   included in the Consolidated Balance Sheets as a component of other
   assets. Deferred Policy Acquisition Costs     Costs that vary with and
   are directly related to the production of new and renewal premiums
   (primarily premium taxes, commissions and underwriting salaries) are
   deferred to the extent they are recoverable against unearned premiums
   and are amortized as related premiums are earned. Deferred Policy
   Acquisition Costs are included in the Consolidated Balance Sheets as a
   component of other assets. Reserve for Losses and Loss Adjustment
   Expenses (Reserve for Losses)     ProAssurance establishes its reserve
   for loss and loss adjustment expenses (reserve for losses) based on
   estimates of the future amounts necessary to pay claims and expenses
   (losses) associated with the investigation and settlement of claims.
   The reserve for losses is determined on the basis of individual claims
   and payments thereon as well as actuarially determined estimates of
   future losses based on past loss experience, available industry data
   and projections as to future claims frequency, severity, inflationary
   trends, judicial trends, legislative changes and settlement patterns.
        ProAssurance believes that the methods it uses to establish the
   reserve for losses are reasonable and appropriate. External actuaries
   review the reserve for losses of each insurance subsidiary at least
   semi-annually. ProAssurance considers the views of the external
   actuaries as well as other factors, such as known, anticipated or
   estimated changes in frequency and severity of claims, loss retention
   levels and premium rates in establishing its reserves. Estimating
   casualty insurance reserves, and particularly liability reserves, is a
   complex process. Claims may be resolved over an extended period of
   time, often five years or more, and may be subject to litigation.
   Estimating losses for liability claims requires ProAssurance to make
   and revise judgments and assessments regarding multiple uncertainties
   over an extended period of time. As a result, reserve estimates may
   vary significantly from the eventual outcome. Reserve estimates and
   the assumptions on which these estimates are predicated are regularly
   reviewed and updated as new information becomes available. Any
   adjustments necessary are reflected in then current operations. Due to
   the size of ProAssurance’s reserve for losses, even a small percentage
   adjustment to these estimates could have a material effect on earnings
   in the period in which the adjustment is made.      The effect of
   adjustments made to reinsured losses is mitigated by the corresponding
   adjustment that is made to reinsurance recoveries. Thus, in any given
   year, the Company may make significant adjustments to gross losses
   that have little effect on its net losses. Recognition of Revenues     Insurance
   premiums are recognized as revenues pro rata over the terms of the
   policies.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting Policies (continued)Stock-Based
   Compensation     ProAssurance accounts for stock options under the
   recognition and measurement principles of Accounting Principles Board
   Opinion No. 25, Accounting for Stock Issued to Employees, and related
   interpretations (collectively referred to as APB 25). The following
   table illustrates the effect on net income and earnings per share as
   if ProAssurance had applied the fair value recognition provisions of
   SFAS No. 123, Accounting for Stock-Based Compensation, to outstanding
   options. See Note 12 for additional information regarding outstanding
   options.

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                                                                                    Year Ended December 31              

                                                                                             2005                           2004            2003  

                                                                              In thousands except per share data        

    Income from continuing operations                                         $                                   80,026           $  43,043          $  15,345    

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    Add: Stock-based employee compensation expense recognized under APB 25                                            84                 218                130    
    related to the exercise of options, net of related tax effects                                                                                                 

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    Deduct: Total stock-based employee compensation expense determined                                            (1,808  )           (1,111  )            (620  ) 
    under fair value based method for all awards, net of related tax                                                                                               
    effects                                                                                                                                                        

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    Pro forma income from continuing operations                               $                                   78,302           $  42,150          $  14,855    

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    Earnings per share, continuing operations:                                                                                                                     

    Basic—as reported                                                         $                                     2.66           $    1.48          $    0.53    

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    Basic—pro forma                                                           $                                     2.61           $    1.45          $    0.51    

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    Diluted—as reported                                                       $                                     2.52           $    1.44          $    0.53    

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    Diluted—pro forma                                                         $                                     2.47           $    1.41          $    0.51    

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   Income Taxes      ProAssurance files a consolidated federal income tax
   return. Deferred income taxes are provided for temporary differences
   between financial and income tax reporting relating primarily to
   unrealized gains on securities, discounting of losses for income tax
   reporting, and the limitation of the unearned premiums deduction for
   income tax reporting.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting Policies (continued)Accounting Changes     On
   December 16, 2004 the Financial Accounting Standards Board
   (FASB) issued SFAS 123 (revised 2004), Share-Based Payment, hereafter
   referred to as SFAS 123(R), which is a revision of SFAS 123,
   Accounting for Stock-Based Compensation (SFAS 123), which superseded
   APB 25, Accounting for Stock Issued to Employees (APB 25), and amends
   SFAS 95, Statement of Cash Flows. The provisions of SFAS 123(R)
   require all share-based payments to employees, including grants of
   employee stock options, to be recognized in the financial statements
   based on their fair values. SFAS 123(R) also requires that the
   benefits of tax deductions in excess of recognized compensation cost
   to be reported as a financing cash flow, rather than as an operating
   cash flow as required under current literature. ProAssurance plans to
   adopt SFAS 123(R) on January 1, 2006, the required effective date,
   using the “modified prospective” method permitted by the statement and
   will value future grants of stock options using the Black Scholes
   valuation method.      Under the “modified prospective” method
   stock-based compensation is recognized under the requirements of SFAS
   123(R) for all share-based payments granted after the effective date
   of SFAS 123(R) and for the non-vested portion of share-based payments
   granted prior to the adoption of SFAS 123(R). Under SFAS 123(R)
   compensation for non-vested share-based payments granted prior to
   adoption shall continue to be calculated as disclosed under SFAS 123,
   except that the effect of forfeitures is required to be estimated
   rather than considered as forfeitures occur.      As permitted by SFAS
   123, ProAssurance currently values employee stock-based payments using
   APB 25’s intrinsic value method. Accordingly, ProAssurance generally
   recognizes no compensation cost related to such payments but does
   provide pro forma disclosure of the effect on net income and earnings
   per share of applying the fair value provisions of SFAS 123 to such
   payments granted.      Had ProAssurance’s SFAS 123 pro forma
   disclosures been prepared in accordance with the provisions of SFAS
   123(R) the effect would have been different; however, the effect that
   SFAS 123(R) would have had on prior periods is not readily
   determinable. SFAS 123(R) provides more extensive guidance than does
   SFAS 123 with regard to factors that should be considered in valuing
   share-based payments. Under SFAS 123, ProAssurance utilized a single
   set of valuation assumptions for all employees. Under SFAS 123(R),
   entities are required to “aggregate individual awards into relatively
   homogeneous groups with respect to exercise and post-vesting
   employment termination behaviors.” Accordingly, ProAssurance
   anticipates aggregating prospective awards into groups consisting of
   senior executives likely to exercise shortly after vesting, other
   senior executives and other employees to appropriately reflect
   differing exercise and post-vesting employee termination behaviors.
   Additionally, under SFAS 123(R), fully vested awards granted to
   directors and awards that vest upon retirement granted to employees
   who are eligible for retirement will be expensed on the date of grant.
   Under SFAS 123, ProAssurance calculated compensation expense (for pro
   forma disclosure) without consideration of expected forfeitures.
   Unlike SFAS 123, which permitted companies to reflect forfeitures as
   they occurred, SFAS 123(R) requires companies to estimate forfeitures
   in determining the amount of compensation cost to recognize each
   period. As a result, ProAssurance will develop estimates of
   forfeitures during the requisite service periods and revise previous
   SFAS 123 calculations for known and expected forfeitures related to
   grants prior to the adoption of SFAS 123(R). ProAssurance’s own
   history with regard to the expected terms of employee stock awards is
   not sufficient to allow such assumptions to be developed statistically
   for most employee groups. Accordingly, through December 31, 2007,
   ProAssurance will apply the “simplified” method consistent with the
   guidance of SEC Staff Accounting Bulletin 107, i.e., expected term =
   (vesting term + original contractual term) / 2) for such groups.
   ProAssurance is in the process of finalizing these assumptions;
   however, the selection of all assumptions is not complete.
        Presently, ProAssurance estimates that the recognition of
   compensation cost, net of related tax effects, for the non-vested
   portion of share-based payments granted prior to the adoption of SFAS
   123(R) will approximate $1.3 million during fiscal 2006. The further
   effect of adoption of SFAS 123(R) on future operating results will
   depend on the levels of share-based payments granted in the future,
   the groups of employees to whom the awards are granted, the number of
   awards granted to employees who are eligible for retirement, the

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20051. Accounting Policies (continued)terms of any future
   awards, as well as the final methods and assumptions used to determine
   the fair value of those share-based payments.      The FASB issued
   SFAS 154, Accounting Changes and Error Corrections, in May 2005 as a
   replacement of APB 20, Accounting Changes, and SFAS 3, Reporting
   Accounting Changes in Interim Financial Statements. SFAS 154 applies
   to voluntary changes in accounting principle and changes the
   requirements for accounting for and reporting of a change in
   accounting principle and is effective for accounting changes and
   corrections of errors made in fiscal years beginning after
   December 15, 2005. ProAssurance expects to adopt SFAS 154 on its
   effective date.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20052. Acquisition of NCRIC     ProAssurance acquired
   100% of the outstanding shares of NCRIC Corporation (NCRIC) on
   August 3, 2005 primarily for the purpose of expanding the distribution
   of its professional liability insurance products. NCRIC, formerly
   known as NCRIC Group, Inc., is a holding company primarily focused on
   providing medical professional liability insurance in Delaware, the
   District of Columbia, Maryland, Virginia, and West Virginia. A summary
   of the components of the aggregate purchase price and a summary of the
   fair value of net assets acquired follows (in thousands):

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    Aggregate Purchase Price:                                                               

    Fair value of 1.7 million ProAssurance common shares issued, based on    $    67,066    
    a fair value of $40.54 per share                                                        

    Fair value of NCRIC options exchanged, estimated using the Black                 192    
    Scholes valuation method                                                                

    Cash paid for NCRIC options in lieu of exchange                                  775    

    Acquisition costs (primarily fees paid for legal, accounting and               1,910    
    financial advisory services)                                                            

    Estimated benefits payable under termination agreements provided to            1,216    
    NCRIC employees                                                                         

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    Aggregate purchase price                                                 $    71,159    

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    Fair Value of Net Assets:                                                               

    Fixed maturities available for sale, at fair value                       $   184,945    

    Equity securities available for sale, at fair value                           27,842    

    Reinsurance recoverable                                                       43,486    

    Other assets                                                                  58,939    

    Reserves for losses and loss adjustment expenses                            (183,158  ) 

    Other policy liabilities                                                     (40,906  ) 

    Long-term debt                                                               (15,464  ) 

    Liability for judgment (Note 9)                                              (19,500  ) 

    Other liabilities                                                            (10,019  ) 

   __TOKEN__80__21__

    Net assets acquired, at fair value                                       $    46,165    

   __TOKEN__80__23__

        The fair value per ProAssurance share is based on the average
   ProAssurance common stock price for three days before and after
   February 28, 2005 (the date the terms of the acquisition were agreed
   to and publicly announced). The acquisition has been accounted for as
   a purchase transaction in accordance with SFAS 141 and the purchase
   price has been allocated to the assets acquired and liabilities
   assumed based on estimates of their respective fair values at the date
   of acquisition. Goodwill of $25.0 million was recognized equal to the
   excess of the purchase price over the fair values of the identifiable
   net assets acquired. The goodwill is not expected to be tax
   deductible.      The fair value of NCRIC’s reserve for losses and loss
   adjustment expenses and related reinsurance recoverables were
   estimated based on the present value of the expected underlying cash
   flows of the loss reserves and reinsurance recoverables, and include a
   risk premium and a profit margin. In determining the fair value
   estimate, management discounted NCRIC’s historical undiscounted net
   loss reserves to present value assuming a discount rate of 4.3%, which
   approximates the ten year treasury rate. The discounting pattern was
   actuarially developed from NCRIC’s historical loss data. An expected
   profit margin of 5% was applied to the discounted loss reserves, which
   is consistent with management’s understanding of the returns
   anticipated by the reinsurance market (the reinsurance market
   representing a willing partner in the purchase of loss reserves).
   Additionally, in consideration of the long-tail nature and the related
   high degree of uncertainty of such reserves, an estimated risk premium
   of 5% was applied to the discounted reserves. The above calculations
   resulted in a fair value which was not materially different

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20052. Acquisition of NCRIC (continued)than NCRIC’s
   historical reserves and therefore did not result in an adjustment to
   NCRIC’s carried reserve for loss and loss adjustment expense.
        ProAssurance’s Consolidated Statement of Income for the year
   ended December 31, 2005 includes NCRIC activity commencing upon
   August 3, 2005, the effective date of the acquisition. The unaudited
   pro forma information below presents combined results of operations as
   if the acquisition had occurred at the beginning of the respective
   periods, and includes the effect of adjusting NCRIC’s assets and
   liabilities to fair value on the date of acquisition. The pro forma
   results for the year ended December 31, 2005 include non-recurring and
   transaction related expenses of $4.3 million, related to compensation
   costs and professional fees, $8.7 million of unfavorable prior year
   loss development and $19.5 million related to a loss contingency (see
   also Note 9).      The following unaudited pro forma information is
   not necessarily indicative of the results of operations of the
   combined company had the acquisition occurred at the beginning of the
   periods presented, nor is it necessarily indicative of future results.

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                                                               Pro Forma Results                  

                                                             Year Ended December 31               

                                                                      2005                           2004   

                                                       In thousands except per share data         

    Revenues                                           $                                   691,048          $  680,463   

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    Income from continuing operations                  $                                    59,936          $   36,521   

   __TOKEN__81__8__

    Net Income                                         $                                    93,120          $   65,883   

   __TOKEN__81__10__

   __TOKEN__81__11__

    Net income per share from continuing operations                                                                      

    Basic                                              $                                      1.93          $     1.18   

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    Diluted                                            $                                      1.86          $     1.17   

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   3. Discontinued Operations     Income from discontinued operations,
   net of tax, is comprised as follows:

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                                                           2005                2004            2003  

                                                       In thousands        

    ConsiCare results                                  $               (103  )        $       —          $       —   

    Personal lines results                                           33,534              29,768             23,358   

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    Income from discontinued operations, net of tax    $             33,431           $  29,768          $  23,358   

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        On December 28, 2005, ProAssurance sold ConsiCare, a
   non-insurance subsidiary acquired August 3, 2005 in the NCRIC
   transaction, for approximately $1.7 million (cash of $0.8 million and
   note receivable of $0.9 million). No gain or loss was recognized
   related to the sale because the carrying value for ConsiCare net
   assets approximated the sales price less sale expenses. In accordance
   with SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived
   Assets” (SFAS 144), ConsiCare’s results of operations since
   acquisition are reported as a component of discontinued operations, as
   follows:

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                                                         2005            

                                                     In thousands        

    Revenues                                         $              1,557    

    Expenses                                                       (1,670  ) 

   __TOKEN__83__5__

    Loss before taxes                                                (113  ) 

    Income tax benefit                                                 10    

   __TOKEN__83__8__

    Loss from discontinued operations, net of tax    $               (103  ) 

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20053. Discontinued Operations (continued)     On
   November 4, 2005 ProAssurance entered into a definitive agreement to
   sell its wholly owned subsidiaries, MEEMIC Insurance Company, Inc. and
   MEEMIC Insurance Services (collectively, the MEEMIC Companies) to
   Motors Insurance Corporation (Motors), a subsidiary of GMAC Insurance
   Holdings, Inc., for total consideration of $400 million ($325 million
   from Motors and $75 million in dividends from the MEEMIC Companies),
   before transaction expenses. The sale, which was approved by the
   Michigan Insurance Department, was completed on January 4, 2006, with
   an effective date of January 1, 2006. ProAssurance expects to
   recognize a gain on the sale in 2006 of approximately $110 million
   after consideration of sale expenses and tax effects.      The MEEMIC
   Companies are the only active entities of ProAssurance’s personal
   lines operations. In accordance with SFAS 144, the Consolidated
   Financial statements reflect the assets, liabilities and operating
   results attributed to ProAssurance’s personal lines operations as
   discontinued operations. The following tables provide detail
   information regarding the personal lines amounts included in the
   financial statement lines identified as discontinued operations.

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                                                            2005                2004             2003  

                                                        In thousands         

    Operating results:                                                                                                   

    Net premiums earned                                 $             187,903          $  183,365          $  170,268    

    Net investment income                                              12,817              10,879              10,253    

    Other revenues                                                      2,871               2,395               2,189    

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    Total revenues                                                    203,591             196,639             182,710    

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    Net losses and loss adjustment expenses                           110,929             112,444             112,008    

    Underwriting, acquisition and insurance expenses                   43,323              40,548              37,578    

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    Total expenses                                                    154,252             152,992             149,586    

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    Income before income taxes                                         49,339              43,647              33,124    

    Provision for income taxes                                         15,805              13,879               9,585    

    Minority interest                                                       —                   —                (181  ) 

   __TOKEN__84__18__

    Income from discontinued operations, net of tax     $              33,534          $   29,768          $   23,358    

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                                                                           2005                2004   

                                                                       In thousands         

    Assets of Discontinued Operations:                                                                             

    Fixed maturities available for sale, at fair value                 $             261,896          $  280,892   

    Cash and cash equivalents                                                         52,721               9,386   

    Premiums receivable                                                               15,063              14,477   

    Receivable from reinsurers on unpaid losses and loss adjustment                  171,820             135,685   
    expenses                                                                                                       

    Other assets                                                                      66,279              55,463   

   __TOKEN__85__9__

    Total                                                              $             567,779          $  495,903   

   __TOKEN__85__11__

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    Liabilities of Discontinued Operations:                                                                        

    Reserve for losses and loss adjustment expenses                    $             252,294          $  210,956   

    Unearned premiums                                                                 65,429              65,640   

    Other liabilities                                                                 19,790              18,178   

   __TOKEN__85__17__

    Total                                                              $             337,513          $  294,774   

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20054. Investments     The amortized cost and estimated
   fair value of available-for-sale fixed maturities and equity
   securities are as follows:

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                                  December 31, 2005           

                                                                                 Gross                         Gross             Estimated  

                                      Amortized                  Unrealized                       Unrealized            Fair             

                                        Cost                       Gains                           (Losses)             Value            

                                                                              In thousands                                       

    Fixed Maturities                                                                                                                                           

    U.S. government and agency    $                    174,760                $                  3                     $   (2,280  )            $    172,483   

    State and municipal bonds                          906,192                               7,185                         (6,258  )                 907,119   

    Corporate bonds                                    627,385                               6,422                        (10,587  )                 623,220   

    Asset-backed securities                            710,284                               1,518                        (11,174  )                 700,628   

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                                                     2,418,621                              15,128                        (30,299  )               2,403,450   

    Equity securities                                    7,858                               2,295                           (135  )                  10,018   

   __TOKEN__86__14__

                                  $                  2,426,479                $             17,423                     $  (30,434  )            $  2,413,468   

   __TOKEN__86__16__

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                                  December 31, 2004           

                                                                                 Gross                         Gross            Estimated  

                                      Amortized                  Unrealized                       Unrealized            Fair            

                                        Cost                       Gains                           (Losses)            Value            

                                                                              In thousands                                      

    Fixed Maturities                                                                                                                                          

    U.S. government and agency    $                    134,262                $                423                     $    (944  )            $    133,741   

    State and municipal bonds                          688,207                              12,475                        (1,469  )                 699,213   

    Corporate bonds                                    602,109                              17,195                        (3,146  )                 616,158   

    Asset-backed securities                            525,233                               4,442                        (1,694  )                 527,981   

   __TOKEN__87__11__

                                                     1,949,811                              34,535                        (7,253  )               1,977,093   

    Equity securities                                   26,523                               3,077                          (196  )                  29,404   

   __TOKEN__87__14__

                                  $                  1,976,334                $             37,612                     $  (7,449  )            $  2,006,497   

   __TOKEN__87__16__

        The following table provides summarized information with respect
   to available-for-sale securities held in an unrealized loss position
   at December 31, 2005, including the length of time the securities have
   been held in a continuous unrealized loss position.

   __TOKEN__88__0__

                                                                 December 31, 2005           

                                                                       Total                    Less than 12 months             More than 12 months  

                                                                       Fair                         Unrealized                         Fair              Unrealized     Fair              Unrealized   

                                                                       Value                           Loss                            Value                Loss        Value                Loss      

                                                                   In thousands              

    Fixed maturities, available for sale                                                                                                                                                                                                 

    U.S. government and agency                                   $                    170,884                         $   (2,280  )                      $     107,694      $       (1,069  )              $   63,190      $   (1,211  ) 

    State and municipal bonds                                                         520,696                             (6,258  )                            461,290              (4,914  )                  59,406          (1,344  ) 

    Corporate bonds                                                                   443,358                            (10,587  )                            263,170              (4,495  )                 180,188          (6,092  ) 

    Asset-backed securities                                                           626,826                            (11,174  )                            475,685              (8,003  )                 151,141          (3,171  ) 

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                                                                                    1,761,764                            (30,299  )                          1,307,839             (18,481  )                 453,925         (11,818  ) 

    Equity securities available for sale                                                3,439                               (135  )                              2,857                 (50  )                     582             (85  ) 

   __TOKEN__88__14__

   __TOKEN__88__15__

    Available for sale securities held with unrealized losses    $                  1,765,203                         $  (30,434  )                      $   1,310,696      $      (18,531  )              $  454,507      $  (11,903  ) 

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20054. Investments (continued)     After an evaluation of
   each security, Management concluded that these securities have not
   suffered an other than temporary impairment in value. Of the
   unrealized losses aggregated in the above table, over 95% are
   considered to be interest rate related. Each fixed maturity security
   has paid all scheduled contractual payments. Management believes that
   each issuer has the capacity to meet the remaining contractual
   obligations of the security, including payment at maturity, and that
   ProAssurance has the current ability and intent to hold the security
   until either the scheduled maturity date or the security recovers in
   value. In total, there are approximately 1,100 securities in a loss
   position. Management considers the loss on 7 of those securities to be
   credit related; the total losses related to these securities total
   $1.3 million. The single greatest credit-related loss position
   approximates $750,000; the second greatest credit-related loss
   position is a loss of approximately $180,000. Management also believes
   each of the equity securities, given the characteristics of the
   underlying company, industry, and price volatility of the security,
   has a reasonable probability of being valued at or above book value in
   the near term.      The amortized cost and estimated fair value of
   fixed maturities at December 31, 2005, by contractual maturity, are
   shown below. Expected maturities will differ from contractual
   maturities because borrowers may have the right to call or prepay
   obligations with or without call or prepayment penalties. ProAssurance
   uses the call date as the contractual maturity for prerefunded state
   and municipal bonds which are 100% backed by U.S. Treasury
   obligations.

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                                                                                Estimated           

                                               Amortized                Fair            

                                                  Cost                  Value           

                                              In thousands           

    Due in one year or less                   $               155,592           $            154,370   

    Due after one year through five years                     570,460                        565,709   

    Due after five years through ten years                    559,840                        560,381   

    Due after ten years                                       422,445                        422,362   

    Asset-backed securities                                   710,284                        700,628   

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                                              $             2,418,621           $          2,403,450   

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        Excluding investments in bonds and notes of the U.S. Government,
   a U.S. Government agency, or prerefunded state and municipal bonds
   which are 100% backed by U.S. Treasury obligations, no investment in
   any person or its affiliates exceeded 10% of stockholders’ equity at
   December 31, 2005.      At December 31, 2005 ProAssurance had
   available-for-sale securities with a carrying value of $11.9 million
   on deposit with various state insurance departments to meet regulatory
   requirements. Business Owned Life Insurance     During 2003
   ProAssurance purchased BOLI policies on executive employees at a cost
   of approximately $50 million. The primary purpose of the program is to
   offset future employee benefit expenses through earnings on the cash
   value of the policies. ProAssurance is the owner and principal
   beneficiary of these policies; however, $50,000 of each death benefit
   is payable to beneficiaries designated by the insured employee. Real
   Estate     Real estate consists of two properties currently in use as
   corporate offices. One property includes 78,000 square feet of office
   space which is leased or available for lease. Balances are net of
   accumulated depreciation of approximately $9.9 million and
   $9.8 million at December 31, 2005 and 2004, respectively. Real estate
   depreciation expense for the three years ended December 31, 2005, 2004
   and 2003 is $1.2 million, $1.1 million and $1.0 million, respectively.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20054. Investments (continued)Net Investment Income / Net
   Realized Investment Gains (Losses)     Net investment income by
   investment category is as follows:

   __TOKEN__90__0__

                                         2005                 2004            2003  

                                     In thousands         

    Fixed maturities                 $              90,496           $  69,950          $  58,306    

    Equities                                           773               1,736              2,438    

    Real estate                                      1,103               1,082              1,120    

    Short-term investments                           3,608               1,296              2,229    

    Other invested assets                            5,045               4,592              1,664    

    Business owned life insurance                    2,298               2,432              1,706    

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                                                   103,323              81,088             67,463    

    Investment expenses                             (5,674  )           (4,742  )          (4,097  ) 

   __TOKEN__90__12__

    Net investment income            $              97,649           $  76,346          $  63,366    

   __TOKEN__90__14__

        Gross investment gains and losses are primarily from sales of
   investment securities. Net realized investment gains (losses) are as
   follows:

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                                              2005            2004                       2003  

                                                                     In thousands                           

    Gross gains                               $      3,488           $              6,998          $   9,156    

    Gross losses                                    (1,921  )                      (1,713  )          (3,299  ) 

    Other than temporary impairments                  (768  )                        (611  )            (322  ) 

    Trading portfolio gains                            113                          2,898                323    

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    Net realized investment gains (losses)    $        912           $              7,572          $   5,858    

   __TOKEN__91__9__

        Net gains related to fixed maturities included in the above table
   are $836,000, $3.7 million and $2.4 million during 2005, 2004 and
   2003, respectively.      Proceeds from sales (excluding maturities and
   paydowns) of available-for-sale securities were $441.0 million,
   $500.5 million and $358.5 million during 2005, 2004 and 2003,
   respectively.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20055. Reinsurance     ProAssurance has various quota
   share, excess of loss, and cession reinsurance agreements.
   Historically, professional liability per claim retention levels have
   varied between the first $200,000 and the first $2 million depending
   on the coverage year and the state in which business was written.
   ProAssurance also insures some large professional liability risks that
   are above the limits of its basic reinsurance treaties. These risks
   are reinsured on a facultative basis, whereby the reinsurer agrees to
   insure a particular risk up to a designated limit.      The effect of
   reinsurance on premiums written and earned is as follows:

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                    2005 Premiums             2004 Premiums             2003 Premiums  

                       Written                   Earned                    Written                    Earned       Written             Earned   

                                                                                           In thousands                                                       

    Direct          $              572,692                    $  596,289                   $             573,496       $        555,428             $  540,815       $  506,752    

    Assumed                            268                           268                                      96                     96                  2,508            2,508    

    Ceded                          (51,617  )                    (53,316  )                              (38,564  )             (35,627  )             (45,664  )       (49,389  ) 

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    Net premiums    $              521,343                    $  543,241                   $             535,028       $        519,897             $  497,659       $  459,871    

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        Reinsurance contracts do not relieve ProAssurance from its
   obligations to policyholders. A contingent liability exists with
   respect to reinsurance ceded to the extent that any reinsurer does not
   meet the obligations assumed under the reinsurance agreements.
   ProAssurance continually monitors its reinsurers to minimize its
   exposure to significant losses from reinsurer insolvencies.      At
   December 31, 2005, all reinsurance recoverables are considered
   collectible. Reinsurance recoverables totaling approximately
   $36.4 million are collateralized by letters of credit or funds
   withheld.      At December 31, 2005 amounts due from individual
   reinsurers that exceed 5% of stockholders’ equity are as follows:

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                                      Amount Due        

                                    From Reinsurer      

    Reinsurer                        In millions        

    Hannover Ruckversicherung AG    $               59.7   

        During 2004, ProAssurance commuted (terminated) its various
   agreements with one of its reinsurers, Gerling Global Reinsurance
   Corporation of America. As a result of that commutation, ProAssurance
   reduced its receivable from reinsurers by approximately $5.5 million
   (net of $11.9 million cash received) and reduced its reinsurance
   liabilities by approximately $1.6 million, resulting in a net loss on
   the commutation of approximately $3.9 million.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20056. Income Taxes     Deferred income taxes reflect the
   net tax effects of temporary differences between the amount of assets
   and liabilities for financial reporting purposes and the amounts used
   for income tax purposes. Significant components of ProAssurance’s
   deferred tax liabilities and assets are as follows:

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                                                 2005                2004   

                                             In thousands         

    Deferred tax assets                                                                 

    Unpaid loss discount                     $              77,049          $  70,025   

    Unearned premium adjustment                             19,026             17,402   

    CHW litigation (see Note 9)                              6,825                  —   

    Loss and credit carryovers                               4,006                  —   

    Unrealized losses on investments, net                    4,554                  —   

    Other                                                    5,878              6,533   

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    Total deferred tax assets                              117,338             93,960   

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    Deferred tax liabilities                                                            

    Deferred acquisition costs                               7,790              7,439   

    Unrealized gains on investments, net                         —             10,557   

    Other                                                    5,613              6,334   

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    Total deferred tax liabilities                          13,403             24,330   

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    Net deferred tax assets                  $             103,935          $  69,630   

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        In management’s opinion, it is more likely than not that
   ProAssurance will realize the benefit of the deferred tax assets, and
   therefore, no valuation allowance has been established.
        ProAssurance, after adjustment for its tax liability for the year
   ended December 31, 2005, has available net operating loss
   (NOL) carryforwards of $9.6 million and Alternative Minimum Tax (AMT)
   credit carryforwards of $634,000. The NOL carryforwards will expire in
   2019; the AMT credit carryforwards have no expiration date. The AMT
   carryforwards can be applied against any future regular tax payable.
        A reconciliation of “expected” income tax expense (35% of income
   before income taxes) to actual income tax expense in the accompanying
   financial statements follows:

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                                           2005                2004            2003  

                                       In thousands        

    Computed “expected” tax expense    $             38,102           $  18,837          $   6,024    

    Tax-exempt income                                (9,548  )           (5,947  )          (4,128  ) 

    Resolution of tax contingencies                       —              (1,667  )               —    

    Other                                               283                (445  )             (31  ) 

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    Total                              $             28,837           $  10,778          $   1,865    

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20057. Deferred Policy Acquisition Costs     Underwriting
   and insurance costs directly related to the production of new and
   renewal premiums are considered as acquisition costs and are
   capitalized and amortized to expense over the period in which the
   related premiums are earned. Reinsurance ceding commissions due
   ProAssurance are considered as a reduction of acquisition costs, and
   therefore reduce the total amount capitalized.      Amortization of
   deferred acquisition costs amounted to approximately $54.0 million,
   $52.8 million, and $45.2 million for the years ended December 31,
   2005, 2004 and 2003, respectively. Unamortized deferred acquisition
   costs are included in other assets on the Consolidated Balance Sheets
   and amounted to approximately $22.3 million and $21.3 million at
   December 31, 2005 and 2004, respectively. 8. Reserve for Losses and
   Loss Adjustment Expenses     ProAssurance establishes its reserve for
   losses based on estimates of the future amounts necessary to pay
   claims and expenses associated with the investigation and settlement
   of claims. These estimates consist of case reserves and bulk reserves.
   Case reserves are estimates of future losses for reported claims and
   are established by ProAssurance’s claims department. Bulk reserves,
   which include a provision for losses that have occurred but have not
   been reported to ProAssurance and reserves for the potential aggregate
   development of known claims, are the difference between (i) the sum of
   case reserves and paid losses and (ii) an actuarially determined
   estimate of the total losses necessary for the ultimate settlement of
   all reported and incurred but not reported claims, including amounts
   already paid.      The reserve for losses is established based on
   estimates of individual claims and actuarially determined estimates of
   future losses based on ProAssurance’s past loss experience, available
   industry data and projections as to future claims frequency, severity,
   inflationary trends and settlement patterns. Estimating reserves, and
   particularly liability reserves, is a complex process. Claims may be
   resolved over an extended period of time, often five years or more,
   and may be subject to litigation. Estimating losses for liability
   claims requires ProAssurance to make and revise judgments and
   assessments regarding multiple uncertainties over an extended period
   of time. As a result, reserve estimates may vary significantly from
   the eventual outcome. The assumptions used in establishing
   ProAssurance’s reserves are regularly reviewed and updated by
   management as new data becomes available. Changes to estimates of
   previously established reserves are included in earnings in the period
   in which the estimate is changed.      ProAssurance believes that the
   methods it uses to establish reserves are reasonable and appropriate.
   Each year, ProAssurance uses external actuaries to review the reserve
   for losses of each insurance subsidiary. ProAssurance considers the
   views of the external actuaries as well as other factors, such as
   known, anticipated or estimated changes in frequency and severity of
   claims and loss retention levels and premium rates, in establishing
   the amount of its reserve for losses. The statutory filings of each
   insurance company with the insurance regulators must be accompanied by
   an actuary’s certification as to their respective reserves in
   accordance with the requirements of the National Association of
   Insurance Commissioners (NAIC).

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20058. Reserve for Losses and Loss Adjustment Expenses
   (continued)     Activity in the reserve for losses and loss adjustment
   expenses is summarized as follows:

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                                                                                2005                   2004               2003  

                                                                            In thousands           

    Balance, beginning of year                                              $             1,818,636           $  1,634,749          $  1,494,875    

    Less reinsurance recoverables                                                           273,654                336,291               395,934    

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    Net balance, beginning of year                                                        1,544,982              1,298,458             1,098,941    

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    Net reserves acquired in NCRIC transaction                                              139,672                      —                     —    

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    Net losses:                                                                                                                                     

    Current year                                                                            461,182                469,151               439,418    

    Unfavorable (favorable) development of reserves established in prior                    (22,981  )              (8,714  )                (50  ) 
    years                                                                                                                                           

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    Total                                                                                   438,201                460,437               439,368    

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    Paid related to:                                                                                                                                

    Current year                                                                            (26,495  )             (13,599  )            (15,533  ) 

    Prior years                                                                            (199,617  )            (200,314  )           (224,318  ) 

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    Total paid                                                                             (226,112  )            (213,913  )           (239,851  ) 

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    Net balance, end of year                                                              1,896,743              1,544,982             1,298,458    

    Plus reinsurance recoverables                                                           327,693                273,654               336,291    

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    Balance, end of year                                                    $             2,224,436           $  1,818,636          $  1,634,749    

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        As discussed in Note 1, estimating liability reserves is complex
   and requires the use of many assumptions. As time passes and ultimate
   losses for prior years are either known or become subject to a more
   definite estimation, ProAssurance increases or decreases the reserve
   estimates established in prior periods. The favorable development of
   $23.0 million recognized in 2005 was due to reductions in our
   estimates of claim severity. The most significant reduction was
   recognized related to the 2003 accident year, however favorable
   development was also seen in accident years 2002 and prior. The
   favorable development recognized in 2004 primarily reflected small
   improvements in claims severity for accident years 2002 and prior.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 20059. Commitments and Contingencies     As a result of
   the acquisition of NCRIC, ProAssurance assumed the risk of loss for a
   judgment entered against NCRIC on February 20, 2004 by a District of
   Columbia Superior Court in favor of Columbia Hospital for Women
   Medical Center, Inc. (“CHW”) in the amount of $18.2 million (the “CHW
   Judgment”). By order of September 30, 2005, the trial court denied all
   post-trial relief sought by NCRIC and NCRIC has appealed the judgment.
   NCRIC posted a $19.5 million appellate bond and associated letter of
   credit to secure payment of the CHW judgment plus interest and costs,
   in the event the judgment is ultimately affirmed and paid. In
   accordance with SFAS 141, ProAssurance established a liability of
   $19.5 million for this judgment and included the liability as a
   component of the fair value of assets acquired and liabilities assumed
   in the allocation of the NCRIC purchase price.      ProAssurance is
   involved in various other legal actions arising primarily from claims
   against itself related to insurance policies and claims handling,
   including but not limited to claims asserted by policyholders. The
   legal actions arising from these claims have been considered by
   ProAssurance in establishing its reserves. While the outcome of all
   legal actions is not presently determinable, ProAssurance’s management
   is of the opinion, based on consultation with legal counsel, that the
   resolution of these actions will not have a material adverse effect on
   ProAssurance’s financial position. However, to the extent that the
   cost of resolving these actions exceeds the corresponding reserves,
   the legal actions could have a material effect on ProAssurance’s
   results of operations for the period in which any such action is
   resolved.      ProAssurance is involved in a number of operating
   leases primarily for office space, office equipment, and communication
   lines. The following is a schedule of future minimum lease payments
   for operating leases that had initial or remaining noncancelable lease
   terms in excess of one year as of December 31, 2005.

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          Operating Leases      

            In thousands        

    2006                            $  2,866   

    2007                               1,955   

    2008                               1,108   

    2009                                 409   

    Thereafter                           256   

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    Total minimum lease payments    $  6,594   

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        ProAssurance incurred rent expense of $2.4 million, $1.9 million
   and $2.0 million in the years ended December 31, 2005, 2004 and 2003,
   respectively.      On December 8, 2005 ProAssurance and Physicians
   Insurance Company of Wisconsin, Inc. (“PIC Wisconsin”) reached a
   definitive agreement whereby ProAssurance has agreed to acquire PIC
   Wisconsin in an all stock merger transaction, having an estimated
   value of $100 million. Under terms of the agreement, each share of PIC
   Wisconsin stock will be converted into shares of ProAssurance stock
   having a value of $5,000. The exchange ratio is based on the average
   closing price of a share of ProAssurance stock on the ten trading days
   preceding the effective date of the merger. This ratio is subject to a
   20% range around $49.76, which is the average closing price in the ten
   days preceding the date of the definitive agreement. Thus, PIC
   Wisconsin shareholders may receive more than $5,000 for each share of
   stock if the average closing price of ProAssurance stock is more than
   $59.71; conversely, PIC Wisconsin shareholders may receive less than
   $5,000 per share if the average closing price of ProAssurance stock is
   less than $39.80. The transaction is subject to required regulatory
   approvals and a vote of PIC Wisconsin stockholders and is expected to
   close in the latter half of 2006.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200510. Long-term Debt     Outstanding long-term debt, as
   of December 31, 2005 and December 31, 2004, consisted of the
   following:

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                                                                                                                        2005              2004

                                                                                                                    In thousands

    Convertible Debentures due June 30, 2023 (the Convertible Debentures),                         $  105,381                  $  105,085       
    unsecured and bearing a fixed interest rate of 3.9%, net of                                                                                 
    unamortized original issuer’s discounts of $2,219 and $2,515 at                                                                             
    December 31, 2005 and December 31, 2004, respectively                                                                                       

    Trust Preferred Subordinated Debentures, unsecured, bearing interest                                                                        
    at a floating rate, adjustable quarterly                                                                                                    

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    Due                                                                       December 31, 2005 Rate                                                

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    April 29, 2034                                                                                       8.19  %                   13,403              13,403   

    May 12, 2034                                                                                         8.19  %                   10,310              10,310   

    May 12, 2034                                                                                         8.19  %                   22,682              22,682   

    December 4, 2032                                                                                     8.44  %                   15,464                   —   

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                                                                                                                               $  167,240          $  151,480   

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   Convertible Debentures Due June 30, 2023 (the Convertible Debentures)     The
   Convertible Debentures were issued by ProAssurance in July 2003 in a
   Private Offering transaction, net of an initial purchaser’s discount
   of $3.0 million. ProAssurance used the net proceeds to pay off its
   existing term loan having an outstanding principal balance of $67.5
   million. Summarized information regarding the structure and terms of
   the Convertible Debentures follows: Issue Price. The Convertible
   Debentures were issued at 100.0% of their principal amount and each
   Convertible Debenture has a principal amount at maturity of $1,000.
   Maturity Date. June 30, 2023. Ranking. The Convertible Debentures are
   unsecured obligations and rank equally in right of payment with all
   other existing and future unsecured and unsubordinated obligations.
   The Convertible Debentures are not guaranteed by any of ProAssurance’s
   subsidiaries and, accordingly, the Convertible Debentures are
   effectively subordinated to the indebtedness and other liabilities of
   ProAssurance’s subsidiaries, including insurance policy-related
   liabilities. Interest. Interest is payable on June 30 and December 30
   of each year, beginning December 30, 2003, at an annual rate of 3.90%.
   In addition, ProAssurance may be required to pay contingent interest,
   as set forth below under Contingent Interest. Contingent Interest.
   Contingent interest is due to the holders of the Convertible
   Debentures during any six-month period from June 30 to December 29 and
   from December 30 to June 29 commencing with the six-month period
   beginning June 30, 2008, if the average market price of a Convertible
   Debenture for the five trading days ending on the second trading day
   immediately preceding the relevant six-month period equals 120% or
   more of the principal amount of the Convertible Debentures. The amount
   of contingent interest payable in respect of any six-month period will
   equal 0.1875% of the average market price of a Convertible Debenture
   for the five trading day period referred to above.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200510. Long-term Debt (continued)Conversion Rights. At
   December 31, 2005 the Convertible Debentures are not eligible for
   conversion; however, holders may convert the Convertible Debentures at
   any time prior to stated maturity from and after the date of the
   following events:

      –    if the sale price of ProAssurance’s common stock for at least 20        
           trading days in the 30 trading-day period ending on the last trading    
           day of the immediately preceding fiscal quarter exceeds 120% of the     
           conversion price on that 30th trading day,                              

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      –    if ProAssurance calls the Convertible Debentures for redemption, or     

   __TOKEN__99__3__

      –    upon the occurrence of certain corporate transactions.                  

   At December 31, 2005 conversion would be at a rate of 23.9037 of
   shares of common stock for each $1,000 principal amount of Convertible
   Debentures; this represents a conversion price of approximately $41.83
   per share of common stock. The conversion rate is subject to future
   adjustment should certain corporate events occur, as defined by the
   related indenture agreement. Upon conversion, holders will generally
   not receive any cash payment representing accrued interest or
   contingent interest, if any. Instead, accrued interest and contingent
   interest will be deemed paid by the common stock received by the
   holders on conversion. Convertible Debentures called for redemption
   may be surrendered for conversion until the close of business two
   business days prior to the redemption date. Upon conversion,
   ProAssurance has the right to deliver, in lieu of common stock, cash
   or a combination of cash and shares of common stock. Payment at
   Maturity. Each holder of $1,000 Convertible Debentures will be
   entitled to receive $1,000 at maturity, plus accrued interest,
   including contingent interest, if any. Sinking Fund. None. Optional
   Redemption. ProAssurance may not redeem the Convertible Debentures
   prior to July 7, 2008. ProAssurance may redeem some or all of the
   Convertible Debentures for cash on or after July 7, 2008, upon at
   least 30 days but not more than 60 days notice by mail to holders at
   par. Repurchase Right of Holders. Each holder of the Convertible
   Debentures may require ProAssurance to repurchase all or a portion of
   the holder’s Convertible Debentures on June 30, 2008, June 30, 2013
   and June 30, 2018 at a purchase price equal to the principal amount of
   the Convertible Debentures plus accrued and unpaid interest, including
   contingent interest, if any, to the date of repurchase. ProAssurance
   may choose to pay the purchase price in cash, shares of common stock,
   or a combination of cash and shares of common stock. If ProAssurance
   elects to pay all or a portion of the repurchase price in common
   stock, the shares of common stock will be valued at 97.5% of the
   average sale price for the 20 trading days immediately preceding and
   including the third day prior to the repurchase date.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200510. Long-term Debt (continued)Change of Control. Upon
   a change of control of ProAssurance, holders may require ProAssurance,
   subject to conditions, to repurchase all or a portion of the
   Convertible Debentures. Depending upon the date at which the change of
   control occurs, ProAssurance will pay a purchase price equal to a
   varying percentage of the applicable principal amount of such
   Convertible Debentures plus accrued and unpaid interest, including
   contingent interest and additional amounts, if any. The percentage
   ranges from 104% for dates before June 29, 2006 to 100% for dates
   after June 30, 2008. ProAssurance may choose to pay the repurchase
   price in cash, shares of common stock, shares of common stock of the
   surviving corporation or a combination of cash and shares of the
   applicable common stock. If ProAssurance elects to pay all or a
   portion of the repurchase price in shares of common stock, the shares
   of the applicable common stock will be valued at 97.5% of the average
   sale price of the applicable common stock for 20 trading days
   commencing after the third trading day following notice of the
   occurrence of a change of control. Events of Default. If there is an
   event of default under the Convertible Debentures, the principal
   amount of the Convertible Debentures, plus accrued interest, including
   contingent interest, if any, may be declared immediately due and
   payable. These amounts automatically become due and payable if an
   event of default relating to certain events of bankruptcy, insolvency
   or reorganization occurs. Registration Rights. On December 15, 2003
   ProAssurance filed a shelf registration statement with the SEC with
   respect to the resale of the Convertible Debentures and for the
   issuance of approximately 2.6 million shares of common stock issuable
   upon conversion of the Convertible Debentures pursuant to a
   registration rights agreement.      The Convertible Debentures do not
   require ProAssurance to maintain minimum financial covenants. 2034 and
   2032 Trust Preferred Subordinated Debentures     In April and
   May 2004, ProAssurance formed two business trusts, (the PRA Trusts)
   for the sole purpose of issuing, in private placement transactions,
   $45.0 million of trust preferred securities (PRA TPS) and using the
   proceeds thereof, together with the equity proceeds received from
   ProAssurance in the initial formation of the PRA Trusts, to purchase
   $46.4 million of variable rate subordinated debentures (the 2034
   Subordinated Debentures) issued by ProAssurance. ProAssurance owns all
   voting securities of the PRA Trusts and the 2034 Subordinated
   Debentures are the sole assets of the PRA Trusts. The PRA Trusts will
   meet the obligations of the PRA TPS with the interest and principal
   paid on the 2034 Subordinated Debentures. ProAssurance received net
   proceeds from the PRA TPS transactions, after commissions and other
   costs of issuance, of $44.9 million.      In December 2002, NCRIC
   formed a business trust (the NCRIC Trust), for the sole purpose of
   issuing, in private placement transactions, $15.0 million of trust
   preferred securities (NCRIC TPS) and using the proceeds thereof,
   together with the equity proceeds received from NCRIC in the initial
   formation of the NCRIC Trust, to purchase $15.5 million of variable
   rate subordinated debentures (the 2032 Subordinated Debentures) issued
   by NCRIC. NCRIC owns all voting securities of the NCRIC Trust and the
   2032 Subordinated Debentures are the sole assets of the NCRIC Trust.
   The NCRIC Trust will meet the obligations of the NCRIC TPS with the
   interest and principal paid on the 2032 Subordinated Debentures.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200510. Long-term Debt (continued)     The 2034 and 2032
   Subordinated Debentures have the same maturities and other applicable
   terms and features as the associated trust preferred securities. The
   2034 and 2032 Subordinated Debentures are uncollateralized and bear a
   floating interest rate adjusted quarterly based upon the three-month
   LIBOR rate, with a maximum rate for the first five years following
   issuance of 12.5%. Payment of interest may be deferred for up to 20
   consecutive quarters; however, stockholder dividends cannot be paid
   during any extended interest payment period or at any time the
   debentures are in default. All have stated maturities of thirty years
   but may be redeemed at any time following the fifth anniversary of
   issuance. None of the securities require either PRA or NCRIC to
   maintain minimum financial covenants. Guarantees     ProAssurance and
   NCRIC have guaranteed that amounts paid to the PRA and NCRIC Trusts
   under the associated subordinated debentures (the 2034 and 2032
   Subordinated Debentures, respectively) will be remitted to the holders
   of the associated trust preferred securities. These guarantees, when
   taken together with the obligations of ProAssurance and NCRIC under
   their respective debentures, the Indentures pursuant to which those
   debentures were issued, and the related trust agreements (including
   obligations to pay related trust cost, fees, expenses, debt and other
   obligations for the PRA and NCRIC Trusts other than with respect to
   the common and trust preferred securities of the PRA and NCRIC
   Trusts), provides a full and unconditional guarantee of amounts due on
   the PRA and NCRIC TPS. The amounts guaranteed are not expected to at
   any time exceed the obligations of the 2034 and 2032 Subordinated
   Debentures, and no additional liability has been recorded related to
   the PRA and NCRIC TPS or the guarantees. Fair Value     At
   December 31, 2005, the fair value of the Convertible Debentures is
   approximately 125% of face value of $107.6 million based on available
   independent market quotes. The fair value of the 2034 and 2032
   Subordinated Debentures approximates the face value of the debentures.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200511. Stockholders’ Equity     At December 31, 2005
   ProAssurance had 100 million shares of authorized common stock and
   50 million shares of authorized preferred stock. The Board of
   Directors has the authorization to determine the provisions for the
   issuance of shares of the preferred stock, including the number of
   shares to be issued, the designations, powers, preferences and rights,
   and the qualifications, limitations or restrictions of such shares. At
   December 31, 2005, the Board of Directors had not authorized the
   issuance of any preferred stock nor determined any provisions for the
   preferred stock.      At December 31, 2005 approximately 2.5 million
   of ProAssurance’s authorized shares of common stock are reserved by
   the Board of Directors of ProAssurance for the award or issuance of
   shares under incentive compensation plans as described in Note 12.
   Additionally, approximately 1.2 million common shares are reserved for
   the exercise of outstanding options, also discussed in Note 12. Also,
   see “Registration Rights” in Note 10 (Long-Term Debt) concerning the
   2.6 million shares reserved for issuance relative to the Convertible
   Debentures.      “Accumulated other comprehensive income (loss)” shown
   in the Consolidated Statements of Changes in Capital is solely
   comprised of net unrealized gains (losses) on securities available for
   sale, net of taxes.      The components of “Other comprehensive income
   (loss)” are as follows (in thousands):

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                                                                              2005          2004   2003

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    Other comprehensive income (loss), continuing operations:                                                                         

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    Unrealized holding gains (losses), net of tax benefit of $(15,393),          $  (28,587  )          $  (12,051  )    $  (7,126  ) 
    $(6,489) and $(3,837), respectively                                                                                               

    Reclassification adjustments for gains (losses) included in the                     524                  3,443           3,587    
    calculation of net income, net of tax of $282, $1,854 and $1,931,                                                                 
    respectively                                                                                                                      

   __TOKEN__100__7__

                                                                                 $  (28,063  )          $   (8,608  )    $  (3,539  ) 

   __TOKEN__100__9__

   __TOKEN__100__10__

    Other comprehensive income (loss), discontinued operations:                                                                       

   __TOKEN__100__12__

    Unrealized holding gains (losses), net of tax (tax benefit) of                   (5,492  )              (1,429  )        1,569    
    $(2,957), $(769) and $845, respectively                                                                                           

    Reclassification adjustments for gains (losses) included in the                     324                     12             (39  ) 
    calculation of net income, net of tax (tax benefit) of $175, $6 and                                                               
    $(21), respectively                                                                                                               

   __TOKEN__100__15__

                                                                                 $   (5,168  )          $   (1,417  )    $   1,530    

   __TOKEN__100__17__

        On February 15, 2006 ProAssurance filed a registration statement
   on Form S-4 with the Securities and Exchange Commission for the
   issuance of 2.5 million shares related to the proposed merger with PIC
   Wisconsin, described in more detail in Note 9. This registration
   statement is not yet effective. 12. Stock Options     ProAssurance
   provides performance-based stock compensation to employees under the
   ProAssurance 2004 Equity Incentive Plan and the ProAssurance
   Corporation Incentive Compensation Stock Plan (the Plans). The terms
   and conditions of all grants under the Plans are at the discretion of
   the compensation committee. Options granted under the Plans since 2002
   vest at a rate of 20% annually, beginning six months after the grant
   date. Options granted prior to 2002 were fully vested at the grant
   date. The exercise price of each option granted is equal to the market
   price of the stock on the date of grant, and all have an original term
   of ten years. At December 31, 2005 there were approximately
   1.1 million options outstanding under the Plans.      ProAssurance
   also has approximately 60,000 outstanding options that were issued in
   conjunction with merger transactions, 12,000 of which resulted from
   the NCRIC acquisition.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200512. Stock Options (continued)     The following table
   provides information regarding ProAssurance’s outstanding options for
   the years ending December 31, 2005, 2004, and 2003:

   __TOKEN__101__0__

                                                                              Weighted                                   Weighted                                          Weighted  

                                             Number                Average                   Number       Average               Number           Average   

                                               Of                  Exercise                    of        Exercise                 Of             Exercise  

                                             Options                Price                    Options       Price                Options           Price    

   __TOKEN__101__5__

                                              2005                   2004                     2003    

   __TOKEN__101__7__

    Outstanding at beginning of year                  1,105,373               $         24.03                 993,576               $        20.72                1,103,037              $  19.46   

    Granted in NCRIC purchase transaction                12,168               $         31.66                       –                            –                        –                     –   

    Granted under incentive plans                       318,356               $         41.25                 291,329               $        33.28                  303,000              $  22.00   

    Exercised                                          (269,434  )            $         24.08                (141,832  )            $        19.50                 (348,815  )           $  18.23   

    Forfeited                                            (3,600  )            $         32.33                 (37,700  )            $        26.58                  (63,646  )           $  18.72   

   __TOKEN__101__13__

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    Outstanding at end of year                        1,162,863               $         28.73               1,105,373               $        24.03                  993,576              $  20.72   

   __TOKEN__101__16__

   __TOKEN__101__17__

    Options exercisable at end of year                  571,257               $         24.46                 585,994               $        22.74                  552,176              $  21.75   

   __TOKEN__101__19__

        Outstanding ProAssurance options as of December 31, 2005
   consisted of the following:

   __TOKEN__102__0__

                                                      Options Outstanding                            Options Exercisable           

                                                                                                                           Weighted                     Weighted                                                      

                                                            Number                                         Average                            Average                    Number                    Weighted       

           Range of                          of                                      Remaining                                     Exercise                      of                  Average              

        Exercise Prices                    Options                                Contractual Life                                  Price                      Options            Exercise Price          

   __TOKEN__102__6__

        $                 9.57 – $17.38                                    267,624                                         5.2 years           $           16.62                             194,624                   $  16.56   

        $                21.01 – $22.00                                    187,625                                         7.1 years           $           21.84                              88,425                   $  21.67   

        $                24.68 – $26.03                                    151,448                                         2.2 years           $           25.00                             151,448                   $  25.00   

        $                33.28 – $36.46                                    240,250                                         8.7 years           $           33.41                              76,300                   $  33.36   

        $                41.15 – $50.87                                    315,916                                         9.5 years           $           41.30                              60,460                   $  41.37   

   __TOKEN__102__12__

              All                         1,162,863                                   7.0 years                          $             28.73                              571,257                    $         24.46    

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        Of the outstanding and exercisable options in the above table,
   68,750 outstanding options and 4,400 exercisable options were held by
   MEEMIC employees. Upon completion of the MEEMIC sale on January 4,
   2006 all options held by MEEMIC employees became exercisable.      The
   weighted average fair values of options granted during 2005, 2004 and
   2003 and the assumptions (on a weighted-average basis) used to
   estimate those fair values as of the date of grant using the
   Black-Scholes option pricing model are shown in the following table.

   __TOKEN__103__0__

                                        2005        2004   2003

   __TOKEN__103__2__

    Weighted average fair value            $  16.52             $  13.10       $  8.46    

    Assumptions:                                                                          

    Risk-free interest rate                     4.3  %               3.4  %        3.1  % 

    Expected volatility                        0.33                 0.34          0.34    

    Dividend yield                                0  %                 0  %          0  % 

    Expected average term (in years)              6                    6             6    

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200513. Earnings Per Share     The following table
   provides detailed information regarding the calculation of basic and
   diluted earnings per share for each period presented:

   __TOKEN__104__0__

                                                                                      2005                         2004   2003

                                                                       In thousands except per share data

    Basic earnings per share calculation:                                                                                                                 

    Numerator:                                                                                                                                            

    Income from continuing operations, net of tax                                                       $   80,026             $  43,043      $  15,345   

    Income from discontinued operations, net of tax                                                         33,431                29,768         23,358   

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    Net income                                                                                          $  113,457             $  72,811      $  38,703   

   __TOKEN__104__9__

   __TOKEN__104__10__

    Denominator:                                                                                                                                          

    Weighted average number of common shares outstanding                                                    30,049                29,164         28,956   

   __TOKEN__104__13__

   __TOKEN__104__14__

    Basic earnings per share:                                                                                                                             

    Income from continuing operations                                                                   $     2.66             $    1.48      $    0.53   

    Income from discontinued operations                                                                       1.11                  1.02           0.81   

   __TOKEN__104__18__

    Net income                                                                                          $     3.77             $    2.50      $    1.34   

   __TOKEN__104__20__

   __TOKEN__104__21__

    Diluted earnings per share calculation:                                                                                                               

    Numerator:                                                                                                                                            

    Income from continuing operations, net of tax                                                       $   80,026             $  43,043      $  15,345   

    Effect of assumed conversion of contingently convertible debt                                            2,967                 2,967              —   
    instruments                                                                                                                                           

   __TOKEN__104__26__

    Income from continuing operations — diluted computation                                                 82,993                46,010         15,345   

    Income from discontinued operations, net of tax                                                         33,431                29,768         23,358   

   __TOKEN__104__29__

    Net income—diluted computation                                                                      $  116,424             $  75,778      $  38,703   

   __TOKEN__104__31__

   __TOKEN__104__32__

    Denominator:                                                                                                                                          

    Weighted average number of common shares outstanding                                                    30,049                29,164         28,956   

    Assumed conversion of dilutive stock options                                                               287                   248            188   

    Assumed conversion of contingently convertible debt instruments                                          2,572                 2,572              —   

   __TOKEN__104__37__

    Diluted weighted average equivalent shares                                                              32,908                31,984         29,144   

   __TOKEN__104__39__

   __TOKEN__104__40__

    Diluted earnings per share:                                                                                                                           

    Income from continuing operations                                                                   $     2.52             $    1.44      $    0.53   

    Income from discontinued operations                                                                       1.02                  0.93           0.80   

   __TOKEN__104__44__

    Net income                                                                                          $     3.54             $    2.37      $    1.33   

   __TOKEN__104__46__

        In accordance with SFAS 128 “Earnings per Share”, the diluted
   weighted average number of shares outstanding includes an incremental
   adjustment for the assumed exercise of dilutive stock options. The
   adjustment is computed quarterly; the annual incremental adjustment is
   the average of the quarterly adjustments. Stock options are considered
   dilutive stock options if the assumed conversion of the options, using
   the treasury stock method as specified by SFAS 128, produces an
   increased number of shares. Options are not dilutive when the exercise
   price of the option is near to or below the average share price during
   the quarter. During years ended December 31, 2005, 2004 and 2003
   certain of ProAssurance’s outstanding options were not considered to
   be dilutive because the strike price of the options was below the
   average ProAssurance share price during the quarter. The average
   number of options not considered to be dilutive during the years ended
   December 31, 2005, 2004, and 2003 is approximately 158,000, 126,000
   and 84,000, respectively. The conversion of the convertible debentures
   was not assumed in the 2003 diluted earnings per share computation
   since the effect of doing so was anti-dilutive.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200514. Benefit Plans     ProAssurance currently
   maintains several defined contribution employee benefit plans that are
   intended to provide additional income to eligible employees upon
   retirement. ProAssurance’s expense under these benefit plans was
   $2.3 million during the year ended December 31, 2005, which includes
   approximately $72 thousand relating to NCRIC employee benefit plans
   since the date of acquisition, and $2.2 million and $2.2 million
   during the years ended December 31, 2004 and 2003, respectively. 15.
   Statutory Accounting and Dividend Restrictions     ProAssurance’s
   insurance subsidiaries are required to file statutory financial
   statements with state insurance regulatory authorities. GAAP differs
   from statutory accounting practices prescribed or permitted by
   regulatory authorities. Differences between financial statement net
   income and statutory net income are principally due to: (a) policy
   acquisition and certain software and equipment costs which are
   deferred under GAAP but expensed for statutory purposes; and (b)
   certain deferred income taxes which are recorded under GAAP but not
   for statutory purposes.      The NAIC specifies risk-based capital
   requirements for property and casualty insurance providers. At
   December 31, 2005, statutory capital for each insurance subsidiary was
   sufficient to satisfy regulatory requirements. Net earnings and
   surplus of ProAssurance’s insurance subsidiaries, on a statutory
   basis, are shown in the following table. Amounts shown exclude MEEMIC
   Insurance Company which has been sold (see Note 3), and includes the
   net earnings and surplus of NCRIC Corporation for the twelve months
   ended December 31, 2005. Consolidated net income, on a GAAP basis,
   includes the earnings of NCRIC Corporation only since the date of
   acquisition.

   __TOKEN__105__0__

    Net Earnings     Surplus

        2005          2004     2003     2005   2004

    In millions 

               $  69                $  49             $  4      $  726      $  544   

        Excluding MEEMIC Insurance Company, ProAssurance’s insurance
   subsidiaries are permitted to pay dividends of approximately
   $87 million during the next year to ProAssurance or its directly owned
   non-insurance subsidiaries without prior approval. However, the
   payment of any dividend requires prior notice to the insurance
   regulator in the state of domicile and the regulator may prevent the
   dividend if, in its judgment, payment of the dividend would have an
   adverse effect on the surplus of the insurance subsidiary.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200516. Variable Interest Entities     ProAssurance holds
   passive investments in various limited partnerships/limited liability
   companies that are considered to be VIE’s under FIN 46(R) guidance.
   ProAssurance is not the primary beneficiary relative to these entities
   and is not required to consolidate the entities under FIN 46(R). These
   investments, five in total at December 31, 2005, are included in Other
   Investments and total $42.1 million at December 31, 2005 and
   $39.3 million at December 31, 2004. The entities are all non-public
   investment pools formed for the purpose of achieving diversified
   equity and debt returns. ProAssurance’s maximum loss exposure relative
   to these investments is limited to the carrying value of
   ProAssurance’s investment in the entity. ProAssurance’s investment in
   one of the entities approximates $7.0 million (a 12.9% interest) and
   is accounted for using the equity method of accounting; this
   investment was acquired in 2002. ProAssurance’s investment in each of
   the four remaining entities represents an interest of less than 10%
   and ProAssurance uses the cost method of accounting for these
   investments. All were acquired after January 1, 2001.
        ProAssurance also holds all the voting securities issued by
   certain trusts (the PRA and NCRIC Trusts; the Trusts) as discussed in
   Note 10 and such trusts are considered to be VIE’s. The Trusts are not
   consolidated because ProAssurance is not the primary beneficiary of
   these trusts. The 2032 and 2034 Subordinated Debentures are reported
   in the accompanying Consolidated Balance Sheet as a component of
   long-term debt. ProAssurance’s equity investments in the Trusts total
   $1.9 million and are included in Other Assets.

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   ProAssurance Corporation and Subsidiaries
   Notes to Consolidated Financial Statements
   December 31, 200517. Quarterly Results of Operations (unaudited)     The
   following is a summary of unaudited quarterly results of operations
   for 2005 and 2004:

   __TOKEN__106__0__

                                                  2005

                                                  1st           2nd                  3rd                          4th

   __TOKEN__106__3__

                                                                        In thousands except per share data                   

    Net premiums earned(1)(2)                        $  128,728                                          $  126,203         $  144,963      $  143,347   

    Net losses and loss adjustment expenses(2)          110,450                                             103,124            117,898         106,728   

    Income from continuing operations(3)                 14,596                                              18,311             20,217          26,902   

    Income from discontinued operations(3)                7,341                                               9,154              9,120           7,816   

    Net income                                           21,937                                              27,465             29,337          34,718   

   __TOKEN__106__10__

    Basic earnings per share:                                                                                                                            

    Income from continuing operations                      0.50                                                0.62               0.66            0.87   

    Income from discontinued operations                    0.25                                                0.31               0.30            0.25   

    Net income                                             0.75                                                0.93               0.96            1.12   

   __TOKEN__106__15__

    Diluted earnings per share:                                                                                                                          

    Income from continuing operations                      0.48                                                0.59               0.63            0.81   

    Income from discontinued operations                    0.23                                                0.29               0.27            0.23   

    Net income                                             0.71                                                0.88               0.90            1.04   

   __TOKEN__107__0__

                                                                 2004               

                                                                 1st                          2nd   3rd          4th

   __TOKEN__107__3__

                                                  In thousands except per share data

    Net premiums earned(1)(2)                                                      $  125,723           $  122,213         $  130,933      $  141,027   

    Net losses and loss adjustment expenses(2)                                        115,206              107,813            116,682         120,736   

    Income from continuing operations(3)                                                8,597                9,102             12,591          12,754   

    Income from discontinued operations(3)                                              7,384                6,702              6,927           8,755   

    Net income                                                                         15,981               15,804             19,518          21,509   

   __TOKEN__107__10__

    Basic earnings per share:                                                                                                                           

    Income from continuing operations                                                    0.30                 0.31               0.43            0.44   

    Income from discontinued operations                                                  0.25                 0.23               0.24            0.30   

    Net income                                                                           0.55                 0.54               0.67            0.74   

   __TOKEN__107__15__

    Diluted earnings per share:                                                                                                                         

    Income from continuing operations                                                    0.29                 0.31               0.42            0.42   

    Income from discontinued operations                                                  0.23                 0.21               0.21            0.27   

    Net income                                                                           0.52                 0.52               0.63            0.69   

   Quarterly and year-to-date computations of per share amounts are made
   independently; therefore, the sum of per share amounts for the
   quarters may not equal per share amounts for the year.

   __TOKEN__108__0__

    (1)    Net premiums earned as shown above reflect the reclassification of      
           ceding commissions on certain reinsurance contracts as discussed in     
           Note 1 to the Consolidated Financial Statements under the caption       
           “Reclassifications”. Previously filed reports did not reflect the       
           reclassification. The effect of the reclassification was to increase    
           these amounts by the following (in millions).                           

   __TOKEN__109__0__

            1st      2nd   3rd      4th

   __TOKEN__109__2__

    2005      $  1.5           $  1.5         $  1.4           –   

    2004      $  2.2           $  1.6         $  1.8      $  1.7   

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    (2)    From continuing operations 

   __TOKEN__110__2__

    (3)    Net of tax                 

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   ProAssurance Corporation and Subsidiaries
   Schedule I — Summary of Investments — Other Than Investments in
   Related Parties
   December 31, 2005

   __TOKEN__111__0__

                                     Continuing Operations           

                                                                                                                        Amount           

                                             Cost                                                           Which is         

                                              or                                                            Presented        

                                           Amortized                    Fair                   in the               

    Type of Investment                       Cost                       Value               Balance Sheet           

   __TOKEN__111__7__

                                         In thousands                

    Fixed Maturities:                                                                                                                       

    U.S. Treasury securities         $                        174,760           $    172,483                            $         172,483   

    State and municipal bonds                                 906,192                907,119                                      907,119   

    Corporate bonds                                           627,385                623,220                                      623,220   

    Asset-backed securities                                   710,284                700,628                                      700,628   

   __TOKEN__111__14__

   __TOKEN__111__15__

    Total fixed maturities                                  2,418,621           $  2,403,450                                    2,403,450   

   __TOKEN__111__17__

   __TOKEN__111__18__

    Equity securities:                                                                                                                      

    Available for sale                                          7,858                 10,018                                       10,018   

    Trading                                                     4,708                  5,181                                        5,181   

   __TOKEN__111__22__

   __TOKEN__111__23__

    Total equity securities                                    12,566           $     15,199                                       15,199   

   __TOKEN__111__25__

   __TOKEN__111__26__

    Real Estate, net                                           16,623                                                              16,623   

    Short-term investments                                     93,066                                                              93,066   

    Other invested assets                                      46,168                                                              46,168   

    Business owned life insurance                              56,436                                                              56,436   

   __TOKEN__111__31__

   __TOKEN__111__32__

    Total investments                $                      2,643,480                                                   $       2,630,942   

   __TOKEN__111__34__

   __TOKEN__112__0__

                                     Discontinued Operations         

                                                                                                                      Amount         

                                              Cost                                                        Which is         

                                               or                                                         Presented        

                                            Amortized                   Fair                 in the               

    Type of Investment                        Cost                      Value             Balance Sheet           

   __TOKEN__112__7__

                                          In thousands               

    Fixed Maturities:                                                                                                                   

    U.S. Treasury securities         $                         35,441           $   35,367                            $        35,367   

    State and municipal bonds                                  47,860               46,683                                     46,683   

    Corporate bonds                                            46,991               45,281                                     45,281   

    Asset-backed securities                                   133,362              134,565                                    134,565   

   __TOKEN__112__14__

   __TOKEN__112__15__

    Total fixed maturities                                    263,654           $  261,896                            $       261,896   

   __TOKEN__112__17__

   __TOKEN__112__18__

    Equity securities:                                                                                                                  

    Available for sale                                          5,025                6,238                                      6,238   

    Trading                                                         —                    —                                          —   

   __TOKEN__112__22__

   __TOKEN__112__23__

    Total equity securities                                     5,025           $    6,238                                      6,238   

   __TOKEN__112__25__

   __TOKEN__112__26__

    Real Estate, net                                           12,694                                                          12,694   

    Short-term investments                                          —                                                               —   

    Other invested assets                                           1                                                               1   

    Business owned life insurance                                   —                                                               —   

   __TOKEN__112__31__

   __TOKEN__112__32__

    Total investments                $                        281,374                                                 $       280,829   

   __TOKEN__112__34__

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   ProAssurance Corporation and Subsidiaries
   Schedule II — Condensed Financial Information of Registrant
   (continued)ProAssurance Corporation — Registrant Only
   Condensed Balance Sheet

   __TOKEN__113__0__

                                                                          December 31 

                                                                              2005              2004

                                                                          In thousands

    Assets                                                                                                            

    Investment in subsidiaries, at equity                                            $  853,801          $  684,732   

    Fixed maturities available for sale, at fair value                                   41,288              56,889   

    Short-term investments                                                               10,735               2,676   

    Cash and cash equivalents                                                             1,434                 743   

    Due from subsidiaries                                                                 1,645              11,956   

    Other assets                                                                          9,585               6,670   

   __TOKEN__113__11__

                                                                                     $  918,488          $  763,666   

   __TOKEN__113__13__

   __TOKEN__113__14__

    Liabilities and Stockholders’ Equity                                                                              

   __TOKEN__113__16__

    Liabilities:                                                                                                      

    Other liabilities                                                                $    1,666          $    1,167   

    Long-term debt                                                                      151,776             151,480   

   __TOKEN__113__20__

                                                                                        153,442             152,647   

   __TOKEN__113__22__

    Stockholders’ Equity:                                                                                             

    Common stock                                                                            312                 293   

    Other stockholders’ equity, including unrealized gains (losses) on                  764,734             610,726   
    securities of subsidiaries                                                                                        

   __TOKEN__113__26__

   __TOKEN__113__27__

    Total stockholders’ equity                                                          765,046             611,019   

   __TOKEN__113__29__

                                                                                     $  918,488          $  763,666   

   __TOKEN__113__31__

   ProAssurance Corporation — Registrant Only
   Condensed Statements of Income

   __TOKEN__114__0__

                                                                    Year Ended December 31

                                                                             2005                   2004   2003

                                                                         In thousands     

    Revenues:                                                                                                                                

    Investment income                                                                    $    2,344             $   1,317       $     267    

    Other Income                                                                                125                 2,779             308    

   __TOKEN__114__7__

                                                                                              2,469                 4,096             575    

   __TOKEN__114__9__

    Expenses:                                                                                                                                

    Loss on early extinguishment of debt                                                          —                     —             305    

    Interest expense                                                                          8,416                 6,515           3,409    

    Other expenses                                                                            3,923                 3,882           1,702    

   __TOKEN__114__14__

   __TOKEN__114__15__

                                                                                             12,339                10,397           5,416    

   __TOKEN__114__17__

   __TOKEN__114__18__

    Loss before income tax (benefit) and equity in net income of                             (9,870  )             (6,301  )       (4,841  ) 
    subsidiaries                                                                                                                             

    Income tax (benefit)                                                                     (3,491  )             (2,319  )         (967  ) 

   __TOKEN__114__21__

    Loss before equity in net income of subsidiaries                                         (6,379  )             (3,982  )       (3,874  ) 

    Equity in net income of subsidiaries                                                    119,836                76,793          42,577    

   __TOKEN__114__24__

   __TOKEN__114__25__

    Net income                                                                           $  113,457             $  72,811       $  38,703    

   __TOKEN__114__27__

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   ProAssurance Corporation and Subsidiaries
   Schedule II — Condensed Financial Information of Registrant
   (continued)ProAssurance Corporation — Registrant Only
   Condensed Statements of Cash Flow

   __TOKEN__115__0__

                                                        Year Ended December 31

                                                                 2005                   2004   2003

                                                             In thousands     

    Cash used by operating activities                                        $   (2,868  )          $   (11,896  )    $    (9,733  ) 

   __TOKEN__115__5__

    Investing activities                                                                                                             

    Purchases of fixed maturities                                               (45,734  )             (101,172  )       (134,661  ) 

    Proceeds from sale or maturities of :                                                                                            

    Fixed maturities available for sale                                          60,162                  50,480           129,160    

    Equity securities available for sale                                              —                   7,791                 —    

    Net decrease/increase in short-term investments                              (8,059  )               20,764           (23,440  ) 

    Dividends from subsidiaries                                                   3,000                  28,350                 —    

    Contribution of capital to subsidiaries                                      (5,937  )              (38,000  )        (25,483  ) 

    Other                                                                        (3,517  )               (1,395  )              —    

   __TOKEN__115__15__

   __TOKEN__115__16__

                                                                                    (85  )              (33,182  )        (54,424  ) 

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    Financing activities                                                                                                             

    Proceeds from long-term debt                                                      —                  44,907           104,641    

    Repayment of debt                                                                 —                       —           (72,500  ) 

    Other                                                                         3,644                      36             2,881    

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                                                                                  3,644                  44,943            35,022    

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    Increase (decrease) in cash and cash equivalents                                691                    (135  )        (29,135  ) 

    Cash and cash equivalents, beginning of period                                  743                     878            30,013    

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    Cash and cash equivalents, end of period                                 $    1,434             $       743       $       878    

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   Notes to Condensed Financial Statements of Registrant1. Basis of
   Presentation The registrant-only financial statements should be read
   in conjunction with ProAssurance Corporation’s (PRA Holding)
   consolidated financial statements. At December 31, 2005 and 2004 PRA
   Holding’s investment in subsidiaries is stated at the initial
   consolidation value plus equity in the undistributed earnings of
   subsidiaries since the date of acquisition less dividends received
   from the subsidiaries. Acquisitions/Dispositions In August 2005 PRA
   Holding purchased NCRIC Corporation as described in Note 2 to the
   Consolidated Financial Statements. PRA Holding reached an agreement to
   sell its indirect subsidiaries, MEEMIC Insurance Company and MEEMIC
   Insurance Services, as described in Note 3 to the Consolidated
   Financial Statements. The sale was completed in 2006; the proceeds
   from the sale of $400 million were paid to an indirect subsidiary of
   ProAssurance.

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   ProAssurance Corporation and Subsidiaries
   Schedule II — Condensed Financial Information of Registrant
   (continued)Notes to Condensed Financial Statements of Registrant
   (continued)2. Long-term Debt Outstanding long-term debt, as of
   December 31, 2005 and December 31, 2004, consisted of the following:

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                                                                                December 31  

                                                                                    2005               2004

                                                                               $ In thousands

    Convertible Debentures due June 30, 2023 (Convertible Debentures),                      $  105,381          $  105,085   
    unsecured and bearing a fixed interest rate of 3.9%, net of                                                              
    unamortized original issuer’s discounts of $2,219 and $2,515 at                                                          
    December 31, 2005 and December 31, 2004, respectively.                                                                   

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    Trust Preferred Subordinated Debentures (Subordinated Debentures),                                                       
    unsecured, and bearing floating interest rate, adjustable quarterly,                                                     
    at three-month LIBOR plus 3.85%.                                                                                         

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    Due               December 31, 2005 Rate                              

    April 29, 2034                            8.19  %        13,403          13,403   

    May 12, 2034                              8.19  %        10,310          10,310   

    May 12, 2034                              8.19  %        22,682          22,682   

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                                                         $  151,776      $  151,480   

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   PRA Holding issued $107.6 million of 3.9% Convertible Debentures in a
   Private Offering transaction, net of an initial purchaser’s discount
   of $3.0 million, in July 2003. The Convertible Debentures are due
   June 30, 2023 but may be repaid or called prior to that date. PRA
   Holding used the net proceeds of the Convertible Debentures to pay off
   its existing term loan having an outstanding principal balance of
   $67.5 million. In April and May 2004, PRA Holding formed two business
   trusts (the Trusts), as the holder of all voting securities issued by
   the Trusts, for the sole purpose of issuing, in private placement
   transactions, $45.0 million of trust preferred securities (TPS) and
   using the proceeds thereof, together with the equity proceeds received
   from ProAssurance in the initial formation of the Trusts, to purchase
   Subordinated Debentures issued by ProAssurance. The Subordinated
   Debentures and the TPS have the same maturities and other applicable
   terms and features. They are uncollateralized and bear a floating
   interest rate equal to the three-month LIBOR plus 3.85%, adjustable
   and payable quarterly, with a maximum rate within the first five years
   of 12.5%. See Note 10 of the Notes to the consolidated financial
   statements of ProAssurance and its subsidiaries included herein for a
   detailed description of the terms of the Convertible Debentures and
   the Subordinated Debentures. 3. Related Party Transactions PRA Holding
   received dividends of $3 million from its subsidiaries in 2005 and
   $28 million dividends were received in 2004. PRA Holding contributed
   capital of $5.9 million in 2005 to its subsidiaries. In 2004 PRA
   Holding contributed $18 million to its subsidiaries. All of PRA
   Holding’s treasury shares are owned by its subsidiaries. In the
   registrant-only financial statements, stockholders’ equity has been
   reduced by the cost of these treasury shares and PRA Holding’s
   investment in subsidiaries has been reduced by the cost of the
   treasury shares owned by the subsidiaries. 4. Income Taxes Under terms
   of PRA Holding’s tax sharing agreement with its subsidiaries, income
   tax provisions for individual companies are allocated on a separate
   company basis.

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   ProAssurance Corporation and Subsidiaries
   Schedule III — Supplementary Insurance Information
   Years Ended December 31, 2005, 2004, and 2003

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                                                              Continuing Operations

                                                                      2005                     2004   2003

                                                                  In thousands     

    Deferred policy acquisition costs                                             $     22,256             $     21,254      $     17,902   

    Reserve for losses and loss adjustment expenses                                  2,224,436                1,818,636         1,634,749   

    Unearned premiums                                                                  264,258                  248,539           230,442   

    Net premiums earned                                                                543,241                  519,897           459,871   

    Premiums assumed from other companies                                                  268                       96             2,508   

    Net investment income                                                               97,649                   76,346            63,366   

    Net losses and loss adjustment expenses                                            438,201                  460,437           439,368   

    Underwriting, acquisition and insurance expenses:                                                                                       

    Amortization of deferred policy acquisition costs                                   53,967                   52,808            45,216   

    Other underwriting, acquisition and insurance expenses                              35,352                   31,575            28,047   

    Net premiums written                                                               521,343                  535,028           497,659   

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                                                              Discontinued Operations

                                                                       2005                    2004   2003

                                                                   In thousands      

    Deferred policy acquisition costs                                               $    7,108             $    6,408      $    5,701   

    Reserve for losses and loss adjustment expenses                                    252,294                210,956         179,835   

    Unearned premiums                                                                   65,429                 65,640          59,692   

    Net premiums earned                                                                187,903                183,365         170,268   

    Premiums assumed from other companies                                                    —                      —               —   

    Net investment income                                                               12,817                 10,879          10,253   

    Net losses and loss adjustment expenses                                            110,929                112,444         112,008   

    Underwriting, acquisition and insurance expenses:                                                                                   

    Amortization of deferred policy acquisition costs                                   19,727                 17,804          16,272   

    Other underwriting, acquisition and insurance expenses                              23,595                 22,744          21,306   

    Net premiums written                                                               187,676                189,306         177,957   

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   ProAssurance Corporation and Subsidiaries
   Schedule IV—Reinsurance
   Years Ended December 31, 2005, 2004, and 2003

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                                           Continuing Operations

                                                   2005                   2004   2003

                                               In thousands     

    Property and Casualty                                                                                            

    Premiums earned                                            $  596,289             $  555,428       $  506,752    

    Premiums ceded                                                (53,316  )             (35,627  )       (49,389  ) 

    Premiums assumed                                                  268                    282            2,494    

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    Net premiums earned                                        $  543,241             $  520,083       $  459,857    

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    Percentage of amount assumed to net                              0.05  %                0.05  %          0.54  % 

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    Accident and Health                                                                                              

    Premiums earned                                            $        —             $        —       $        —    

    Premiums ceded                                                      —                      —                —    

    Premiums assumed                                                    —                   (186  )            14    

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    Net premiums earned                                        $        —             $     (186  )    $       14    

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    Percentage of amount assumed to net                                 —                    100  %           100  % 

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    Total net premiums earned                                  $  543,241             $  519,897       $  459,871    

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                                           Discontinued Operations

                                                    2005                    2004   2003

                                                In thousands      

    Property and Casualty                                                                                              

    Premiums earned                                              $  219,526             $  210,119       $  189,087    

    Premiums ceded                                                  (31,623  )             (26,754  )       (18,819  ) 

    Premiums assumed                                                      —                      —                —    

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    Net premiums earned                                          $  187,903             $  183,365       $  170,268    

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    Percentage of amount assumed to net                                   —                      —                —    

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    Total net premiums earned                                    $  187,903             $  183,365       $  170,268    

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   ProAssurance Corporation and Subsidiaries
   Schedule VI — Supplementary Property and Casualty Insurance
   Information
   Years Ended December 31, 2005, 2004, and 2003

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                                                                              Continuing Operations

                                                                                      2005                     2004   2003

                                                                                  In thousands     

    Deferred policy acquisition costs                                                             $     22,256             $     21,254       $     17,902    

    Reserve for losses and loss adjustment expenses                                                  2,224,436                1,818,636          1,634,749    

    Unearned premiums                                                                                  264,258                  248,539            230,442    

    Net premiums earned                                                                                543,241                  519,897            459,871    

    Net investment income                                                                               97,649                   76,346             63,366    

    Losses and loss adjustment expenses incurred related to current year,                              461,182                  469,151            439,418    
    net of reinsurance                                                                                                                                        

    Losses and loss adjustment expenses incurred related to prior year,                                (22,981  )                (8,714  )             (50  ) 
    net of reinsurance                                                                                                                                        

    Amortization of deferred policy acquisition costs                                                   53,967                   52,808             45,216    

    Paid losses and loss adjustment expenses related to current year                                   (26,495  )               (13,599  )         (15,534  ) 
    losses, net of reinsurance                                                                                                                                

    Paid losses and loss adjustment expenses related to prior year losses,                            (199,617  )              (200,314  )        (224,317  ) 
    net of reinsurance                                                                                                                                        

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                                                                              Discontinued Operations

                                                                                       2005                    2004   2003

                                                                                   In thousands      

    Deferred policy acquisition costs                                                               $    7,108             $    6,408       $    5,701    

    Reserve for losses and loss adjustment expenses                                                    252,294                210,956          179,836    

    Unearned premiums                                                                                   65,429                 65,640           59,692    

    Net premiums earned                                                                                187,903                183,365          170,268    

    Net investment income                                                                               12,817                 10,879           10,253    

    Losses and loss adjustment expenses incurred related to current year,                              119,129                120,346          122,838    
    net of reinsurance                                                                                                                                    

    Losses and loss adjustment expenses incurred related to prior year,                                 (8,200  )              (7,902  )       (10,830  ) 
    net of reinsurance                                                                                                                                    

    Amortization of deferred policy acquisition costs                                                   19,727                 17,804           16,272    

    Paid losses and loss adjustment expenses related to current year                                   (76,679  )             (78,762  )       (79,290  ) 
    losses, net of reinsurance                                                                                                                            

    Paid losses and loss adjustment expenses related to prior year losses,                             (29,048  )             (29,725  )       (22,918  ) 
    net of reinsurance                                                                                                                                    

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   EXHIBIT INDEX

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    Exhibit                   

    Number        Description 

              2.1                 Agreement to Consolidate by and between Medical Assurance, Inc. and       
                                  Professionals Group, Inc. dated June 22, 2000 as amended as of            
                                  November 1, 2000. (1)                                                     

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              2.2                 Agreement and Plan of Merger dated as of July 9, 2002 among               
                                  ProNational Insurance Company, MEEMIC Merger Corp. and MEEMIC Holdings    
                                  (2)                                                                       

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              2.3                 Amendment No. 1 to Agreement and Plan of Merger dated as of July 9,       
                                  2002 among ProNational Insurance Company, MEEMIC Merger Corp. and         
                                  MEEMIC Holdings, Inc. made on September 18, 2002 (3)                      

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              2.4                 Agreement and Plan of Merger among ProAssurance, NCRIC Group, Inc. and    
                                  NCP Merger Corporation, dated February 28, 2005 (4)                       

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              2.5                 Stock Purchase Agreement dated November 7, 2005, among Motors             
                                  Insurance Corporation, MEEMIC Insurance Company, MEEMIC Insurance         
                                  Services Corporation, MEEMIC Holdings, Inc. and ProAssurance              
                                  Corporation (5)                                                           

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              2.6                 Agreement and Plan of Merger, dated as of December 8, 2005, between       
                                  ProAssurance and PIC Wisconsin, as amended February 14, 2006 (6)          

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              3.1  (a)            Certificate of Incorporation of ProAssurance (1)                          

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              3.1  (b)            Certificate of Amendment to Certificate of Incorporation of               
                                  ProAssurance (7)                                                          

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              3.2                 First Restatement of the Bylaws of ProAssurance (8)                       

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                4                 The following documents defining rights of holders of ProAssurance’s      
                                  long-term debt represent indebtedness in an amount in excess of ten       
                                  percent of ProAssurance’s consolidated assets; instruments                
                                  representing long term indebtedness that is less than ten percent of      
                                  ProAssurance’s consolidated assets either have been previously filed      
                                  or will be filed with the Commission upon request pursuant to the         
                                  requirements of Item 601(b)(4) of Regulation S-K:                         

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              4.1                 Purchase Agreement, dated July 1, 2003, between Registrant and the        
                                  representatives of the initial purchasers of the Debentures (without      
                                  exhibits) (9)                                                             

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              4.2                 Indenture dated July 7, 2003, between and among Registrant and the        
                                  initial purchasers of the Debentures (10)                                 

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              4.3                 Registration Rights Agreement, dated July 7, 2003, between and among      
                                  Registrant and the initial purchasers of the Debentures (10)              

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             10.1  (a)            Medical Assurance, Inc. Incentive Compensation Stock Plan (formerly       
                                  known as the Mutual Assurance, Inc. 1995 Stock Award Plan) (11)           

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             10.1  (b)            Amendment and Assumption Agreement by and between ProAssurance and        
                                  Medical Assurance, Inc. (7)                                               

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    Exhibit                   

    Number        Description 

             10.1  (c)            Amendment and Assumption Agreement by and between Mutual Assurance,       
                                  Inc. and MAIC Holdings, Inc. dated April 8, 1996 (12)                     

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             10.2                 Professionals Insurance Company Management Group 1996 Long Term           
                                  Incentive Plan (13)                                                       

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             10.3                 ProAssurance Corporation 2004 Equity Incentive Plan (14)                  

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             10.4  (a)            Release and Severance Agreement between Victor T. Adamo and               
                                  ProAssurance (15)                                                         

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             10.4  (b)            Amendment to Release and Severance Compensation Agreement of Victor T.    
                                  Adamo (16)                                                                

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             10.4  (c)            Release and Severance Agreement between Howard H. Friedman and            
                                  ProAssurance (16)                                                         

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             10.4  (d)            Release and Severance Agreement between James J. Morello and              
                                  ProAssurance (16)                                                         

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             10.4  (e)            Release and Severance Agreement between Frank B. O’Neil and               
                                  ProAssurance (17)                                                         

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             10.4  (f)            Release and Severance Agreement between Edward L. Rand and                
                                  ProAssurance (18)                                                         

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             10.4  (g)            Release and Severance Agreement between Lynn M. Kalinowski and            
                                  ProAssurance (19)                                                         

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             10.4  (h)            Letter Agreement between Lynn M. Kalinowski and ProAssurance dated        
                                  November 4, 2005 (5)                                                      

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             10.4  (i)            Cross Receipt and Release between Lynn M. Kalinowski and ProAssurance     
                                  and MEEMIC Holdings, Inc. (2)                                             

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             10.4  (j)            Release and Severance Agreement between Darryl K. Thomas and              
                                  ProAssurance                                                              

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             10.5                 Employment Agreement of A. Derrill Crowe, as amended (16)                 

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             10.6                 Form of Indemnification Agreement between ProAssurance and each of the    
                                  following named executive officers and directors of ProAssurance: (17)    

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                                  Victor T. Adamo                                                           

                                  Lucian F. Bloodworth                                                      

                                  Paul R. Butrus                                                            

                                  A. Derrill Crowe                                                          

                                  Robert E. Flowers                                                         

                                  Howard H. Friedman                                                        

                                  Jeffrey P. Lisenby                                                        

                                  John J. McMahon                                                           

                                  James J. Morello                                                          

                                  John P. North                                                             

                                  Frank B. O’Neil                                                           

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    Exhibit                    

    Number         Description 

                                   Ann F. Putallaz                                                        

                                   Edward L. Rand, Jr.                                                    

                                   Darryl K. Thomas                                                       

                                   William H. Woodhams                                                    

                                   Wilfred W. Yeargan, Jr.                                                

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              10.7                 ProAssurance Group Employee Benefit Plan which includes the Executive  
                                   Supplemental Life Insurance Program (Article VIII) (8)                 

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              10.8                 ProAssurance Group 2004 Deferred Compensation Plan dated October 11,   
                                   2004, of which A. Derrill Crowe is the sole participant (8)            

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              10.9                 Executive Non-Qualified Excess Plan and Trust dated December 1, 2004   
                                   (4)                                                                    

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             10.10                 ProAssurance Director Deferred Compensation Plan adopted on May 18,    
                                   2005 (21)                                                              

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              21.1                 Subsidiaries of ProAssurance Corporation                               

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              23.1                 Consent of Ernst & Young LLP                                           

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              31.1                 Certification of Principal Executive Officer of ProAssurance as        
                                   required under SEC Rule 13a-14(a)                                      

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              31.2                 Certification of Principal Financial Officer of ProAssurance as        
                                   required under SEC Rule 13a-14(a)                                      

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              32.1                 Certification of Principal Executive Officer of ProAssurance as        
                                   required under SEC Rule 13a-14(b) and Section 1350 of Chapter 63 of    
                                   Title 18 of the United States Code, as amended (18 U.S.C. 1350)        

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              32.2                 Certification of Principal Financial Officer of ProAssurance as        
                                   required under SEC Rule 13a-14(b) and 18 U.S.C. 1350                   

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    Footnotes

                (1  )    Filed as an Exhibit to ProAssurance’s Registration Statement on           
                         Form S-4 (File No. 333-49378) and incorporated herein by reference        
                         pursuant to Rule 12b-32 of the Securities and Exchange Commission         
                         (SEC).                                                                    

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                (2  )    Filed as an Exhibit to ProAssurance’s Quarterly Report on Form 10-Q       
                         for the period ended June 30, 2002 (File No. 001-16533) and               
                         incorporated herein by reference pursuant to SEC Rule 12b-32.             

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                (3  )    Filed as an Exhibit to ProAssurance’s Annual Report on Form 10-K for      
                         the year ended December 31, 2002 (Commission File No. 001-16533) and      
                         incorporated herein by reference pursuant to SEC Rule 12b-32.             

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                (4  )    Filed as an Exhibit to ProAssurance’s Registration Statement on           
                         Form S-4 (File No. 333-124156) and incorporated herein by reference       
                         pursuant to SEC Rule 12b-32.                                              

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                (5  )    Filed as an Exhibit to ProAssurance’s Current Report on Form 8-K for      
                         event occurring November 4, 2005 and incorporated by reference            
                         pursuant to SC Rule 12b-32.                                               

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                (6  )    Filed as an Exhibit to ProAssurance’s Registration Statement on           
                         Form S-4 (File No. 333-131874) and incorporated by reference pursuant     
                         to SEC Rule 12b-32.                                                       

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                (7  )    Filed as an Exhibit to ProAssurance’s Annual Report on Form 10-K for      
                         the year ended December 31, 2001 (File No. 001-16533) and incorporated    
                         herein by reference pursuant to SEC Rule 12b-32.                          

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                (8  )    Filed as an Exhibit to ProAssurance’s Annual Report on Form 10-K for      
                         the year ended December 31, 2004 (File No. 001-16533) and incorporated    
                         herein by reference pursuant to SEC Rule 12b-32.                          

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                (9  )    Filed as an Exhibit to ProAssurance’s Registration Statement on           
                         Form S-3 (File No. 333-109972) and incorporated by reference pursuant     
                         to SEC Rule 12b-32.                                                       

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               (10  )    Filed as an Exhibit to ProAssurance’s Quarterly Report on Form 10-Q       
                         for the period ended June 30, 2003 (File No. 333-16533) and               
                         incorporated by reference pursuant to SEC Rule 12b-32.                    

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               (11  )    Filed as an Exhibit to MAIC Holding’s Registration Statement on           
                         Form S-4 (File No. 33-91508) and incorporated herein by reference         
                         pursuant to SEC Rule 12b-32.                                              

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               (12  )    Filed as an Exhibit to MAIC Holding’s Proxy Statement for the 1996        
                         Annual Meeting (File No. 0-19439) is incorporated herein by reference     
                         pursuant to SEC Rule 12b-32.                                              

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               (13  )    Filed as an Exhibit to Professionals Group’s Registration Statement on    
                         Form S-4 (File No. 333-3138) and incorporated herein by reference         
                         pursuant to SEC Rule 12b-32.                                              

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    Footnotes

               (14  )    Filed as an Exhibit to ProAssurance’s Definitive Proxy Statement (File    
                         No. 001-165333) on April 16, 2004 and incorporated herein by reference    
                         pursuant to SEC Rule 12b-32.                                              

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               (15  )    Filed as an Exhibit to ProAssurance’s Form 10-Q for the quarter ended     
                         June 30, 2001 (File No. 001-16533) and incorporated herein by             
                         reference pursuant to SEC Rule 12b-32.                                    

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               (16  )    Filed as an Exhibit to ProAssurance’s Registration Statement on           
                         Form S-3 (File No. 333-100526) and incorporated herein by reference       
                         pursuant to SEC Rule 12b-32.                                              

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               (17  )    Filed as an Exhibit to ProAssurance’s Annual Report on Form 10-K for      
                         the year ended December 31, 2002 (File No. 001-16533) and incorporated    
                         herein by this reference pursuant to SEC Rule 12b-32.                     

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               (18  )    Filed as an Exhibit to ProAssurance’s Current Report on Form 8-K for      
                         event occurring March 31, 2005 (File No. 001-16533) and incorporated      
                         herein by reference pursuant to SEC Rule 12b-32.                          

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               (19  )    Filed as an Exhibit to ProAssurance’s Quarterly Report on Form 10-Q       
                         for the quarter ended September 30, 2001 (File No. 000-16533) and         
                         incorporated herein by reference pursuant to SEC Rule 12b-32.             

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               (20  )    Filed as an Exhibit to ProAssurance’s Current Report on Form 8-K for      
                         event occurring on January 4, 2006 (File No. 000-16533) and               
                         incorporated herein by reference pursuant to SEC Rule 12b-32.             

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               (21  )    Filed as an Exhibit to ProAssurance’s Current Report on Form 8-K for      
                         event occurring on May 18, 2005 (File No. 001-16533) and incorporated     
                         herein by reference pursuant to SEC Rule 12b-32.                          

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   EX-10.4(J) 2 g99804exv10w4xjy.txt EX-10.4(J) RELEASE AND SEVERANCE
   AGREEMENT / DARRYL K. THOMAS Exhibit 10.4(J) RETENTION PLAN RELEASE
   AND SEVERANCE COMPENSATION AGREEMENT THIS RELEASE AND SEVERANCE
   COMPENSATION AGREEMENT (the "Agreement") is between ProAssurance
   Corporation, a Delaware corporation ("ProAssurance"), ProNational
   Insurance Company, a Michigan insurance company ("ProNational"),
   Professionals Group, Inc., a Michigan corporation ("Professionals
   Group") and Darryl K. Thomas, an individual (the "Executive").
   ProAssurance, ProNational, and Professionals Group and their
   respective majority-owned subsidiaries are hereinafter collectively
   referred to as the "Companies." RECITALS: The Executive is currently
   rendering valuable services to Professionals Group and/or its
   wholly-owned subsidiary of ProNational. ProAssurance has acquired, or
   will acquire, control of Professionals Group and ProNational in a
   transaction (the "Consolidation") that will result in a "change of
   control" (the "Change of Control") under the terms and conditions of
   the 1996 Key Employee Retention Plan of ProNational as assumed by
   Professionals Group (the "Change of Control Agreement"). The Companies
   have offered to employ the Executive in an at will employment
   relationship after the Consolidation and to expand protection to the
   Executive in the form of severance benefits payable on termination of
   employment under certain circumstances after the Consolidation on the
   condition that the Executive releases the Companies from any past or
   future liability under the Change of Control Agreement. The Executive
   desires to continue employment with the Companies under such terms and
   conditions, and with the protection afforded to the Executive by this
   Agreement. AGREEMENT NOW, THEREFORE, These Premises Considered, and in
   consideration of the mutual covenants and promises in this Agreement,
   the sufficiency of which is hereby acknowledged, the parties agree as
   follows: 1. Term of Agreement. This Agreement is subject to, and
   conditioned upon, the closing (the "Closing") of the transactions (the
   "Consolidation") contemplated by the Agreement to Consolidate by and
   between Medical Assurance, Inc. and Professionals Group, Inc. dated
   June 22, 2000, as amended November 1, 2000. This Agreement is
   effective on the date of Closing which is scheduled to occur on June
   27, 2001, and shall continue in effect for a period of two years from
   the date of Closing (the "Initial Term"). Thereafter, this Agreement
   shall automatically be extended for successive terms of one year (a
   "Renewal Term"), except this Agreement may be terminated after the
   first Renewal Term upon delivery of written notice of the termination
   of this Agreement by any of the Companies at least six months prior to
   the expiration of any Renewal Term. If the Executive's employment is
   terminated during the term of the Agreement, the date on which the
   Executive's employment terminates shall be referred to as the "Date of
   Termination." 2. Severance Benefits. If during the term of this
   Agreement the Executive leaves the employment of the Companies for
   Good Reason, as explained in Section 4 of this Agreement, and the
   Executive signs the release (the "Release") that is attached to and
   incorporated in this Agreement, the Executive shall receive the
   following benefits (the "Severance Benefits"): (a) An amount equal to
   either of whichever the following is applicable: (i) if the Date of
   Termination occurs during the Initial Term, two (2) times the
   Executive's annual base salary; or (ii) if the Date of Termination
   occurs during a 2 Renewal Term, one (1) times the Executive's annual
   base salary. The "annual base salary" of the Executive shall be
   defined as the Executive's base rate of compensation in effect as of
   the Date of Termination, but in no event less than the Executive's
   base rate of compensation in effect as of the end of the last calendar
   quarter preceding the Date of Termination; (b) An amount equal to
   either of whichever of the following is applicable: (i) if the Date of
   Termination occurs during the Initial Term, two (2) times the average
   total annual incentive award(s) or bonus(es); or (ii) if the Date of
   Termination occurs during a Renewal Term, one (1) times the average
   total annual incentive award(s) or bonus(es). The "average total
   annual incentive award(s) or bonus(es)" shall mean the average of the
   sum of (i) cash awards or bonuses earned with the Companies by the
   Executive, plus (ii) the value of stock awarded to the Executive by
   the Companies for each complete fiscal year during the last three
   years (whether or not deferred) or, if shorter, over the Executive's
   entire period of employment with the Companies. The value of stock
   awarded to the Executive shall be calculated based on the value of the
   stock as of the date the stock was awarded to the Executive as annual
   incentive compensation. Notwithstanding the foregoing, the Executive's
   actual total annual incentive awards or bonuses shall be calculated
   excluding the value of options to purchase stock which may have been
   awarded to the Executive; (c) Payment of the Executive's monthly COBRA
   premiums for continued health and dental insurance coverage for the
   shorter of the following: (i) 18 months if the Date of Termination
   occurs in the Initial Term; (ii) 12 months if the Date of Termination
   occurs in the Renewal Term; (iii) until the Executive no longer has
   coverage 3 under COBRA; or (iv) until the Executive becomes eligible
   for substantially similar coverage under a subsequent employer's group
   health plan; and (d) Outplacement services that are customary to
   Executive's position. The cash severance benefits described in
   subparagraphs (a) and (b) above shall be paid in equal monthly
   installments during the period that the covenants set forth in Section
   7 shall be in effect commencing upon the Date of Termination; provided
   that the obligation of the Companies to pay such cash severance
   benefits to the Executive shall be subject to termination under the
   provisions of Section 7 hereof in the event the Executive should
   violate the covenants set forth therein; and provided further that the
   payment of such cash severance benefits shall be accelerated and
   payable in lump sum by the Companies upon a breach of this Agreement
   as a result of the failure of a successor (herein defined) to assume
   this Agreement as required in Section 10 of this Agreement. The
   Companies shall withhold from any amounts payable under this Agreement
   all federal, state, city or other income and employment taxes that
   shall be required. The Companies shall fund the obligation to pay cash
   Severance Benefits by depositing in escrow an amount equal to the sum
   of the amounts payable to the Executive under subparagraphs (a) and
   (b) hereof (the "Escrow Funds") with SouthTrust Bank (or another
   financial institution with total assets of more than $1,000,000,000)
   as escrow agent (the "Escrow Agent"). The Escrow Funds shall be the
   property of the Companies and shall be held, invested and distributed
   by Escrow Agent in accordance with the following provisions. At the
   time of delivery of the Escrow Funds, the Escrow Agent shall
   acknowledge receipt of the Escrow Funds and agree to be bound by the
   provisions of this Agreement in a separate written document. The
   Escrow Agent shall invest the Escrow Funds in a money market account
   for the benefit of the Companies and 4 shall distribute the earnings
   not more frequently than monthly. Unless and until the Escrow Agent
   receives notice from ProAssurance that the Executive has breached this
   Agreement, the Escrow Agent shall distribute the Escrow Funds to the
   Executive in the same number of equal monthly installments as the
   number of whole calendar months in the Restricted Period (as defined
   in Section 7 hereof). The monthly installments shall be distributed to
   the Executive on the first day of each calendar month in the
   Restricted Period together with accrued and undistributed earnings on
   the Escrow Funds. If the Company delivers written notice to the Escrow
   Agent and Executive that the cash Severance Benefits payable to
   Executive are subject to termination under Section 7 of this
   Agreement, the Escrow Agent shall distribute the balance of the Escrow
   Funds and accrued and undistributed earnings thereon to ProAssurance
   unless the Escrow Agent receives a written notice of objection from
   the Executive within 15 days after delivery of ProAssurance's notice.
   If Executive provides a timely notice of objection, the Escrow Agent
   shall hold the Escrow Funds until it receives a written notice of
   distribution from the arbitrator appointed pursuant to Section 13
   hereof or a joint written notice of distribution from the Executive
   and ProAssurance. The failure of the Executive or the Company to
   deliver notice to the Escrow Agent as herein provided shall not be a
   waiver of any of their respective rights under this Agreement. The
   Executive shall be entitled to the following in addition to and not in
   limitation of the Severance Benefits: (i) accrued and unpaid base
   salary as of the Date of Termination; (ii) accrued vacation and sick
   leave, if any, on Date of Termination in accordance with the then
   current policy of the Companies with respect to terminated employees
   generally; and (iii) vested benefits under the Companies' employee
   benefit plans in which the Executive was a participant on Date of
   Termination, which vested benefits shall be paid or provided for in
   accordance with 5 the terms of said employee benefit plans. If the
   Executive has regular use of a vehicle provided by the Companies for
   business and personal use on Date of Termination, the Companies shall
   offer for sale to the Executive the vehicle at a purchase price equal
   to either of the following: (x) if owned by any of the Companies, the
   then current book value of the vehicle (cost less accumulated
   depreciation), or (y) if leased by any of the Companies, the purchase
   price upon the exercise of the purchase option, if any, under the
   lease. The Executive shall not be entitled to receive Severance
   Benefits if employment with the Companies is terminated by reason of
   death of Executive, retirement of Executive pursuant to the Company's
   retirement plan as then in effect, the Executive having reached the
   age of mandatory retirement (if such requirement then exists for bona
   fide executives); or Disability of Executive (herein defined); or by
   reason of termination of employment by the Executive without Good
   Reason (herein defined); or by reason of termination of employment by
   the Companies with Cause (herein defined). The Executive shall be
   under no duty or obligation to seek or accept other employment and
   shall not be required to mitigate the amount of the Severance Benefits
   provided under the Agreement by seeking employment or otherwise;
   provided, however, that the Executive shall be required to notify the
   Companies if the Executive becomes covered by a health or dental care
   program providing substantially similar coverage, at which time health
   or dental care continuation coverage provided under this Agreement
   shall cease. 3. Parachute Payments. Subject to Section 280G of the
   Internal Revenue Code of 1986, as amended ("Code"), if the board of
   directors of ProAssurance determines that an excise tax under Section
   4999 ("Excise Tax") would be due, the Executive's Severance Benefits
   under this Agreement shall be limited to the amount necessary to avoid
   the Excise Tax only if applying 6 such a limit results in a greater
   net benefit to the Executive than would have resulted had the benefits
   not been limited and an Excise Tax paid. For purposes of making such
   computation: (a) Any other payments or benefits received or to be
   received by the Executive in connection with the Change of Control or
   the Executive's termination of employment (whether pursuant to the
   terms of this Agreement or any other plan, arrangement, or agreement
   with the Companies, or with any person whose actions result in the
   Change of Control) shall be treated as "parachute payments" within the
   meaning of Section 280G(b)(2) of the Code, and all "excess parachute
   payments" within the meaning of Section 280G(b)(1) of the Code shall
   be treated as subject to the Excise Tax, unless, in the opinion of tax
   counsel selected by ProAssurance's independent auditors, such other
   payments or benefits (in whole or in part) do not constitute parachute
   payments, or such other payments or benefits (in whole or in part)
   represent reasonable compensation for services actually rendered
   within the meaning of Section 280G(b)(4) of the Code in excess of the
   base amount within the meaning of Section 280G(b)(3) of the Code, or
   such other payments or benefits (in whole or in part) are otherwise
   not subject to the Excise Tax. In the event an Excise Tax is due,
   because of payments made under this Agreement, the Executive shall be
   responsible for paying said Excise Tax. (b) The amount of the
   Severance Benefits that will be treated as subject to the Excise Tax
   shall be equal to the lesser of: (i) the total amount of the Severance
   Benefits; or (ii) the amount of excess parachute payments within the
   meaning of Section 280G(b)(l) (after applying subparagraph (a) above).
   (c) The value of any noncash benefits or any deferred payment or
   benefit shall be determined by ProAssurance's independent auditors in
   accordance with the principles of Sections 280G(d)(3) and (4) of the
   Code. 7 (d) The Executive shall be deemed to pay federal income taxes
   at the highest marginal rate of federal income taxation in a calendar
   year in which the Severance Benefits are to be paid, and state and
   local income taxes at the highest marginal rate of taxation in the
   state and locality of the Executive's residence on the Date of
   Termination, net of the maximum reduction in federal income taxes that
   could be obtained from deduction of such state and local taxes. In the
   event the Internal Revenue Service adjusts the computation in
   subparagraphs (a) through (d) above, so that the Executive did not
   receive the greatest net benefit, the Companies shall reimburse the
   Executive for the amount necessary to make the payment of Severance
   Benefits to the Executive to the extent permitted hereunder, plus a
   market rate of interest as determined by the Board of Directors of
   ProAssurance. 4. Good Reason for Termination. In the event that the
   Executive's employment relationship with the Companies is terminated
   for any of the reasons described in this Section 4, the Executive
   shall be entitled to Severance Benefits, subject to and described in
   Section 2 of this Agreement. "Good Reason" shall constitute any of the
   following circumstances if they occur without the Executive's express
   written consent during the term of this Agreement: (a) The Executive
   no longer holds an executive level position with executive level
   responsibilities with the Companies consistent with the Executive's
   training and experience (Executive and Company acknowledge that the
   initial position and responsibilities of Executive will be as set
   forth in the terms of employment ("Terms of Employment") attached to,
   and incorporated in, this Agreement); (b) The Companies require that
   the Executive's primary location of employment be more than 50 miles
   from the location of the Executive's primary location of 8 employment
   on June 27, 2001; provided, however, that it is agreed that the
   relocation of Executive's principal office to Birmingham, Alabama will
   not violate this subparagraph and that after the relocation to
   Birmingham, the fifty (50) mile radius will apply with respect to the
   Birmingham location; (c) The failure of the Companies to provide the
   Executive, at a level in 2001 as set forth in the Terms of Employment
   and thereafter at a level commensurate with the Executive's position,
   the incentive compensation opportunities and employee benefits that
   are provided to other executives of comparable rank with the
   Companies; (d) A breach by the Companies of any provision of this
   Agreement, including without limitation, the failure of a successor to
   assume this Agreement as required in Section 10 hereof; (e) The
   termination of the Executive's employment by the Companies for a
   reason other than: (i) death; (ii) retirement pursuant to the
   Companies' retirement plan as then in effect; (iii) Disability as
   explained in Section 5 of this Agreement; (iv) the Executive has
   reached the age of mandatory retirement (if such requirement then
   exists for bona fide executives); (v) for Cause, as explained in
   Section 7 of this Agreement; (f) A reduction by the Companies in the
   Executive's base salary as set forth in the Terms of Employment; or
   (g) The termination or non-renewal of this Agreement by the Companies.
   The Executive must provide the Companies with written notice no later
   than 45 calendar days after the Executive knows or should have known
   that Good Reason has occurred. Following the Executive's Notice, the
   Companies shall have 45 calendar days to rectify the 9 circumstances
   causing the Good Reason. If the Company fails to rectify the event(s)
   causing the Good Reason within the 45 day period after the Executive's
   Notice, or if any of the Companies delivers to the Executive written
   notice stating that the circumstances cannot or shall not be
   rectified, the Executive shall be entitled to assert Good Reason and
   terminate employment on or before 90 days after the delivery of the
   Executive's Notice. Should Executive fail to provide the required
   Notice in a timely manner, Good Reason shall not be deemed to have
   occurred as a result of that event. The Initial Term or a Renewal Term
   shall not be deemed to have expired during the Notice period, however,
   as long as the Executive has provided Notice within the Term. 5.
   Disability. For purposes of this Agreement, Disability means a serious
   injury or illness that requires the Executive to be under the regular
   care of a licensed medical physician and renders the Executive
   incapable of performing the essential functions of the Executive's
   position for 12 months as determined by the Board of Directors of the
   Companies in good faith and upon receipt of and in reliance on
   competent medical advice from one or more individuals selected by the
   Board of Directors, who are qualified to give professional medical
   advice. 6. Cause. If the Executive's employment relationship with the
   Companies is terminated for Cause by the Companies, as described below
   in this Section, the Executive shall not be eligible for Severance
   Benefits and all rights of the Executive and obligations of the
   Companies under this Agreement shall expire. Cause means: (a) The
   Executive has been convicted in a federal or state court of a crime
   classified as a felony; (b) Action or inaction by the Executive (i)
   that constitutes embezzlement, theft, misappropriation or conversion
   of assets of the Companies which alone or together with related 10
   actions or inactions involve assets of more than a de minimis amount,
   or that constitutes fraud, gross malfeasance of duty, or conduct
   grossly inappropriate to Executive's office; and (ii) such action or
   inaction has adversely affected or is likely to adversely affect the
   business of the Companies or has resulted or is intended to result in
   direct or indirect gain or personal enrichment of the Executive to the
   detriment of the Companies; (c) The Executive has been grossly
   inattentive to, or in a grossly negligent manner failed to competently
   perform, Executive's job duties and the failure was not cured within
   45 days after written notice from the Companies. Any termination of
   the Executive's employment by the Companies for Cause shall be
   communicated by a notice of termination (the "Notice of Termination")
   to the Executive. The Notice of Termination shall be a written notice
   indicating the specific termination provision of this Agreement relied
   upon and shall set forth in reasonable detail the facts and
   circumstances claimed to provide a basis for termination of the
   Executive's employment under this provision. 7. Non-Competition. (a)
   In the event the Date of Termination occurs during the Initial Term,
   the Executive (i) will be bound by and subject to any covenant not to
   compete or noncompetition agreement with the Companies (or any of
   them) to which the Executive was subject as of the Date of Termination
   (other than the noncompetition agreement set forth in Section 7(b)
   hereof), or (ii) in the alternative if the Executive is not subject to
   a covenant not to compete or noncompetition agreement with the
   Companies (or any of them) as of the Date of Termination (other than a
   covenant not to compete or noncompetition agreement contained in an
   employee handbook or otherwise applicable to employees generally) the
   Executive will be bound by and subject to the noncompetition agreement
   set forth in subparagraph 7(b) of this Agreement. Upon 11 the
   expiration of the Initial Term, any and all covenants not to compete
   or noncompetition agreements between the Executive and the Companies
   (or any of them) then in effect shall be superseded by the
   noncompetition agreement set forth in Section 7(b) hereof and the
   Executive and the Companies shall not be bound by the provisions of
   any covenant not to compete or noncompetition agreement other than the
   provisions of Section 7(b) hereof unless specifically agreed to in a
   written document executed by the Executive and the Companies (or any
   of them) after the Closing. (b) In the event that either (i) the Date
   of Termination occurs during the Initial Term and the provisions of
   Section 7(a)(ii) hereof are binding on the Executive, or (ii) the Date
   of Termination occurs during a Renewal Term, the Executive will not
   during the Restricted Period (herein defined): (i) become employed by
   a competitor company at any location and directly solicit or sell
   medical professional liability insurance to any person or entity that
   was insured by any of the Companies within one year prior to the Date
   or Termination, or directly provide services related to medical
   professional liability insurance to any such person or entity; or (ii)
   receive or earn compensation of any type directly arising out of the
   purchase of medical professional liability insurance by any person or
   entity that was insured by the Companies at any time within one year
   prior to the Date of Termination; or (iii) solicit or induce any other
   employees of the Companies to leave such employment or accept
   employment with any other person or entity, or solicit or 12 induce
   any insurance agent of the Companies to offer, sell or market medical
   professional liability insurance for a competitor company in the
   primary market of the Companies. "Competitor company" means an
   insurance company, insurance agency, business, for profit or not for
   profit organization (other than the Companies) that provides, or
   offers to provide medical professional liability insurance to health
   care providers. "Health care providers" means physicians, dentists,
   podiatrists, physician assistants, nurse practitioners, other
   individual health care providers and hospital and other institutional
   health care providers. "Medical professional liability insurance"
   means medical malpractice insurance and reinsurance, and equivalent
   self-insured services such as administration of self-insured trusts,
   claims management services and risk management services for health
   care providers. "Medical professional liability insurance" does not
   include services provided as an employee of a health care provider if
   such services are rendered solely for the purpose of servicing medical
   professional liability risk of the employer or that of its employees.
   "Primary market area" means any state in which the Companies derived
   more than $5 million in direct written premiums from the sale of
   medical professional liability insurance to health care providers in
   the most recent complete fiscal year prior to the Date of Termination.
   "Restricted Period" means as applicable either (i) if the Date of
   Termination occurs within the Initial Term, a period of 24 months from
   such Date 13 of Termination; or (ii) if the Date of Termination occurs
   within a Renewal Term, a period of 12 months from such Date of
   Termination. "Employed" includes activities as an owner, proprietor,
   employee, agent, solicitor, partner, member, manager, principal,
   shareholder (owning more than 1% of the outstanding stock),
   consultant, officer, director or independent contractor. "Companies"
   means any company that is a subsidiary of ProAssurance, now or in the
   future, and any other company that has succeeded to the business of
   any of the Companies. If the Executive is deemed to have materially
   breached the non-competition covenants set forth in Section 7 of this
   Agreement, the Companies may, in addition to seeking an injunction or
   any other remedy they may have, withhold or cancel any remaining
   payments or benefits due to the Executive pursuant to Section 2 of
   this Agreement. The Companies shall give prior or contemporaneous
   written notice of such withholding or cancellation of payments in
   accordance with Section 2 hereof. If the Executive violates any of
   these restrictions, the Companies shall be further entitled to an
   immediate preliminary and permanent injunctive relief, without bond,
   in addition to any other remedy which may be available to the
   Companies. Both parties agree that the restrictions in this Agreement
   are fair and reasonable in all respects, including the geographic and
   temporal restrictions, and that the benefits described in this
   Agreement, to the extent any separate or special consideration is
   necessary, are fully sufficient consideration for the Executive's
   obligations under this Agreement. 8. Confidentiality. Executive will
   remain obligated under any confidentiality or nondisclosure agreement
   with the Companies (or any of them) that is currently in effect or to
   14 which the Executive may in the future be bound. In the event that
   the Executive is at any time not the subject of a separate
   confidentiality or nondisclosure agreement with the Companies (or any
   of them), Executive expressly agrees that Executive shall not use for
   the Executive's personal benefit, or disclose, communicate or divulge
   to, or use for the direct or indirect benefit of any person, firm,
   association or company any confidential or competitive material or
   information of the Companies or their subsidiaries, including without
   limitation, any information regarding insureds or other customers,
   actual or prospective, and the contents of their files; marketing,
   underwriting or financial plans or analyses which is not a matter of
   public record; claims practices or analyses which are not matters of
   public record; pending or past litigation in which the Companies have
   been involved and which is not a matter of public record; and all
   other strategic plans, analyses of operations, computer programs,
   personnel information and other proprietary information with respect
   to the Companies which are not matters of public record. Executive
   shall return to the Companies promptly, and in no event later than the
   Date of Termination, all items, documents, lists and other materials
   belonging to the Companies or their subsidiaries, including but not
   limited to, credit, debit or service cards, all documents, computer
   tapes, or other business records or information, keys and all other
   items in the Executive's possession or control. 9. Release of Change
   of Control Agreement. In consideration of the continued employment of
   the Executive by the Companies after the Change of Control and the
   obligation of the Companies to pay the Executive Severance Benefits as
   herein provided, the Executive hereby waives, releases and forever
   discharges the Companies and each of their direct or indirect parents,
   subsidiaries, affiliates and related entities, and all present or
   former employees, officers, agents, directors or representatives of
   any of them, from any and all claims, charges, suits, causes 15 of
   action, demands, expenses and compensation whatsoever, known or
   unknown, direct or indirect, on account of or growing out of the
   Executive's Change of Control Agreement, including, without
   limitation, the payment of severance benefits as provided thereunder.
   Executive hereby further agrees that he will not institute any suit or
   action at law, in equity or otherwise against the Companies or any of
   their direct or indirect parents, subsidiaries, affiliates and related
   entities, or the present or former employees, officers, agents,
   directors, or representatives of any of them and their respective
   successors and assigns, nor will the Executive ever institute,
   prosecute, or in any way aid in the institutional prosecution of any
   claim, demand, action or cause of action for damages, costs, expenses,
   penalties, fines, compensation or equitable relief, for or on account
   of any damage, loss or injury to either person or property or both,
   whether developed or undeveloped, resulting or to result, known or
   unknown, which Executive ever had, now has, or which Executive or his
   successors and assigns may in the future have against any of said
   persons in connection with the Change of Control Agreement of the
   Executive. The Executive acknowledges and agrees that Executive has
   been advised in writing by this Agreement, and otherwise, to CONSULT
   WITH AN ATTORNEY before Executive enters into this Agreement. The
   Executive agrees that the Executive received and read a copy of this
   Agreement prior to executing the same. 10. Successors of ProAssurance.
   ProAssurance will require any successor (herein defined) to assume
   expressly and agree to perform this Agreement in the same manner and
   to the same extent that the Companies would be required to perform
   this Agreement if no such succession had taken place. Failure of
   ProAssurance to obtain such agreement prior to the effectiveness of
   any such succession shall be a breach of this Agreement and shall
   entitle the 16 Executive to terminate employment for Good Reason and
   receive Severance Benefits as provided in Section 2 hereof. Reference
   to the Companies in this Agreement shall include any successor which
   assumes and agrees to perform this Agreement by operation of law or
   otherwise. The term "successor" means any Person, as defined by
   Section 3(a)(9) of the Securities Exchange Act of 1934, as amended
   (the "Exchange Act") other than a Person in control of the Companies
   immediately after completion of the Change of Control, that either (i)
   becomes the Beneficial Owner, as defined by Rule 13d-3 of the General
   Rules and Regulations under the Exchange Act, directly or indirectly,
   of the securities of ProAssurance representing more than 50.1% of the
   combined voting power of the then outstanding securities of
   ProAssurance; (ii) purchases or otherwise acquires substantially all
   of the assets of the Companies such that the Companies cease to
   function on a going forward basis as an insurance holding company
   system that provides medical professional liability insurance; or
   (iii) survives a merger, consolidation or reorganization that results
   in less than 50.1% of the combined voting power of ProAssurance or
   such surviving entity being owned by stockholders of ProAssurance
   immediately preceding such merger, consolidation or reorganization.
   11. Notice. For purposes of this Agreement, notices and all other
   communications provided for in this Agreement shall be in writing and
   shall be deemed to have been duly given when delivered by hand or
   commercial courier or mailed by certified or registered mail, return
   receipt requested, postage prepaid, addressed to the respective
   addresses as set forth below or to such other address as one party may
   have furnished to the other in writing in accordance herewith. 17
   Notice to the Executive: Darryl K. Thomas or such more recent address
   as ProNational Insurance Company may appear in the Companies' 2600
   Professionals Drive employment records Box 150 Okemos, MI 48805-0150
   Notice to the Companies: ProAssurance Corporation Mailing Address:
   P.O. Box 590009 Birmingham, Alabama 35259-0009 Street Address: 100
   Brookwood Place Birmingham, Alabama 35209 Attention: Chairman of the
   Board 12. Claims Procedure. (a) The administrator for purposes of this
   Agreement shall be ProAssurance ("Administrator"), whose address is
   100 Brookwood Place, Birmingham, Alabama 35209; Telephone: (205)
   877-4400. The "Named Fiduciary" as defined in Section 402(a)(2) or
   ERISA, also shall be ProAssurance. ProAssurance shall have the right
   to designate one or more employees of the Companies as the
   Administrator and the Named Fiduciary at any time, and to change the
   address and telephone number of the same. ProAssurance shall give the
   Executive written notice of any change in the Administrator and Named
   Fiduciary, or in the address or telephone number of the same. (b) The
   Administrator shall make all determinations as to the right of any
   person to receive benefits under the Agreement. Any denial by the
   Administrator of a claim for benefits by the Executive ("the
   claimant") shall be stated in writing by the Administrator and
   delivered or mailed to the claimant within ten (10) days after receipt
   of the claim, unless special circumstances require an extension of
   time for processing the claim. If such an extension is 18 required,
   written notice of the extension shall be furnished to the claimant
   prior to the termination of the initial 10-day period. In no event
   shall such extension exceed a period of ten (10) days from the end of
   the initial period. Any notice of denial shall set forth the specific
   reasons for the denial, specific reference to pertinent provisions of
   this Agreement upon which the denial is based, a description of any
   additional material or information necessary for the claimant to
   perfect the claim, with an explanation of why such material or
   information is necessary, and any explanation of claim review
   procedures, written to the best of the Administrator's ability in a
   manner that may be understood without legal or actuarial counsel. (c)
   A claimant whose claim for benefits has been wholly or partially
   denied by the Administrator may request, within ten (10) days
   following the receipt of such denial, in a writing addressed to the
   Administrator, a review of such denial. The claimant shall be entitled
   to submit such issues or comments in writing or otherwise, as the
   claimant shall consider relevant to a determination of the claim, and
   the claimant may include a request for a hearing in person before the
   Administrator. Prior to submitting the request, the claimant shall be
   entitled to review such documents as the Administrator shall agree are
   pertinent to the claim. The claimant may, at all stages of review, be
   represented by counsel, legal or otherwise, of the claimant's choice.
   All requests for review shall be promptly resolved. The
   Administrator's decision with respect to any such review shall be set
   forth in writing and shall be mailed to the claimant not later than
   ten (10) days following receipt by the Administrator of the claimant's
   request unless special circumstances, such as the need to hold a
   hearing, require an extension of time for processing, in which case
   the Administrator's decision shall be so mailed not later than twenty
   (20) days after receipt of such request. 19 13. Arbitration. The
   parties to this Agreement agree that final and binding arbitration
   shall be the sole recourse to settle any claim or controversy arising
   out of or relating to a breach or the interpretation of this
   Agreement, except as either party may be seeking injunctive relief.
   Either party may file for arbitration. A claimant seeking relief on a
   claim for benefits, however, must first follow the procedure in
   Section 12 hereof and may file for arbitration within sixty (60) days
   following claimant's receipt of the Administrator's written decision
   on review under Section 12(c) hereof, or if the Administrator fails to
   provide any written decision under Section 12 hereof, within 60 days
   of the date on which such written decision was required to be
   delivered to the claimant as therein provided. The arbitration shall
   be held at a mutually agreeable location, and shall be subject to and
   in accordance with the arbitration rules then in effect of the
   American Arbitration Association; provided that if the location cannot
   be agreed upon the arbitration shall be held in either Atlanta,
   Georgia, or Chicago, Illinois, whichever location is closer to the
   principal office where the Executive was employed on the Date of
   Termination. The arbitrator may award any and all remedies allowable
   by the cause of action subject to the arbitration, but the
   arbitrator's sole authority shall be to interpret and apply the
   provisions of this Agreement. In reaching its decision the arbitrator
   shall have no authority to change or modify any provision of this
   Agreement or other written agreement between the parties. The
   arbitrator shall have the power to compel the attendance of witnesses
   at the hearing. Any court having jurisdiction may enter a judgment
   based upon such arbitration. All decisions of the arbitrator shall be
   final and binding on the parties without appeal to any court. Upon
   execution of this Agreement, the Executive shall be deemed to have
   waived any right to commence litigation proceedings regarding this
   Agreement outside of arbitration or injunctive relief without the
   express consent of ProAssurance. The Companies shall pay all
   arbitration fees and the 20 arbitrator's compensation. If the
   Executive prevails in the arbitration proceeding, the Companies shall
   reimburse to the Executive the reasonable fees and expenses of
   Executive's personal counsel for his or her professional services
   rendered to the Executive in connection with the enforcement of this
   Agreement. 14. Miscellaneous. (a) Except insofar as this provision may
   be contrary to applicable law, no sale, transfer, alienation,
   assignment, pledge, collateralization or attachment of any benefits
   under this Agreement shall be valid or recognized by the Companies.
   (b) This Agreement is an unfunded deferred compensation arrangement
   for a member of a select group of the Companies' management and any
   exemptions under ERISA, as applicable to such arrangement, shall be
   applicable to this Agreement. Nothing in this Agreement shall require
   or be deemed to require the Companies or any of them to segregate,
   earmark or otherwise set aside any funds or other assets to provide
   for any payments made or required to be made hereunder. (c) Nothing in
   this Agreement shall be deemed to create an employment agreement
   between the Executive and the Companies or any of them providing for
   Executive's employment for any fixed duration, nor shall it be deemed
   to modify or undercut the Executive's at will employment status with
   the Companies. (d) Neither the provisions of this Agreement nor the
   severance benefits provided hereunder shall reduce any amounts
   otherwise payable, or in any way diminish the Executive's rights as an
   employee of the Companies, whether existing now or hereafter, under 21
   any benefit, incentive, retirement, stock option, stock bonus or stock
   purchase plan, or any employment agreement or other plan or
   arrangement. (e) This Agreement sets forth the entire agreement
   between the parties with respect to the matters set forth herein. This
   Agreement may not be modified or amended except by written agreement
   intended as such and signed by all parties. (f) This Agreement shall
   benefit and be binding upon the parties and their respective
   directors, officers, employees, representatives, agents, heirs,
   successors, assigns, devisees, and legal or personal representatives.
   (g) The Companies, from time to time, shall provide government
   agencies with such reports concerning this Agreement as may be
   required by law, and shall provide Executive with such disclosure
   concerning this Agreement as may be required by law or as the
   Companies may deem appropriate. (h) Executive and the Companies
   respectively acknowledge that each of them has read and understand
   this Agreement, that they have each had adequate time to consider this
   Agreement and discuss it with each of their attorneys and advisors,
   that each of them understands the consequences of entering into this
   Agreement, that each of them is knowingly and voluntarily entering
   into this Agreement, and that they are each competent to enter into
   this Agreement. (i) If any provision of this Agreement is determined
   to be unenforceable, at the discretion of ProAssurance the remainder
   of this Agreement shall not be affected but each remaining provision
   shall continue to be valid and effective and shall be modified so that
   it is enforceable to the fullest extent permitted by law. Moreover, in
   the event this Agreement is 22 determined to be unenforceable against
   any of the Companies, it shall continue to be valid and enforceable
   against the other Companies. (j) This Agreement will be interpreted as
   a whole according to its fair terms. It will not be construed strictly
   for or against either party. (k) Except to the extent that federal law
   controls, this Agreement is to be construed according to Michigan law.
   IN WITNESS WHEREOF, the parties have duly executed this Agreement as
   of this 27TH day of JUNE, 2001. EXECUTIVE: /s/ Darryl K. Thomas
   ---------------------------------------- Darryl K. Thomas PROASSURANCE
   CORPORATION By: /s/ A Derrill Crowe
   ------------------------------------ Its: Chairman PRONATIONAL
   INSURANCE COMPANY By: /s/ Victor T Adamo
   ------------------------------------ Its: President PROFESSIONALS
   GROUP, INC. By: /s/ Victor T Adamo
   ------------------------------------ Its: President 23 RELEASE IN
   CONJUNCTION WITH SEVERANCE COMPENSATION This Release of Claims
   ("Release") is between ProAssurance Corporation ("ProAssurance"),
   ProNational Insurance Company, Professionals Group, Inc., and any
   successor company that has assumed the Agreement to which this Release
   was an attachment (all such organizations being referred to in this
   Release as the "Companies") and Darryl K. Thomas ("Executive"). The
   Companies and Executive have agreed to terminate their employment
   relationship. To effect an orderly termination, the Executive, and the
   Companies are entering into this Release. 1. For the purposes of this
   Release, "Date of Termination" is the effective date of Executive's
   termination of employment from Companies. Executive hereby waives any
   and all rights Executive may otherwise have to continued employment
   with or re-employment by the Companies or any parent, subsidiary or
   affiliate of Companies. 2. Effective with the Date of Termination,
   Executive is relieved of all duties and obligations to the Companies,
   except as provided in this Release or any applicable provisions of the
   Change of Control Agreement between Companies and Executive, effective
   as of June 27, 2001 ("Agreement"), which survive termination of the
   employment relationship. 3. Executive agrees that this Release and its
   terms are confidential and shall not be disclosed or published
   directly or indirectly to third persons, except as necessary to
   enforce its terms, by Executive or to Executive's immediate family
   upon their agreement not to disclose the fact or terms of this
   Release, or to Executive's attorney, financial consultant or
   accountant, except that Executive may disclose, as necessary, the fact
   that Executive has terminated Executive's employment with the
   Companies. 4. Any fringe benefits that Executive has received or
   currently is receiving from the Companies or its affiliates shall
   cease effective with the Date of Termination, except as otherwise
   provided for in this Release, in the Agreement or by law. 5. The
   parties agree that the terms contained and payments provided for in
   the Agreement are compensation for and in full consideration of
   Employee's release of claims under this Release, and Executive's
   confidentiality, non-compete, non-solicitation and non-disclosure
   agreements contained in the Agreement. 6. The Executive shall be under
   no duty or obligation to seek or accept other employment and shall not
   be required to mitigate the amount of the Severance Benefits (as
   defined and provided under the Agreement) by seeking employment or
   otherwise, provided, however, that the Executive shall be required to
   notify the Companies if the Executive becomes covered by a health or
   dental care program providing substantially similar coverage, at which
   time health or dental care continuation coverage provided under the
   Agreement shall cease. 24 7. Executive waives, releases, and forever
   discharges the Companies and each of their direct or indirect parents,
   subsidiaries, affiliates, and any partnerships, joint ventures or
   other entities involving or related to any of the Companies, their
   parents, subsidiaries or affiliates, and all present or former
   employees, officers, agents, directors, successors, assigns and
   attorneys of any of these corporations, persons or entities (all
   collectively referred to in this Release as the "Released") from any
   and all claims, charges, suits, causes of action, demands, expenses
   and compensation whatsoever, known or unknown, direct or indirect, on
   account of or growing out of Executive's employment with and
   termination from the Companies, or relationship or termination of such
   relationship with any of the Released, or arising out of related
   events occurring through the date on which this Release is executed.
   This includes, but is not limited to, claims for breach of any
   employment contract; handbook or manual; any express or implied
   contract; any tort; continued employment; loss of wages or benefits;
   attorney fees; employment discrimination arising under any federal,
   state, or local civil rights or anti-discrimination statute, including
   specifically any claims Executive may have under the federal Age
   Discrimination in Employment Act, as amended, 29 USC Sections 621, et
   seq.; emotional distress; harassment; defamation; slander; and all
   other types of claims or causes of action whatsoever arising under any
   other state or federal statute or common law of the United States. 8.
   The Executive does not waive or release any rights or claims that may
   arise under the federal Age Discrimination in Employment Act, as
   amended, after the date on which this Release is executed by the
   Executive. 9. The Executive acknowledges and agrees that Executive has
   been advised in writing by this Release, and otherwise, to CONSULT
   WITH AN ATTORNEY before Executive executes this Release. 10. The
   Executive agrees that Executive received a copy of this Release prior
   to executing the Agreement, that this Release incorporates the
   Companies' FINAL OFFER; that Executive has been given a period of at
   least twenty-two (22) calendar days within which to consider this
   Release and its terms and to consult with an attorney should Executive
   so elect. 11. The Executive shall have seven (7) calendar days
   following Executive's execution of this Release to revoke this
   Release. Any revocation of this Release shall be made in writing by
   the Executive and shall be received on or before the time of close of
   business on the seventh calendar day following the date of the
   Employee's execution of this Release at ProAssurance's address at 100
   Brookwood Place, P. O. Box 590009, Birmingham, Alabama 35259-0009,
   Attention: Chairman, or such other place as the Companies may notify
   Executive in writing. This Release shall not become effective or
   enforceable until the eighth (8th) calendar day following the
   Executive's execution of this Release. 12. Executive and the Companies
   acknowledge that they have read and understand this Release, that they
   have had adequate time to consider this Release and discuss it with
   their attorneys and advisors, that they understand the consequences of
   entering into this Release, that they are knowingly and voluntarily
   entering into this Release, and that they are competent to enter into
   this Release. 25 13. This Release shall benefit and be binding upon
   the parties and their respective directors, officers, employees,
   agents, heirs, successors, assigns, devisees and legal or personal
   representatives. 14. This Release, along with the attached Agreement,
   sets forth the entire agreement between the parties at the time and
   date these documents are executed, and fully supersedes any and all
   prior agreements or understandings between them pertaining to the
   subject matter in this Release. This Release may not be modified or
   amended except by a written agreement intended as such, and signed by
   all parties. 15. Except to the extent that federal law controls, this
   Release is to be construed according to the law of the state of
   Michigan. 16. If any provision of this Release is determined to be
   unenforceable, at the discretion of ProAssurance the remainder of this
   Release shall not be affected but each remaining provision or portion
   shall continue to be valid and effective and shall be modified so that
   it is enforceable to the fullest extent permitted by law. 17. To
   signify their agreement to the terms of this Release, the parties have
   executed it on the date set forth opposite their signatures, or those
   of their authorized agents, which follow. EXECUTIVE Dated:
   ------------------- ---------------------------------------- Darryl K.
   Thomas PROASSURANCE CORPORATION Dated: By: -------------------
   ------------------------------------ Its:
   ----------------------------------- PROFESSIONALS GROUP, INC. Dated:
   By: ------------------- ------------------------------------ Its:
   ----------------------------------- PRONATIONAL INSURANCE COMPANY
   Dated: By: ------------------- ------------------------------------
   Its: ----------------------------------- 26 EX-21.1 3
   g99804exv21w1.txt EX-21.1 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1
   SUBSIDIARIES OF PROASSURANCE CORPORATION Medical Assurance, Inc.
   (Delaware) The Medical Assurance Company, Inc. (Alabama) IAO, Inc.
   (Alabama) Woodbrook Casualty Insurance Company, Inc. (Alabama) Medical
   Insurance of Indiana Agency, Inc. (Indiana) Mutual Assurance Agency of
   Ohio, Inc. (Ohio) NCRIC Corporation (Delaware) NCRIC Physicians
   Organization, Inc. (District of Columbia) NCRIC, Inc. (District of
   Columbia) American Captive Corporation (District of Columbia) National
   Capital Insurance Brokerage Ltd. (District of Columbia) National
   Capital Risk Services LLC (Nevada) NCRIC Insurance Agency, Inc.
   (District of Columbia) Healthcare Compliance Purchasing Group, LLC
   (District of Columbia) E-Health Solutions Group, Inc. (Delaware)
   ProAssurance Group Services Corporation (Alabama) Professionals Group
   Inc. (Michigan) American Insurance Management Corporation (Indiana)
   ProNational Insurance Agency, Inc. (Michigan) Professionals Group
   Services Corporation (Michigan) Professionals National Insurance
   Company, Ltd. (Bermuda) PRA Services Corporation (Michigan) Physicians
   Protective Plan, Inc. (Florida) ProNational Insurance Company
   (Michigan) Red Mountain Casualty Insurance Company (Alabama) MEMH
   Holdings, Inc. (Michigan) MEEMIC Insurance Company (Michigan) MEEMIC
   Insurance Services Corporation (Michigan) EX-23.1 4 g99804exv23w1.txt
   EX-23.1 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF
   INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the
   incorporation by reference in the following Registration Statements of
   our reports dated February 27, 2006, with respect to the consolidated
   financial statements and schedules of ProAssurance Corporation,
   ProAssurance Corporation management's assessment of the effectiveness
   of internal control over financial reporting, and the effectiveness of
   internal control over financial reporting of ProAssurance Corporation,
   included in this Annual Report (Form 10-K) for the year ended December
   31, 2005: Form S-3 No. 333-109972 pertaining to the registration of
   $107,600,000 convertible senior debentures and ProAssurance
   Corporation shares of common stock under this shelf registration; Form
   S-8 No. 333-111136 pertaining to the Amended and Restated ProAssurance
   Corporation Stock Ownership Plan; Form S-8 No. 333-81444 pertaining to
   the ProAssurance Corporation Incentive Compensation Stock Plan; Form
   S-8 No. 333-119917 pertaining to the ProAssurance Corporation 2004
   Equity Incentive Plan; Post-Effective Amendment No. 1 to Form S-4 on
   Form S-8 File No. 333-49378 pertaining to the Medical Assurance, Inc.
   Incentive Compensation Stock Plan and Professionals Group, Inc. 1996
   Long Term Stock Incentive Plan assumed by ProAssurance Corporation;
   Form S-4 No. 333-124156 pertaining to the registration of 2,000,000
   common shares in connection with the NCRIC Group, Inc. purchase
   transaction; Form S-4 No. 333-131874 relating to the registration of
   2,480,050 common shares in connection with the proposed Physicians
   Insurance Company of Wisconsin, Inc. transaction. /s/ Ernst & Young
   Birmingham, Alabama February 27, 2006 EX-31.1 5 g99804exv31w1.txt
   EX-31.1 SECTION 302 CERTIFICATION OF THE PEO Exhibit 31.1
   CERTIFICATION I, A. Derrill Crowe, certify that: 1. I have reviewed
   this report on Form 10-K of ProAssurance Corporation; 2. Based on my
   knowledge, this report does not contain any untrue statement of a
   material fact or omit to state a material fact necessary to make the
   statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period
   covered by this report; 3. Based on my knowledge, the financial
   statements, and other financial information included in this report,
   fairly present in all material respects the financial condition,
   results of operations and cash flows of the registrant as of, and for,
   the periods presented in this report; 4. The registrant's other
   certifying officer and I are responsible for establishing and
   maintaining disclosure controls and procedures (as defined in Exchange
   Act Rules 13a-15(e) and 15d-15 (e)) and internal control over
   financial reporting (as defined in Exchange Act Rules 13a-15(f) and
   15d-15(f)) for the registrant and have: a) Designed such disclosure
   controls and procedures, or caused such disclosure controls and
   procedures to be designed under our supervision, to ensure that
   material information relating to the registrant, including its
   consolidated subsidiaries, is made known to us by others within those
   entities, particularly during the period in which this report is being
   prepared; b) Designed such internal control over financial reporting,
   or caused such internal control over financial reporting to be
   designed under our supervision, to provide reasonable assurance
   regarding the reliability of financial reporting and the preparation
   of financial statements for external purposes in accordance with
   generally accepted accounting principles; c) Evaluated the
   effectiveness of the registrant's disclosure controls and procedures
   and presented in this report our conclusions about the effectiveness
   of the disclosure controls and procedures, as of the end of the period
   covered by this report based on such evaluation; and d) Disclosed in
   this report any change in the registrant's internal control over
   financial reporting that occurred during the registrant's most recent
   fiscal quarter (the registrant's fourth fiscal quarter in the case of
   an annual report) that has materially affected, or is reasonably
   likely to materially affect, the registrant's internal control over
   financial reporting; and 5. The registrant's other certifying officer
   and I have disclosed, based on our most recent evaluation of internal
   control over financial reporting, to the registrant's auditors and the
   audit committee of registrant's board of directors (or persons
   performing the equivalent functions): a) All significant deficiencies
   and material weaknesses in the design or operation of internal control
   over financial reporting which are reasonably likely to adversely
   affect the registrant's ability to record, process, summarize and
   report financial information; and b) Any fraud, whether or not
   material, that involves management or other employees who have a
   significant role in the registrant's internal control over financial
   reporting. Date: February 28, 2005 /s/ A. Derrill Crowe, M.D.
   -------------------------- A. Derrill Crowe, M.D. Chief Executive
   Officer EX-31.2 6 g99804exv31w2.txt EX-31.2 SECTION 302 CERTIFICATION
   OF THE PFO Exhibit 31.2 CERTIFICATIONS I, Edward L. Rand, Jr., certify
   that: 1. I have reviewed this report on Form 10-K of ProAssurance
   Corporation; 2. Based on my knowledge, this report does not contain
   any untrue statement of a material fact or omit to state a material
   fact necessary to make the statements made, in light of the
   circumstances under which such statements were made, not misleading
   with respect to the period covered by this report; 3. Based on my
   knowledge, the financial statements, and other financial information
   included in this report, fairly present in all material respects the
   financial condition, results of operations and cash flows of the
   registrant as of, and for, the periods presented in this report; 4.
   The registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as
   defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal
   control over financial reporting (as defined in Exchange Act Rules
   13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such
   disclosure controls and procedures, or caused such disclosure controls
   and procedures to be designed under our supervision, to ensure that
   material information relating to the registrant, including its
   consolidated subsidiaries, is made known to us by others within those
   entities, particularly during the period in which this report is being
   prepared; b) Designed such internal control over financial reporting,
   or caused such internal control over financial reporting to be
   designed under our supervision, to provide reasonable assurance
   regarding the reliability of financial reporting and the preparation
   of financial statements for external purposes in accordance with
   generally accepted accounting principles; c) Evaluated the
   effectiveness of the registrant's disclosure controls and procedures
   and presented in this report our conclusions about the effectiveness
   of the disclosure controls and procedures, as of the end of the period
   covered by this report based on such evaluation; and d) Disclosed in
   this report any change in the registrant's internal control over
   financial reporting that occurred during the registrant's most recent
   fiscal quarter (the registrant's fourth fiscal quarter in the case of
   an annual report) that has materially affected, or is reasonably
   likely to materially affect, the registrant's internal control over
   financial reporting; and 5. The registrant's other certifying officer
   and I have disclosed, based on our most recent evaluation of internal
   control over financial reporting, to the registrant's auditors and the
   audit committee of registrant's board of directors (or persons
   performing the equivalent functions): a) All significant deficiencies
   and material weaknesses in the design or operation of internal control
   over financial reporting which are reasonably likely to adversely
   affect the registrant's ability to record, process, summarize and
   report financial information; and b) Any fraud, whether or not
   material, that involves management or other employees who have a
   significant role in the registrant's internal control over financial
   reporting. Date: February 28, 2005 /s/ Edward L. Rand, Jr.
   --------------------------------- Edward L. Rand, Jr. Chief Financial
   Officer EX-32.1 7 g99804exv32w1.txt EX-32.1 SECTION 906 CERTIFICATION
   OF THE PEO Exhibit 32.1 A signed original of this written statement
   required by Section 906 has been provided to ProAssurance Corporation
   and will be retained by ProAssurance Corporation and furnished to the
   Securities and Exchange Commission or its staff upon request.
   CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
   TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with
   the Annual Report of ProAssurance Corporation (the "Company") on Form
   10-K for the year ending December 31, 2005 as filed with the
   Securities and Exchange Commission on the date hereof (the "Report"),
   I, A. Derrill Crowe, M.D., Chief Executive Officer of the Company,
   certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
   Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report
   fully complies with the requirements of Section 13(a) of the
   Securities Exchange Act of 1934; and (2) The information contained in
   the Report fairly presents, in all material respects, the financial
   condition and result of operations of the Company. /s/ A. Derrill
   Crowe, M.D. -------------------------- A. Derrill Crowe, M.D. Chief
   Executive Officer February 28, 2005 EX-32.2 8 g99804exv32w2.txt
   EX-32.2 SECTION 906 CERTIFICATION OF THE PFO Exhibit 32.2 A signed
   original of this written statement required by Section 906 has been
   provided to ProAssurance Corporation and will be retained by
   ProAssurance Corporation and furnished to the Securities and Exchange
   Commission or its staff upon request. CERTIFICATION PURSUANT TO 18
   U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
   SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of
   ProAssurance Corporation (the "Company") on Form 10-K for the year
   ending December 31, 2005 as filed with the Securities and Exchange
   Commission on the date hereof (the "Report"), I, Edward L. Rand, Jr.,
   Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
   Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
   Act of 2002, that: (1) The Report fully complies with the requirements
   of Section 13(a) of the Securities Exchange Act of 1934; and (2) The
   information contained in the Report fairly presents, in all material
   respects, the financial condition and result of operations of the
   Company. /s/ Edward L. Rand, Jr. ----------------------- Edward L.
   Rand, Jr. Chief Financial Officer February 28, 2005 -----END
   PRIVACY-ENHANCED MESSAGE-----

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