EIHI Eastern Insurance Holdings - Common Stock, NO Par Value (MM)

PROXY STATEMENT

SPECIAL MEETING OF SHAREHOLDERS

We are providing this proxy statement and accompanying proxy card to you in connection with the solicitation by the board of directors of Eastern Insurance Holdings, Inc. of proxies to be voted at a special meeting of shareholders and at any postponement or adjournment of the special meeting. In this proxy statement, “Eastern,” “we,” “us,” and “our” refer to Eastern Insurance Holdings, Inc.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a shareholder of Eastern. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, all of which you should read carefully. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find Additional Information” beginning on page     .

You are receiving this proxy statement because you own shares of our common stock. This proxy statement contains important information about the proposed transaction and the special meeting, and you should read it carefully. The enclosed proxy card allows you to vote your shares of Eastern common stock without attending the special meeting in person.

Your vote is extremely important, and we encourage you to vote as soon as possible. For more information on how to vote your shares of Eastern common stock, please see the section of this proxy statement entitled “The Special Meeting” beginning on page     .

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YOU SHOULD CONSULT YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO YOU, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS OR ANY OTHER U.S. FEDERAL TAX LAWS.

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If you properly sign your proxy card but do not mark the boxes indicating how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

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If you hold your shares in “street name” and you have instructed a broker, bank or nominee to vote your shares, the above-described options for changing your vote do not apply, and instead you must follow the instructions received from your broker, bank or nominee to change your vote.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement, and the documents to which we refer you in this proxy statement, contain forward-looking statements intended to be covered by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include financial projections and their underlying assumptions, other information concerning possible or assumed future results of operations of Eastern, the expected completion and timing of the merger and other information relating to the merger. There are forward-looking statements throughout this proxy statement, including, among others, under the headings “Summary,” “The Merger,” “The Merger—Opinion of Keefe, Bruyette & Woods, Inc.” and in statements containing the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimates” or other similar expressions. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. These forward-looking statements reflect management’s current expectations and forecasts, and we cannot assure you that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on the business or operations of Eastern. In addition to other factors and matters discussed in this document or discussed and identified in other public filings we make with the SEC, we believe the following risks could cause actual results to differ materially from those discussed in the forward-looking statements:

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You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document or the date of any document to which we refer you. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this document and attributable to Eastern or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, Eastern undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

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RISK FACTORS RELATING TO THE MERGER

In addition to the other information included in this proxy statement or referred to in this document, you should consider carefully the risk factors described below in deciding how to vote. You should keep these risk factors in mind when you read forward-looking statements in this proxy statement.

The need for regulatory approval may delay the date of completion of the merger or may diminish the benefits of the merger.

ProAssurance is required to obtain approval of the merger from the Pennsylvania Insurance Department. Satisfying any requirements of the Pennsylvania Insurance Department may delay the date of completion of the merger. In addition, conditions to the approval of the merger imposed by the Pennsylvania Insurance Department may diminish the benefits of the merger to ProAssurance. A condition of ProAssurance’s obligation to close is that the permits, authorizations, consents, and approvals from these insurance regulators may be subject only to:

See “The Merger Agreement—Conditions to the Merger.”

Directors and executive officers of Eastern have interests in the merger that are different from, or in addition to, the interests of Eastern shareholders.

Eastern’s executive officers and directors have economic interests in the merger that are different from, or in addition to, their interests as Eastern shareholders. These interests include rights of executive officers under the severance and retention agreements that they entered into with ProAssurance that become effective on the effective date of the merger, the termination of the ESOP and the distribution of account balances to the ESOP participants, including officers of Eastern, and rights of directors and officers to continued indemnification and insurance coverage by ProAssurance after the merger for acts or omissions occurring before the merger. Eastern’s directors and executive officers will also receive payment for all of their outstanding vested and unvested options and restricted stock awards. See “The Merger—Interests of Our Directors and Executive Officers in the Merger.”

The merger may distract management from their other responsibilities.

The merger could cause the management of Eastern to focus their time and energy on matters relating to the merger that would otherwise be directed to the business and operations of Eastern. Any such distraction on the part of Eastern’s management, if significant, could affect its ability to service existing business and develop new business and adversely affect the business and earnings of Eastern if the merger is not consummated.

If the merger is not completed, Eastern will have incurred substantial expenses without its shareholders realizing the expected benefits.

Eastern has incurred substantial expenses in connection with the transactions described in this proxy statement. If the merger is not completed, Eastern expects to incur approximately $1,000,000 in merger-related expenses, exclusive of any termination fee. These expenses may have an adverse impact on the earnings of Eastern. No assurance can be given that the merger will be completed.

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The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire Eastern.

Until completion or termination of the merger, Eastern is prohibited from soliciting, initiating, encouraging, or with some exceptions, considering any inquiries or proposals that may lead to a proposal or offer for a merger or other business combination transaction with any person other than ProAssurance. In addition, Eastern has agreed to pay ProAssurance a termination fee equal to 4.0% of the merger consideration and to reimburse ProAssurance for its out-of-pocket expenses under certain specified circumstances. See “Merger Agreement—Termination Fee.” These provisions could discourage other companies from trying to acquire Eastern even though those other companies might be willing to offer greater value to Eastern’s shareholders than ProAssurance has agreed to pay in the merger. Absent the successful completion of a business combination with another company, the payment of the termination fee would have a material adverse effect on the financial condition of Eastern.

A downgrade of our financial strength rating by A.M. Best Company, Inc. could permit ProAssurance to elect not to complete the merger.

On September 24, 2013, A.M. Best Company, Inc., or A.M. Best, commented that the financial strength rating of A (Excellent) for Eastern remained unchanged following the announcement of the merger agreement.

A downgrade of our rating may permit ProAssurance to elect not to close under the merger agreement, unless such downgrade directly resulted from the announcement of the merger. See “The Merger Agreement—Conditions to Closing.”

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THE SPECIAL MEETING

Time and Place of the Special Meeting

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on November     , 2013, starting at                  , local time, at Eastern’s corporate offices, 25 Race Avenue, Lancaster, Pennsylvania or at any postponement or adjournment of the special meeting. This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on or about October     , 2013.

Matters to be Considered

At the special meeting, our shareholders will be asked to consider and vote upon the following proposals:

Record Date and Quorum

The holders of record of Eastern common stock as of the close of business on October     , 2013, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. On the record date, there were                  shares of our common stock outstanding and entitled to vote.

The holders of a majority of the outstanding shares of our common stock on the record date represented in person or by proxy will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. Any shares of common stock held in treasury by Eastern or owned by any of our subsidiaries for their own account are not considered to be outstanding for purposes of determining a quorum. Abstentions and properly executed broker non-votes, if any, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any postponement or adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established.

Required Vote

Completion of the merger requires the adoption of the merger agreement by the affirmative vote of the holders of a majority of the Eastern common stock voted at the special meeting, provided that a quorum exists. The affirmative vote of a majority of the shares of Eastern common stock voted at the special meeting is required to adjourn or postpone the meeting. Each outstanding share of Eastern common stock on the record date entitles the holder to one vote on each proposal considered at the special meeting.

If your shares are held in “street name” by your broker, bank or other nominee you should instruct your broker, bank or other nominee how to vote your shares using the instructions provided by your broker, bank or other nominee. If you have not received these voting instructions or require further information regarding these voting instructions, contact your broker, bank or other nominee and he or she can give you directions on how to vote your shares. New York Stock Exchange and NASDAQ member brokers who hold shares in “street name” for customers may not exercise their voting discretion with respect to the approval of non-routine matters such as the merger proposal, and thus, absent specific instructions from the beneficial owner of the shares, brokers are not empowered to vote the shares with respect to the adoption of the merger agreement. Shares of Eastern common stock held by persons attending the special meeting but not voting, or shares for which we have

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received proxies with respect to which holders have abstained from voting, will be considered abstentions. Abstentions and properly executed broker non-votes, which are shares of Eastern common stock for which proxies have been returned by a broker indicating that the broker has not received voting instructions from the beneficial owner of the shares and does not have discretionary authority to vote the shares, if any, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists.

We currently expect that all of our executive officers and directors will vote all of their shares of common stock “FOR” the adoption of the merger agreement and “FOR” any postponement or adjournment of the special meeting to solicit additional proxies. As of October 1, 2013, directors and executive officers of Eastern owned a total of 1,384,218 shares, representing approximately 17.5% of the shares entitled to vote on the merger.

Proxies; Revocation

If you are a shareholder of record and submit a proxy by telephone or the Internet or by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your proxy card or by such other method. If no instructions are indicated on your proxy card or by such other method, your shares of Eastern common stock will be voted “FOR” the adoption of the merger agreement and “FOR” any postponement or adjournment of the special meeting to solicit additional proxies.

You may revoke your proxy at any time before the vote is taken at the special meeting. To revoke your proxy, you must do one of the following: advise our Corporate Secretary in writing prior to the voting of the proxy; submit, by telephone, the Internet or mail, a proxy dated after the date of the proxy you wish to revoke; or attend the special meeting and vote your shares in person. Attendance at the special meeting will not by itself constitute revocation of a proxy.

If you have instructed your broker, bank or other nominee to vote your shares, the options for revoking your proxy described in the paragraph above do not apply, and instead you must follow the directions provided by your broker, bank or other nominee to change those instructions.

Written notices of revocation and other communications regarding the revocation of your proxy should be addressed to:

Eastern Insurance Holdings, Inc.

25 Race Avenue

Lancaster, Pennsylvania 17603

Attention: Scott C. Penwell, Corporate Secretary

Eastern does not expect that any matter other than the adoption of the merger agreement and adjournment, if necessary, will be brought before the special meeting. If, however, such a matter is properly presented at the special meeting or any adjournment or postponement of the special meeting, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their judgment.

Attending the Meeting

Eastern shareholders who plan to attend the special meeting and wish to vote in person will be given a ballot at the special meeting. If you hold your shares of Eastern common stock in street name and you want to vote those shares in person at the Eastern special meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

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Voting via the Internet or by Telephone

Shareholders of record and many shareholders who hold their shares through a broker, bank or other nominee will have the option to submit their proxies or voting instructions via the Internet or by telephone. There are separate arrangements for using the Internet and telephone to submit your proxy depending on whether you are a shareholder of record or your shares are held in “street name.” If your shares are held in “street name,” you should check the voting instruction card provided by your broker, bank or other nominee to see which options are available and the procedures to be followed.

In addition to submitting the enclosed proxy card by mail, Eastern shareholders of record may submit their proxies:

Solicitation of Proxies

Eastern will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, directors, officers and employees of Eastern may solicit proxies personally and by telephone, facsimile or other electronic means of communication. These persons will not receive additional or special compensation for such solicitation services. Eastern will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

Additional Information

If you have more questions about the merger, need assistance in voting your shares or need additional copies of this proxy statement or the enclosed proxy card, you should contact Kevin M. Shook, Executive Vice President, Treasurer and Chief Financial Officer, by phone at (855) 533-3444 or by email at kshook@eains.com . If your broker holds your shares, you should also call your broker for additional information.

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THE PARTIES TO THE MERGER

Eastern Insurance Holdings, Inc.

Eastern is an insurance holding company owning, directly and indirectly, all of the outstanding shares of three insurance companies and certain non-insurance subsidiaries. Our insurance companies, Eastern Alliance Insurance Company, Allied Eastern Indemnity Company, and Eastern Advantage Assurance Company are licensed collectively in 30 states, but are currently focused on underwriting property and casualty insurance in Pennsylvania, Indiana, North Carolina, Virginia, Maryland, South Carolina, Delaware, New Jersey, Tennessee, Michigan, and Kentucky with a recent expansion into the Gulf South states. At June 30, 2013, Eastern had $407.3 million in assets and total shareholders’ equity of $140.8 million. For the six months ended June 30, 2013, Eastern had total revenues of $91.5 million.

Collectively, Eastern’s insurance companies have been assigned a group rating of “A” (Excellent) by A.M. Best. Eastern’s insurance companies have been assigned that rating for the past 4 years. An “A” rating is the third highest rating of A.M. Best’s 16 possible rating categories. Upon the announcement of the merger, A.M. Best affirmed the “A” rating.

Eastern Alliance Insurance Company (“Eastern Alliance”), Allied Eastern Indemnity Company (“Allied Eastern”), and Eastern Advantage Assurance Company (“Eastern Advantage”) are Pennsylvania insurance companies. Employers Alliance, Inc. is a wholly owned subsidiary of Eastern that offers claims administration and risk management services to self-insured property/casualty customers. Eastern Re Ltd., SPC (“Eastern Re”) is a segregated portfolio cell reinsurance company domiciled in the Cayman Islands.

Eastern Alliance, Allied Eastern, and Eastern Advantage offer workers’ compensation insurance coverage to employers, generally with 1,000 employees or less, primarily in the Mid-Atlantic, Southeast, and Midwest regions of the continental United States. During 2012, Eastern expanded into the Gulf South region, with a primary focus in the states of Mississippi, Alabama, Arkansas and Louisiana. Eastern’s workers’ compensation products include guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies, deductible policies, and alternative market programs. Through Eastern Re, its Cayman Islands subsidiary, Eastern offers alternative market workers’ compensation solutions to individual companies, groups, and associations through the creation of segregated portfolio cells. The segregated portfolio cells are segregated pools of assets and liabilities that function as insurance companies within an insurance company.

Eastern Insurance Holdings, Inc. is incorporated in the Commonwealth of Pennsylvania with its principal executive offices at 25 Race Avenue, Lancaster, Pennsylvania 17603, and its telephone number is (855) 533-3444.

For more information on Eastern, see “Where You Can Find Additional Information” on page     .

ProAssurance Corporation

ProAssurance is a Delaware insurance holding company for property and casualty insurance companies focused on professional and product liability insurance. At June 30, 2013, ProAssurance had assets of $5.1 billion and total shareholders’ equity of $2.3 billion. For the six months ended June 30, 2013, ProAssurance had total revenues of $365.8 million.

For the six months ended June 30, 2013, ProAssurance’s professional liability insurance business accounted for approximately 96% of its net premiums earned. ProAssurance’s common stock is traded on the New York Stock Exchange under the symbol “PRA.”

Its principal executive offices are located at 100 Brookwood Place, Birmingham, Alabama 35209, and its telephone number is (205) 877-4400.

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PA Merger Company

PA Merger Company, or Acquisition Corp., is a Pennsylvania corporation and a wholly owned subsidiary of ProAssurance. Acquisition Corp.’s principal executive offices are located at c/o ProAssurance Corporation, 100 Brookwood Place, Birmingham, Alabama 35209, and its telephone number is (205) 877-4400. Acquisition Corp. was organized solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement. It has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement. Under the terms of the merger agreement, Acquisition Corp. will merge with and into Eastern. Eastern will survive the merger as a wholly owned subsidiary of ProAssurance, and Acquisition Corp. will cease to exist at the effective time of the merger.

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THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully because it is the legal document that governs the terms and conditions of the merger.

Introduction

We are seeking approval of the merger agreement among ProAssurance, Acquisition Corp. and Eastern. If the merger is completed, Acquisition Corp. will be merged with and into Eastern and Eastern will continue as the surviving corporation and a wholly owned subsidiary of ProAssurance. In addition, if the merger is completed, Eastern will cease to be a publicly held company. In connection with the merger, each outstanding share of our common stock will be canceled and converted into the right to receive $24.50 in cash per share, without interest and less any required withholding taxes. You will not own any shares of capital stock of the surviving corporation.

Background of the Merger

Since Eastern became a public company in 2006, our board of directors and our senior management regularly reviewed and assessed opportunities to achieve our long-term strategic goals and to increase shareholder value. The strategy that evolved for Eastern consisted of:

The board of directors also believed that transforming Eastern into a “pure play” workers’ compensation company made it more understandable to investors and more attractive to potential buyers of the Company.

Examples of this strategy include:

Once we had disposed of substantially all lines of business other than our workers’ compensation line, the level of interest in the Company from potential buyers increased as expected. The Company periodically evaluated inorganic opportunities, including the possible sale of the Company and bolt on acquisitions. Due to the deep recession that began in 2008 and the slow recovery from that recession, however, the board believed that a sale of the Company was not likely to occur until 2014 or later.

One company with whom management had informal discussions during 2012 was ProAssurance, which resulted in an initial meeting at the Philadelphia airport on July 13, 2012, between Michael Boguski,

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President and Chief Executive Officer of Eastern, and Kevin Shook, Executive Vice President, Treasurer and Chief Financial Officer of Eastern, and Howard Friedman, Senior Vice President and Chief Underwriting Officer, Victor Adamo, Vice Chairman (now retired), and Jeffrey Bowlby, Senior Vice President and Chief Marketing Officer, of ProAssurance. At this initial meeting, the executives from both companies presented their company histories, their financial performance and strategic plans. There was mutual interest in further discussions as a result of this initial meeting, and a subsequent meeting was held on September 27, 2012, at ProAssurance’s headquarters in Birmingham, Alabama which included Messrs. Boguski and Shook from Eastern and from ProAssurance, Messrs. Friedman, Adamo and Bowlby, who attended the July 13, 2012 meeting, together with W. Stancil Starnes, Chairman and CEO, Edward L. Rand, Jr., Senior Vice President and Chief Financial Officer, Frank O’Neil, Senior Vice President, Corporate Communications and Investor Relations, and Jeffrey P. Lisenby, General Counsel.

During October and December of 2012, Messrs. Boguski and Shook had conference calls with Howard Friedman of ProAssurance and provided Mr. Friedman with additional information relating to Eastern and its business.

On April 3, 2013, the board received a presentation from Keefe, Bruyette & Woods, Inc., a nationally recognized investment banking firm specializing in the financial services industry (“KBW”). The presentation provided a general update on the current market for mergers and acquisitions, an overview of ProAssurance and some preliminary valuation analysis of Eastern.

On April 17, 2013, Eastern and ProAssurance entered into a nondisclosure agreement. Upon execution of the nondisclosure agreement, Mr. Shook provided further information relating to Eastern to representatives of ProAssurance.

On May 22, 2013, representatives of Eastern met with representatives of ProAssurance at ProAssurance’s headquarters in Birmingham, Alabama to discuss the possible terms of an acquisition of Eastern by ProAssurance. ProAssurance indicated that it would prefer to make an offer consisting of part cash and part stock. Messrs. Boguski and Shook informed ProAssurance that Eastern’s board of directors had a strong preference for an all cash transaction.

The parties agreed during this time frame that the general counsel for ProAssurance and Eastern’s external counsel, Stevens & Lee, should have a preliminary discussion regarding various provisions of Pennsylvania corporate law regarding mergers and other matters. That discussion occurred in late May 2013.

In addition, as discussions progressed, Mr. Shook continued to provide ProAssurance with additional information relating to Eastern and its business.

On May 29, 2013, Eastern’s board participated in a teleconference during which Messrs. Boguski and Shook briefed the board on the status of the discussions with ProAssurance. The board directed Messrs. Boguski and Shook to continue discussions with ProAssurance.

Further discussions between Mr. Shook and Mr. Friedman continued during June 2013. On June 12, 2013, Eastern’s board participated in a teleconference during which Messrs. Boguski and Shook briefed the board on the status of the discussions with ProAssurance. Mr. Boguski reported that ProAssurance had offered to acquire Eastern in an all cash transaction for a price of $23.50 per share and had requested a 5% breakup fee in the event Eastern accepted a competing offer after the execution of a definitive merger agreement. In addition, other terms of the ProAssurance offer included that Eastern will maintain its corporate office in Lancaster, Pennsylvania and its existing regional and satellite offices, existing Eastern agency relationships would be maintained, there would be no planned reduction in jobs, and Eastern will operate autonomously under the Eastern Alliance Insurance Group brand. The board instructed Mr. Boguski and Mr. Shook to advise

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ProAssurance that $23.50 per share was not reflective of the Company’s value and that a higher price would be required for negotiations to continue. The board also requested that the breakup fee be reduced.

Discussions among Eastern’s management and ProAssurance’s management continued during the remaining weeks of June, and on July 1, 2013, Eastern’s board participated in a teleconference during which Mr. Boguski reported that ProAssurance had increased its offer to $24.50 per share and reduced its breakup fee to 4% plus reimbursement of any out-of-pocket expenses up to $1.0 million in the event Eastern accepted another offer after entering into a definitive agreement with ProAssurance. The board determined that the ProAssurance offer was acceptable and instructed management to engage KBW as its financial advisor to contact other potential parties with regard to an acquisition of Eastern and to provide an opinion as to the fairness of the ProAssurance offer from a financial point of view, provided that management could negotiate an acceptable fee with KBW.

On July 10, 2013, ProAssurance provided Eastern with a draft of a letter of intent setting forth the financial terms of an all-cash merger between Eastern and ProAssurance. On July 12, 2013, Eastern’s board participated in teleconference to discuss the proposed letter of intent submitted by ProAssurance. At the board’s direction, Mr. Shook, with the assistance of Eastern’s counsel, provided ProAssurance with proposed revisions to the letter of intent. ProAssurance provided Eastern with a revised letter of intent on July 12, 2013. At the board’s direction, on July 12, 2013, Eastern executed the revised letter of intent with ProAssurance.

The letter of intent provided that Eastern could terminate the letter of intent for any reason prior to 5:00 p.m. Eastern Time on August 1, 2013. In consideration of ProAssurance continuing to expend resources toward completion of the transaction, Eastern agreed that if Eastern received a proposal from any person other than ProAssurance prior to August 1, 2013 relating to an acquisition of Eastern that Eastern elected to pursue, Eastern would reimburse ProAssurance for its expenses in the fixed amount of $400,000. In addition, the letter of intent provided that if Eastern did not terminate the letter of intent prior to 5:00 p.m. Eastern Time on August 1, 2013, then for 90 days thereafter Eastern would not solicit or enter into any discussion with any person other than ProAssurance relating to any acquisition proposal or furnish to any person other than ProAssurance any information relating to an acquisition proposal.

Also at the July 12, 2013 teleconference meeting, the Eastern board approved the engagement of KBW and directed it to identify other insurance companies that would be able to enter into an all-cash merger with Eastern and to solicit proposals from any interested insurance companies.

KBW identified 12 potential alternative merger candidates and began contacting the potential buyers on July 15, 2013, on a confidential basis. Eight potential alternative buyers entered into nondisclosure agreements and were provided with confidential information on Eastern, including financial projections, actuarial reports, rating agency presentations and board presentations. Each of the candidates was invited to submit written proposals by noon Eastern Time on July 30, 2013. Only two candidates submitted proposals. Each bid was expressed as a 1.4x multiple of tangible book value net of certain transaction expenses. Based upon the specifics of each bid, KBW determined that Party A’s bid was an implied value of $22.58 per share, and Party B’s bid was an implied value of $22.33 per share. Each of the proposals provided for an all-cash merger and indicated that obtaining financing would not be necessary in connection with the transaction, but that further due diligence would be necessary.

On July 31, 2013, Eastern’s board met to discuss the two alternative proposals submitted by the other bidders and the terms of the letter of intent with ProAssurance. Based on the superior terms of the ProAssurance offer, the board directed management to notify ProAssurance of Eastern’s intent to move forward with ProAssurance on an exclusive basis for 90 days from August 1, 2013 as provided in the letter of intent.

On July 24, 2013, Burr & Forman LLP, which we refer to as Burr & Forman, delivered a first draft of the merger agreement to Eastern and its counsel, Stevens & Lee, P.C. On August 7, 2013, Stevens & Lee

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provided ProAssurance and Burr & Forman with a revised draft of the merger agreement reflecting Eastern’s comments based on discussions held among Eastern, Stevens & Lee and KBW. On August 14, 2014, Burr & Forman delivered a revised draft of the merger agreement in response to Eastern’s comments.

From the initial delivery of the merger agreement through September 20, 2013, Stevens & Lee and Burr & Forman exchanged multiple drafts of the merger agreement and the retention and severance agreements for six key members of Eastern management. Counsel for the parties conducted a comprehensive negotiation of the terms of the merger agreement, including the exchange of additional drafts of the merger agreement. The areas of focus included Eastern’s ability to pay dividends prior to the merger, the definition of “material adverse effect”, representations regarding Eastern’s loss reserves, the treatment of existing employment agreements entered into between Eastern and certain executive officers, and the circumstances in which the termination fee would be paid. Throughout the course of such negotiations, Stevens & Lee had several conversations with management regarding the developments and progress of the negotiations, and received input from management regarding the issues emerging from such negotiations.

In addition, after consultation with ProAssurance, Eastern elected to initiate the merger of its Indiana subsidiary, Employers Security Insurance Company, into its Pennsylvania subsidiary, Eastern Alliance Insurance Company. Eastern had long contemplated this merger for cost saving reasons. The advent of the transaction with ProAssurance provided additional impetus for this consolidation because completing this merger in advance of the execution of the merger agreement would eliminate the need for ProAssurance to obtain an additional regulatory approval from the state of Indiana. This merger was completed on September 19, 2013.

On September 23, 2013, the board of directors of ProAssurance approved the merger agreement and the board of directors of Eastern held a special meeting to review the final draft of the merger agreement. Stevens & Lee reviewed the provisions of the merger agreement in detail with the board of directors and advised the board of directors regarding its fiduciary duty. KBW reviewed its financial analysis of the merger consideration and delivered its opinion that, as of that date and subject to assumptions made, procedures followed, matters considered and limitations on the review undertaken set forth in the opinion, the $24.50 per share merger consideration to be received by the holders of Eastern’s common stock was fair, from a financial point of view, to such holders. The parties exchanged signature pages for the merger agreement after the market closed on September 23, 2013.

On September 24, 2013, before the opening of the markets, Eastern and ProAssurance issued a joint press release announcing the execution of the merger agreement. In addition, the six key executives of Eastern executed their respective retention and severance agreements.

Reasons for the Merger

In evaluating the merger agreement and the merger, the board of directors consulted with our senior management team, Stevens & Lee and KBW and considered a number of factors weighing in favor of the merger, including, among others, the material factors set forth below.

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The board of directors also considered, among others, the following potentially negative factors in determining whether to approve the merger agreement.

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The above discussion of the information and factors considered by the board of directors includes the principal information and factors, both positive and negative, considered by the board of directors in its evaluation of the merger agreement and the merger. The above discussion is not intended to be exhaustive and may not include all of the information and factors considered by the board of directors. After considering the above factors, the board of directors concluded that, in the aggregate, the positive factors relating to the merger agreement and merger significantly outweighed the potential negative factors, and therefore was in the best interests of Eastern and fair to its shareholders.

In view of the variety of factors considered in connection with its evaluation, and the complexity of these matters, the board of directors did not quantify or assign relative or specific weights to the factors considered in reaching its conclusion, nor did it consider it practical to do so. Rather, the board of directors made its recommendation based on the totality of the information presented to and considered by it and the investigations it conducted, with no particular factor being determinative. In addition, individual directors may have given different weights to different factors.

It should be noted that this explanation of the reasoning of the board of directors and certain information presented in this section is forward-looking in nature and should be read in light of the factors discussed in the section titled “Cautionary Statement Concerning Forward-Looking Information” beginning on page      of this proxy statement.

Recommendation of Our Board of Directors

After careful consideration, our board of directors:

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Opinion of Keefe, Bruyette & Woods, Inc.

Pursuant to an engagement letter dated July 12, 2013, Eastern retained Keefe, Bruyette & Woods, Inc. (“KBW”) to act as Eastern’s financial advisor in connection with a potential sale of the Company. KBW is a nationally recognized investment banking firm which is regularly engaged in the valuation of insurance companies and their securities in connection with mergers and acquisitions and other corporate transactions. Eastern hired KBW on the basis of KBW’s qualifications, experience in transactions similar to the merger and its reputation in the investment community.

At a meeting of Eastern’s board of directors held on September 23, 2013, KBW reviewed the financial aspects of the proposed merger and rendered an oral opinion (subsequently confirmed in writing on the same date) to Eastern’s board of directors that, as of such date, and based upon and subject to factors, qualifications, limitations and assumptions set forth therein, the merger consideration payable to the holders of Eastern’s common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of KBW’s written opinion, dated September 23, 2013, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. The description of the opinion set forth herein is qualified by reference to the full text of the opinion. Eastern’s stockholders are urged to read KBW’s opinion carefully in its entirety.

The KBW opinion is subject to the assumptions and conditions contained in its opinion and is necessarily based on economic, market and other conditions as in effect on, and the information made available to KBW as of, the date of its opinion. KBW’s opinion speaks only as of the date thereof. Subsequent developments may affect KBW’s opinion, and KBW does not have any obligation to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of KBW’s opinion.

The opinion was directed to Eastern’s board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger and does not constitute a recommendation to the shareholders of Eastern as to how to vote in connection with the proposed merger or any other matter. KBW’s opinion is not an expression of an opinion as to the prices, trading range or volume at which the securities of Eastern would trade after announcement of the proposed merger. The opinion addresses only the fairness, from a financial point of view, of the transaction consideration to be paid to the holders of Eastern’s common stock pursuant to the merger agreement. It does not address the underlying business decision of Eastern to engage in the merger or the relative merits of the merger as compared to any strategic alternatives that have been or may be available to Eastern. KBW’s opinion does not express any opinion about the fairness of the amount or nature of the compensation to any of Eastern’s officers, directors or employees, or any class of persons, relative to the consideration paid in respect of the merger or otherwise. KBW’s opinion does not express any opinion as to the treatment of, the effect of the merger on, or the fairness of the consideration to be received by, holders of any class of securities of Eastern other than the Eastern common stock, or any class of securities of any other party to any transaction contemplated by the merger agreement. In addition, the opinion did not address any legal, regulatory, accounting, tax or similar matters relating to Eastern, ProAssurance, their respective shareholders, or relating to or arising out of or as a consequence of the merger.

In connection with rendering its opinion, KBW:

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KBW also took into account its assessment of general economic, market and financial conditions, its experience in other transactions, as well as its experience in securities valuation and knowledge of the insurance industry generally.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all the financial and other information provided to it or publicly available and did not independently verify the accuracy or completeness of any such information or assume any responsibility for such verification, accuracy or completeness. With respect to the financial and operating forecasts provided to KBW, KBW was advised by Eastern, and assumed, that they were reasonably prepared and reflected the best currently available estimates and judgments of Eastern’s management as to the expected future financial performance of Eastern. KBW relied on projected information without independent verification or analysis. KBW is not an expert in the valuation of reserves for loss and loss adjustment expenses, and did not make an independent valuation or analysis of the adequacy of the loss reserves of Eastern. Accordingly, KBW expressed no opinion as to the adequacy of the reserves for loss and loss adjustment expenses of Eastern. KBW assumed, with Eastern’s consent, that the aggregate reserves for loss and loss adjustment expenses of Eastern were adequate, as of the date of KBW’s opinion, to cover such losses and loss adjustment expenses. KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of Eastern, the collateral securing any of such assets or liabilities, or the collectability of such assets. KBW did not evaluate the solvency or fair value of Eastern under any state or federal laws, including those relating to bankruptcy, insolvency or other matters.

In rendering its opinion, KBW also assumed, in all material respects:

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As discussed above, KBW’s opinion does not address the relative merits of the merger as compared to any alternative transaction that might exist for Eastern or the effect of any other transaction in which Eastern might engage. The type and amount of consideration payable in the merger were determined through negotiations between Eastern and ProAssurance and were approved by the Eastern board of directors. KBW did not recommend to Eastern or the Eastern board of directors that any specific amount of consideration be received by the stockholders of Eastern in connection with the merger. The decision to enter into the merger agreement was solely that of Eastern’s board of directors.

KBW performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In addition, KBW’s opinion was among several factors taken into consideration by Eastern’s board of directors in making its determination to adopt and approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of Eastern’s board of directors with respect to the fairness of the merger consideration.

Summary of Financial Analyses Performed by KBW

The following is a summary of the material financial analyses presented by KBW to Eastern’s board of directors on September 23, 2013 in connection with rendering its fairness opinion. The following summary is not a complete description of the analyses underlying the KBW opinion or the presentation made by KBW, but summarizes the analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. Selecting portions of the analysis or of the summary set forth herein, without considering the analysis as a whole, could create an incomplete view of the processes underlying KBW’s opinion and of the overall conclusion reached by KBW. In arriving at its opinion, KBW considered the results of its entire analysis and KBW did not attribute any particular weight to any analysis or factor that it considered. Rather, KBW made its determination as to fairness on the basis of its experience and professional judgment after considering the results of the entire analysis. The financial analyses summarized below include information presented in tabular format. KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

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The tables alone do not constitute a complete description of the financial analyses. Where the text refers to “per share” in relation to Eastern, it should be read to mean per share of common stock of Eastern.

Summary of Proposal

KBW reviewed the financial terms of the proposed merger. Based on merger consideration of $24.50 per Eastern common share in cash and 9,007,015 diluted shares of Eastern common stock outstanding as of June 30, 2013, KBW calculated an aggregate equity transaction value of $220.7 million. Diluted shares outstanding of Eastern included the dilutive impact of stock options to purchase 1,096,188 shares of common stock of Eastern, which had a weighted average exercise price of $13.61.

Based on this transaction value, KBW calculated a number of ratios, including ratios of the closing stock price of Eastern as of September 20, 2013 (the last full trading day before Eastern delivered its opinion) and the merger consideration of $24.50 per common share of Eastern to (i) operating net earnings per Eastern share (on a fully diluted basis) for the twelve months ended June 30, 2013, which shows net earnings before realized gains and losses, (ii) estimated net earnings per Eastern share (on a fully diluted basis) for calendar years 2013 and 2014 based on consensus earnings published by a nationally recognized earnings consolidator as well as estimated net earnings per share (on a fully diluted basis) based on projections provided by Eastern, (iii) the book value per Eastern share as of June 30, 2013, calculated in accordance with U.S. generally accepted accounting principles, or GAAP, calculated both on a basic and diluted share outstanding basis, (iv) the book value per Eastern share as of June 30, 2013, calculated in accordance with GAAP but excluding accumulated other comprehensive income, or AOCI, in order to exclude unrealized gains and losses from the calculation of book value, with such book value calculated both on a basic and diluted share outstanding basis and (v) tangible book value per Eastern share as of June 30, 2013, calculated as GAAP shareholders’ equity less goodwill and less intangible assets tax effected at a tax rate of 35% as directed by Eastern to reflect the fact that Eastern’s intangible assets are tax deductible, with such book value calculated both on a basic and diluted share outstanding basis. KBW did not tax effect intangible assets in its calculation of tangible book value per share for the selected other companies included in the Selected Publicly Traded Companies Analysis and the Selected Precedent M&A Transactions Analysis below as it did not have sufficient information to evaluate whether the intangible assets for these companies were tax deductible for the companies in that analysis and, if so, at what tax rate.

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This analysis resulted in the following ratios:

Select Publicly Traded Companies Analysis

KBW used publicly available information to perform a comparison of selected financial and market trading information for Eastern with a selected group of insurance companies with market capitalizations between $100 million and $1 billion that underwrite specialty-market commercial lines of property-casualty risks that KBW deemed similar to those underwritten by Eastern’s subsidiaries. None of the selected publicly traded companies is identical or directly comparable to Eastern. The selected companies consisted of the following publicly-traded insurance companies or holding companies thereof:

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In the analysis, based on publicly available information, KBW calculated for the group of companies ratios of closing stock prices as of September 20, 2013 to (i) book value per share as of June 30, 2013 (other than with respect to Tower Group International, Ltd. whose results were as of March 31, 2013 since the company had not, as of the date of KBW’s analysis, publicly filed its financial statements as of June 30, 2013), calculated in accordance with GAAP, with such book value calculated on a basic share outstanding basis, (ii) book value per share as of June 30, 2013 (other than with respect to Tower Group International, Ltd. whose results were as of March 31, 2013), calculated in accordance with GAAP but excluding AOCI, with such book value calculated on a basic share outstanding basis, (iii) tangible book value per share as of June 30, 2013 (other than with respect to Tower Group International, Ltd. whose results were as of March 31, 2013), calculated as GAAP shareholders’ equity less goodwill and less intangible assets, with such book value calculated on a basic share outstanding basis, and (iv) estimated net earnings per share (on a fully diluted basis) for calendar year 2013 and 2014 based on financial information taken from a nationally recognized earnings estimate consolidator for the selected companies.

KBW then compared these results to the ratios derived for Eastern for such metrics both based on the September 20, 2013 closing stock price of Eastern and the merger consideration of $24.50 per share of Eastern common stock. The results of this analysis are set forth in the following table:

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Selected Precedent M&A Transactions Analysis

KBW reviewed publicly available information related to selected merger transactions announced from January 1, 2008 through September 20, 2013 with equity transaction values between $100 million and $1 billion involving target companies domiciled in the US or Bermuda that KBW deemed to have certain characteristics similar to those of Eastern. Each of the target companies in the selected transactions underwrote specialty-market commercial property-casualty risks KBW deemed similar to those underwritten by Eastern. However, neither the selected merger transactions nor the selected companies included in the selected transactions are directly comparable to the proposed merger or Eastern, respectively. The ten (10) merger transactions selected were:

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For each of the selected transactions, KBW derived the implied ratio, to the extent publicly disclosed, of the equity purchase price per share paid for the target company to the target company’s (i) book value per share as of the most recent quarter end prior to the transaction announcement, calculated in accordance with GAAP, with such book value calculated on a basic share outstanding basis, (ii) tangible book value per share as of the most recent quarter end prior to the transaction announcement, calculated as GAAP shareholders’ equity less goodwill and less intangible assets, with such book value calculated on a basic share outstanding basis and (iii) operating net income per share (on a fully diluted basis) for the 12 month period ending on the most recent quarter-end prior to the transaction announcement. KBW then compared these ratios to the ratio of the $24.50 per common Eastern share merger consideration to (i) the book value per Eastern share as of June 30, 2013, calculated in accordance with GAAP, with such book value calculated on a basic share outstanding basis, (ii) tangible book value per Eastern share as of June 30, 2013, calculated as GAAP shareholders’ equity less goodwill and less intangible assets tax effected at a tax rate of 35% as directed by Eastern, with such book value calculated on a basic share outstanding basis, and (iii) operating net income per Eastern share (on a fully diluted basis) for the 12 month period ending on June 30, 2013. The results of the analysis are set forth in the following table:

Discounted Cash Flow Analysis

KBW performed a discounted cash flow analysis to estimate a range of the present values of after-tax cash flows that Eastern could provide to equity holders through December 31, 2017 on a stand-alone basis. In performing this analysis, KBW used projected earnings estimates provided by Eastern for such period. The range of values was determined by adding (i) the present value of projected cash dividends per Eastern share from September 20, 2013 to December 31, 2017 and (ii) the present value of the terminal value per share of Eastern. The projected cash dividends per Eastern share were as follows:

In calculating the terminal value per share of Eastern, KBW applied (i) multiples ranging from 1.20 to 1.60 to Eastern’s estimated tangible book value per share as of December 31, 2017 on a diluted share outstanding basis and (ii) multiples ranging from 8.0 to 12.0 to Eastern’s estimated operating net earnings per Eastern share (on a fully diluted basis) for the twelve months ending December 31, 2017. KBW selected these ranges of multiples based on the professional judgment and experience, including considering the comparable multiples paid in the transactions identified above under the caption “Selected Precedent M&A Transactions Analysis.”

The dividend stream and the terminal value were discounted back to present value using discount rate ranges from 11.0% to 15.0%, which was determined using the capital asset pricing model. The range of discount

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rates was selected based on KBW’s analysis of the cost of equity for Eastern based upon current U.S. Treasury rates, Eastern’s capital structure and size, as well as beta and capital structure information for the companies identified above under the caption “Selected Publicly Traded Companies Analysis.” Eastern’s financial forecasts were prepared by, and are solely the responsibility of, Eastern’s management.

As set forth below, based on these assumptions, KBW derived an implied equity value per share reference range for Eastern’s common stock of $19.72 to $35.98, as compared to the per Eastern share merger consideration of $24.50:

Historical Stock Price Analysis

KBW compared, for information purposes, the $24.50 per Eastern share merger consideration to the closing price of a share of Eastern common stock on September 20, 2013, the 52-week high and low closing prices for a share of Eastern common stock and volume-weighted average closing prices per share of Eastern common stock for the 30-day and 90-day period prior to the public announcement of the merger. The following table displays a summary of the analysis:

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Historical Premiums Paid Analysis

KBW reviewed historical premiums paid in whole company insurance merger and acquisition transactions with an equity purchase price between $100 million and $1 billion between January 1, 2008 through September 20, 2013, involving target companies domiciled in the US or Bermuda that KBW deemed to have certain characteristics similar to those of Eastern. Each of the target companies in the selected transactions underwrote specialty-market commercial property-casualty risks KBW deemed similar to those underwritten by Eastern. The list of such transactions is set forth in “— Selected Precedent M&A Transactions Analysis ”. For each of the transactions, KBW compared the premiums paid based on the closing price per share of the target company’s common stock one day and thirty days prior to the announcement of the transaction, to implied premiums calculated in an identical manner for the proposed merger. The following table displays a summary of the analysis:

Miscellaneous

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters. Many of these assumptions are beyond the control of Eastern. Any estimates contained in KBW’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Eastern retained KBW as an independent contractor to act as a financial advisor to Eastern in connection with a potential sale of Eastern. As part of its investment banking business, KBW is continually engaged in the valuation of insurance businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of insurance companies, KBW has experience in, and knowledge of, the valuation of insurance enterprises. In the ordinary course of KBW’s business as a broker-dealer, KBW may, from time to time purchase securities from, and sell securities to Eastern and ProAssurance, and as a market maker in securities, KBW may from time to time have a long or short position in, and buy or sell, debt or equity securities of Eastern or ProAssurance for KBW’s own account and for the accounts of KBW’s customers.

Pursuant to its engagement with KBW, KBW is entitled to receive a fee of $1,900,000 (plus reimbursement of out-of-pocket expenses), of which $100,000 became payable upon execution of its engagement letter and $400,000 became payable upon delivery of the KBW fairness opinion and the balance of which is contingent upon consummation of the merger. In addition, Eastern has agreed to reimburse KBW for all

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reasonable out-of-pocket expenses incurred in connection with KBW’s engagement and to indemnify and hold harmless KBW and its affiliates, their respective directors, officers, agents and employees and each other person, if any, controlling KBW or any of its affiliates against certain losses, claims, damages and liabilities, relating to or arising out of KBW’s engagement.

Other than in connection with the fairness opinion described above, during the last two years, KBW has not had any other material relationships with Eastern or ProAssurance for which KBW received or intended to receive any compensation. KBW may in the future provide investment banking and financial advisory services to Eastern or ProAssurance and receive compensation for such services.

Interests of Our Directors and Executive Officers in the Merger

In considering the recommendation of our board of directors with respect to the merger, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our shareholders generally. These interests, to the extent material, are described below. Our board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger.

Current Eastern Employment Agreements. Michael L. Boguski, Kevin M. Shook, Robert A. Gilpin, Suzanne M. Emmet, and Cynthia Sklar are each parties to an employment agreement with Eastern. These employment agreements are substantially identical except as to term of employment, titles and responsibilities, and compensation. Each employment agreement provides for an initial term with an evergreen provision that automatically extends the remaining term of the agreement for an additional day each day until the day when the remaining term of the agreement would end on such person’s 65 ^th birthday. The initial terms of the employment agreements of Messrs. Boguski and Shook are three and two years, respectively. The initial terms of the employment agreements of Mr. Gilpin, Ms. Emmet and Ms. Sklar are each one year with a similar evergreen provision. This results in the remaining term at any given time being three years for Mr. Boguski, two years for Mr. Shook, and one year for each of Mr. Gilpin, Ms. Emmet, and Ms. Sklar.

The employment agreements, as in effect prior to the effective date of the merger provide for minimum annual base salaries, as follows: Mr. Boguski—$430,850; Mr. Shook—$334,400; Mr. Gilpin—$229,620; Ms. Emmet—$213,100, and Ms. Sklar—$168,513. In addition, each executive officer is entitled to participate in any incentive compensation and employee benefit plans that are maintained by Eastern.

Under each of the employment agreements, in the event that the executive officer’s employment is terminated by Eastern without “cause” or by the executive officer for “good reason,” the executive officer is entitled to receive certain benefits for the remaining term of his or her employment agreement. Any material adverse change in his or her responsibilities or authority or material reduction in salary constitutes a “good reason” under such employment agreements and would entitle each executive officer to receive the following benefits:

In the case of Mr. Boguski:

The employment agreements for Mr. Shook, Mr. Gilpin, Ms. Emmet, and Ms. Sklar contain similar provisions, but provide for smaller benefits based on the lengths of their respective agreements.

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In the event that the executive officer is required to pay an excise tax as a result of any compensation and benefits received under his or her employment agreement in connection with a change in control, Eastern is obligated under the employment agreement to pay the executive officer an additional amount, such that the net amount retained by him or her, after the payment of such excise taxes (and any additional income tax resulting from such payment), equals the amount he or she would have received but for the imposition of such excise tax.

As a material inducement to ProAssurance to enter into the merger agreement, Mr. Boguski, Mr. Shook, Mr. Gilpin, Ms. Emmet, Ms. Sklar and Harry Talbert entered into severance and retention agreements with ProAssurance, which will become effective at the effective time of the merger, and agreed to terminate their existing employment agreements at the effective time of the merger. Pursuant to these agreements, ProAssurance will cause the executives to be paid salary and annual incentive compensation at levels consistent with their compensation levels at Eastern and will make annual retention payments to each of such officers provided that they are still employed by Eastern on the dates such annual retention payments vest and become payable and will make annual payments in consideration for the covenants not to compete with ProAssurance after termination of employment as set forth in the following table.

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Assuming the employment agreements remained in effect, no cash severance payments or continuation of welfare benefits would have been due pursuant to the existing employment agreements solely on account of the merger. The table below shows the amounts that have would been paid out to each of the officers pursuant to their existing employment agreements assuming that their employment agreements continued after the merger and they terminated their agreements for “good reason” after the effective date of the merger and that the merger occurs on December 1, 2013.

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S tock Options. Each option to purchase shares of Eastern common stock issued and outstanding immediately prior to the effective time of the merger, whether or not vested and exercisable, will be cancelled and converted into the right to receive the product of (i) the number of shares of Eastern common stock that would have been acquired upon the exercise of such stock option, multiplied by (ii) the excess, if any, of the per share cash consideration of $24.50 over the exercise price of such stock option.

As of September 30, 2013, the directors and executive officers of Eastern held a total of 719,348 of the 1,028,200 outstanding Eastern options. Each of the options of the directors and executive officers will vest immediately prior to the effective date of the merger. The table below shows the number of options each director and executive officer held as of September 30, 2013, the weighted average exercise price of such options, the number of restricted shares and the consideration each of our directors and executive officers will receive for such options and restricted shares if the merger is approved and consummated as provided in the merger agreement.

Unallocated ESOP Shares. Under the terms of the merger agreement, all of the participants in Eastern’s ESOP will be eligible at closing to receive merger consideration in exchange for shares allocated to them under the ESOP. In addition, when the ESOP is terminated at closing, the ESOP will repay its outstanding loan to Eastern. Any merger proceeds remaining in the unallocated ESOP account after the loan is repaid will be allocated to all eligible ESOP participants in accordance with the terms of the ESOP. Each of Eastern’s executive officers will be eligible to receive an allocation of such merger proceeds. At this time, the amount of such proceeds to be allocated to the ESOP accounts of the executive officers cannot be ascertained.

Indemnification and Insurance. ProAssurance has agreed to indemnify and hold harmless all present and former officers, directors, and employees of Eastern for a period of six years after the closing date, for all losses, claims, damages, expenses, or liabilities arising from actions or omissions or alleged actions or omissions occurring at or prior to the closing date of the merger, to the same extent such persons would be entitled to such indemnification under Eastern’s articles of incorporation and bylaws, which currently provide such persons the fullest coverage available under applicable law.

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The merger agreement provides that ProAssurance will maintain Eastern’s current directors’ and officers’ insurance policy or obtain and fully pay premiums, up to an amount of 400% of Eastern’s current directors’ and officers’ insurance policies premiums, for “tail” coverage with a claims period of six years after completion of the merger covering claims arising from facts or events occurring before the completion of the merger. The tail coverage must be no less favorable than the terms of Eastern’s current directors’ and officers’ insurance coverage, or if such terms are not available, the best available insurance at a premium equal to 400% of Eastern’s current directors’ and officers’ insurance policy.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion describes the material U.S. federal income tax consequences of the merger to holders of our common stock. This discussion is not a complete analysis of all the potential U.S. federal income tax consequences of the merger to holders of our common stock, nor does it address any tax consequences arising under any state, local, or foreign tax laws or any other U.S. federal tax laws. This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, or the IRS, all as in effect as of the date of this proxy statement. These authorities may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. No ruling from the IRS has been or will be sought with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the merger, or that any such contrary position would not be sustained by a court.

This discussion is limited to holders of our common stock who hold their shares of our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax considerations that may be relevant to a particular holder in light of such holder’s particular circumstances. This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under the U.S. federal income tax laws, including, without limitation: U.S. expatriates; partnerships and other pass-through entities; “controlled foreign corporations;” “passive foreign investment companies;” corporations that accumulate earnings to avoid U.S. federal income tax; financial institutions; insurance companies; brokers, dealers or traders in securities, commodities or currencies; tax-exempt organizations; tax qualified retirement plans; participants in the ESOP; persons subject to the alternative minimum tax; persons holding our common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a constructive sale or conversion transaction or other integrated investment; real estate investment trusts or companies; regulated investment companies; grantor trusts; persons that received our common stock through the exercise of employee stock options or other compensation arrangements or as compensation for performance of services; persons that have a functional currency other than the U.S. dollar; and certain former citizens or residents of the U.S. In addition, the discussion does not address any tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax that may apply to holders.

For the purposes of this discussion, a “non-U.S. holder” is any beneficial owner of our common stock (other than an entity that is taxed as a partnership or other pass-through entity for U.S. federal income tax purposes) that is not a “U.S. holder” for U.S. federal income tax purposes. A “U.S. holder” is any of the following:

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If a partnership (or other entity taxed as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock and partners in such partnerships are urged to consult their tax advisors regarding the specific U.S. federal income tax consequences of the merger to them.

The determination of the actual tax consequences of the merger to you will depend on your specific situation. We urge you to consult your own tax advisors to determine the particular tax consequences of the receipt of cash in exchange for your shares of our common stock pursuant to the merger based on your particular circumstances, including the application and effect of the alternative minimum tax and any state, local or foreign income and other tax laws and changes in those laws.

U.S. Holders

Generally, the exchange by a U.S. holder of shares of our common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder of our common stock will recognize a gain or loss in an amount equal to the difference, if any, between:

Generally, capital gains recognized by U.S. holders are subject to U.S. federal income tax at the same rate as ordinary income, except that long-term capital gains recognized by non-corporate U.S. holders are generally subject to U.S. federal income tax at a maximum rate of 20%. Capital gain or loss will constitute long-term capital gain or loss if the U.S. holder’s holding period for such holder’s shares of our common stock as of the effective time of the merger exceeds one year. Generally, U.S. holders that hold separate blocks of our common stock (i.e., shares of our common stock acquired by such holder at the same cost in a single transaction) must determine their adjusted tax basis, gain or loss and holding period separately for each such block of our common stock. The deductibility of capital losses is subject to various limitations under the Code. In addition to income taxes, any individual shareholder with adjusted gross income (including certain foreign income that is exempt from U.S. taxes) in excess of $250,000 for a married couple filing a joint return (in excess of $200,000 for individuals filing as single) will be subject to the 3.8% Medicare tax on all or part of the income recognized by such individual as a result of the merger. You will be required to report such gain or loss for your taxable year in which the merger becomes effective.

Generally, a U.S. holder’s share of the proceeds of the merger will be subject to information reporting to the IRS and may be subject to U.S. backup withholding at a current rate of 28%. Information reporting will not apply to a U.S. holder that is a corporation or other exempt recipient. Backup withholding will not apply to a U.S. holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if any, provided that such U.S. holder furnishes the required information to the IRS in a timely manner.

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Non-U.S. Holders

Generally, the exchange by a non-U.S. holder of shares of our common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. However, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized as a result of the merger unless:

Unless an applicable tax treaty provides otherwise, gain described in the first bullet point above will be subject to U.S. federal income tax on a net income basis in the same manner as if such holder were a resident of the United States. Non-U.S. holders that are foreign corporations also may be subject to a branch profits tax equal to 30% (or such lower rate specified by an applicable tax treaty) of a portion of its effectively connected earnings and profits for the taxable year. Non-U.S. holders are urged to consult any applicable tax treaties that may provide for different rules.

Gain described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate, but may be offset by U.S. source capital losses.

We believe we are not and have not been, and we do not anticipate becoming, a “United States real property holding corporation” for U.S. federal income tax purposes.

Generally, a non-U.S. holder’s share of the proceeds of the merger will be subject to information reporting and backup withholding, unless the non-U.S. holder certifies under penalty of perjury that it is a non-U.S. holder, by providing a valid IRS Form W-8BEN or W-8ECI, or otherwise establishes an exemption from information reporting and backup withholding. Notwithstanding the foregoing, information reporting and backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

YOU SHOULD CONSULT YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO YOU, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS OR ANY OTHER U.S. FEDERAL TAX LAWS.

Payment of Merger Consideration and Surrender of Stock Certificates

If the merger is completed, each share of Eastern common stock you own will be cancelled and retired and you will cease to have any rights with respect to such share of Eastern common stock except the right to receive $24.50 in cash, without interest and less any required withholding taxes, for each share of Eastern common stock that you own.

As soon as practicable after the effective time of the merger, the exchange agent will mail a letter of transmittal and instructions to you and the other Eastern shareholders. The letter of transmittal and instructions will tell you how to surrender your shares in exchange for the merger consideration.

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You should not return Eastern stock certificates with the enclosed proxy card, and you should not forward Eastern stock certificates to the exchange agent without a letter of transmittal.

You will not be entitled to receive the merger consideration until you deliver your stock certificate or certificates to the exchange agent along with a duly completed and executed letter of transmittal.

Source of Funds; Capital

ProAssurance’s obligation to complete the merger is not conditioned upon ProAssurance obtaining financing. We anticipate that approximately $205 million will be required to pay the aggregate merger consideration to our shareholders. ProAssurance has informed us that it expects to fund the cash requirements for the merger by using available cash and existing credit facilities.

Regulatory Approvals

ProAssurance and Eastern have agreed to use commercially reasonable efforts to obtain the regulatory approvals required to complete the merger.

Insurance Regulators. Under the insurance laws and regulations in force in each state in which Eastern’s insurance subsidiaries are domiciled, the merger will result in a change in control of Eastern’s insurance subsidiaries. Therefore, the merger is subject to the approval of the primary state insurance regulators for Eastern’s insurance subsidiaries and will require the filing of an application with the Pennsylvania Insurance Department.

In Pennsylvania, the insurance regulator may fail to approve the application if it finds that:

The Pennsylvania Insurance Department may fail to approve the merger if the merger is likely to be hazardous or prejudicial to the insurance buying public, or if the merger is not in compliance with the laws of the Commonwealth of Pennsylvania.

ProAssurance has filed an application and related notices seeking regulatory approval with the Pennsylvania Insurance Department. ProAssurance and Eastern cannot be certain that approval will be granted by the Pennsylvania Insurance Department and, if granted, of the date of the approval or what conditions, if any, may be imposed in connection with the grant of the approval. A condition of ProAssurance’s obligation to close the merger is that no conditions to the approval are imposed that are materially burdensome to ProAssurance, that would have a material adverse effect on Eastern or ProAssurance, or that would materially affect the value of Eastern to ProAssurance.

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Because Eastern Re Ltd., SPC, a subsidiary of Eastern, is domiciled in the Cayman Islands, the transaction must be approved by the Cayman Islands Monetary Authority. ProAssurance intends to file an application and any other required documents with the Cayman Islands Monetary Authority in connection with obtaining any necessary approvals.

Antitrust Laws. Under the Hart-Scott-Rodino Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until each of Eastern and ProAssurance file a notification and report form with the FTC and the Antitrust Division of the Department of Justice under the Hart-Scott-Rodino Act, and the applicable waiting period has expired or been terminated. At any time before the merger is completed, the Antitrust Division of the Department of Justice or the FTC could take action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the merger or seeking divestiture of assets of ProAssurance or Eastern or their respective subsidiaries. Private parties also may seek to take legal action under the antitrust laws under some circumstances. Based upon a review of available information relating to the businesses in which the companies are engaged, ProAssurance and Eastern believe that the completion of the merger will not violate U.S. antitrust laws and will not require divestiture of any assets. However, ProAssurance and Eastern can give no assurance that a challenge to the merger on antitrust grounds will not be made, or, if such a challenge is made, that ProAssurance and Eastern will prevail.

Except as noted above and the filing of articles of merger in Pennsylvania at or before the effective date of the merger, we are not aware of any other significant governmental approvals that are required for completion of the merger. If any other approval or action is required, it is presently contemplated that ProAssurance and Eastern would seek to obtain such approval. There can be no assurance that any other approvals, if required, will be obtained.

The approval of any application merely implies the satisfaction of regulatory criteria for approval, which do not include review of the merger from the standpoint of the adequacy of the consideration to be received by Eastern shareholders. Further, regulatory approvals do not constitute an endorsement or recommendation of the merger.

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THE MERGER AGREEMENT

The following is a summary of certain material provisions of the merger agreement, a copy of which is attached to this proxy statement as Annex A, and which we incorporate by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read carefully the merger agreement in its entirety.

The merger agreement contains representations and warranties made by and to the parties to the merger agreement. The assertions embodied in those representations and warranties were made for purposes of the merger agreement and are subject to qualifications and limitations agreed to by the respective parties in connection with negotiating the terms of the merger agreement. In addition, certain representations and warranties were made as of a specified date, may be qualified by certain additional disclosure in disclosure schedules, may be subject to a contractual standard of materiality different from what might be viewed as material to shareholders, or may have been used for the purpose of allocating risk between the respective parties rather than establishing matters as facts. For the foregoing reasons, you should not rely on the representations and warranties as statements of factual information at the time they were made or otherwise. ProAssurance and Eastern have agreed to update the schedules to the merger agreement through the closing date to reflect any matter arising after the date of the merger agreement to correct any information in the schedules that would otherwise be materially inaccurate.

Structure; Directors and Officers

Subject to the terms and conditions of the merger agreement, and in accordance with Pennsylvania law, at the completion of the merger, Acquisition Corp., a Pennsylvania corporation that is a direct and wholly owned subsidiary of ProAssurance, will merge with and into Eastern. Eastern will be the surviving company in the merger and will continue to exist after the merger as a wholly owned subsidiary of ProAssurance. All of the property, rights, powers, duties and obligations of Eastern and Acquisition Corp. will become those of Eastern, as the surviving corporation.

The board of directors of Eastern will, from and after the effective date of the merger, consist of W. Stancil Starnes, Chairman and CEO of ProAssurance, Edward L. Rand, Jr., Senior Vice President and Chief Financial Officer of ProAssurance, Howard H. Friedman, Senior Vice President and Chief Underwriting Officer of ProAssurance, Michael L. Boguski, and Kevin M. Shook. The officers of Eastern after the effective date of the merger will be W. Stancil Starnes, Chairman, Michael L. Boguski, President, Kevin M. Shook, Chief Financial Officer and Treasurer, Edward L. Rand, Jr., Assistant Treasurer, and Kathryn A. Neville, Secretary.

Effective Time and Closing

The closing of the merger will occur no later than five business days after the satisfaction or waiver in writing of all of the conditions to the closing of the merger, other than the conditions that by their terms are to be satisfied at the closing of the merger (subject to the satisfaction or waiver of those conditions), or on such other date as Eastern and ProAssurance shall agree. See “—Conditions to the Merger” below.

The effective time of the merger will occur when Eastern and Acquisition Corp. file articles of merger with the Secretary of State of the Commonwealth of Pennsylvania (or at such later time as the parties may agree and specify in the articles of merger). The merger is expected to be effective by January 2014. Each of Eastern and ProAssurance has the right to terminate the merger agreement if closing of the merger has not occurred prior to January 31, 2014. See “—Termination” below.

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Treatment of Stock and Options

Common Stock

At the effective time of the merger, each share of Eastern common stock issued and outstanding immediately prior to the effective time of the merger (other than shares of Eastern common stock held by Eastern in treasury or shares held by any of their respective subsidiaries), including any allocated and unallocated shares held by Eastern’s ESOP and shares of restricted stock, will be automatically cancelled and converted into the right to receive $24.50 in cash.

After the effective time of the merger, each of our outstanding stock certificates representing shares of common stock converted in the merger will represent only the right to receive the merger consideration, without any interest and less any required withholding taxes, and each holder of our outstanding stock certificates shall cease to have any rights with respect to the shares of Eastern common stock represented by such certificates, except the right to receive the per share cash consideration of $24.50.

Each share of Acquisition Corp. common stock issued and outstanding immediately prior to the effective time of the merger will become one share of common stock of Eastern as the surviving entity in the Merger.

Stock Options and Restricted Stock

Each option to purchase shares of Eastern common stock issued and outstanding immediately prior to the effective time of the merger, whether or not vested and exercisable, will be cancelled and converted into the right to receive the product of (i) the number of shares of Eastern common stock that would have been acquired upon the exercise of such stock option, multiplied by (ii) the excess, if any, of the per share cash consideration of $24.50 over the exercise price of such stock option. As of September 30, 2013, Eastern had outstanding options to acquire 1,028,200 shares of Eastern Common Stock with a weighted average exercise price of $13.58 per share.

Immediately prior to the effective time of the merger, each share of restricted stock granted under the Eastern Stock Incentive Plan shall become a right to receive $24.50 per share in cash.

Exchange and Payment Procedures

At the effective time of the merger, ProAssurance will deposit an amount of cash sufficient to pay the merger consideration to each holder of shares of Eastern common stock with an exchange agent reasonably acceptable to Eastern. ProAssurance will also deliver to the exchange agent an amount of cash sufficient to pay the merger consideration payable to holders of options to purchase Eastern common stock and to holders of restricted shares of Eastern common stock. As promptly as practical after the effective time, but in no event later than ten days after the effective date of the merger, the exchange agent will mail a letter of transmittal and instructions to each Eastern shareholder of record. The letter of transmittal and instructions will tell you how to surrender Eastern common stock certificates in exchange for the merger consideration.

Holders of Eastern stock options and restricted shares in book entry form will receive such merger consideration no later than ten days following the closing date. With respect to restricted shares represented by stock certificates, the holder of such restricted shares must follow the procedures described below to surrender such stock certificates and receive the merger consideration payable with respect to such restricted shares.

You should not return Eastern stock certificates with the enclosed proxy card, and you should not forward Eastern stock certificates to the exchange agent without a letter of transmittal.

You will not be entitled to receive the merger consideration until you return a duly completed and signed letter of transmittal to the exchange agent, and if your shares are represented by stock certificates, you

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surrender your Eastern stock certificate or certificates to the exchange agent. The merger consideration may be paid to a person other than the person in whose name the shares are registered if the letter of transmittal and/or stock certificates are in the proper form for transfer. In addition, the person who surrenders the shares must either pay any transfer or other applicable taxes or establish to the satisfaction of ProAssurance that those taxes have been paid or are not applicable.

No interest will be paid or will accrue on the cash payable upon surrender of the shares. ProAssurance or the exchange agent will be entitled to deduct and withhold, and pay to the appropriate taxing authorities, any applicable taxes from the merger consideration. Any sum which is withheld and paid to a taxing authority by ProAssurance or the exchange agent will be deemed to have been paid to the person with regard to whom it is withheld.

At any time after six months following the effective time of the merger, ProAssurance may choose to have any portion of the merger consideration deposited with the exchange agent that has not been disbursed to Eastern shareholders be delivered to ProAssurance. Holders of shares who have not surrendered their shares prior to the delivery of those funds to ProAssurance may thereafter only look to ProAssurance with respect to merger consideration that may be payable to them. Any portion of the merger consideration that remains unclaimed may escheat to or become property of a governmental authority. None of the exchange agent, Eastern or ProAssurance will be liable to any person for any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the merger consideration, you will have to comply with the replacement requirements, including, if required by ProAssurance, the posting of a bond in a customary amount sufficient to protect ProAssurance, Acquisition Corp. or the exchange agent against any claim that may be made against it with respect to that certificate.

Representations and Warranties

You should be aware that the representations and warranties described below, which were made by Eastern and ProAssurance in the merger agreement, may be subject to important limitations and qualifications agreed to by the parties, may not be accurate as of the date they were made and do not purport to be accurate as of the date of this proxy statement. See “Where You Can Find Additional Information” on page     .

We make various representations and warranties in the merger agreement that are subject, in some cases, to specified exceptions and qualifications. Our representations and warranties relate to, among other things:

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Certain of the representations and warranties made by Eastern are qualified as to “materiality” or “material adverse effect.”

For purposes of the merger agreement, “material adverse effect” means, with respect to Eastern, any event, circumstance, development, change, occurrence or effect that has a material adverse effect upon the business, assets, properties, operations, or condition (financial or otherwise), of Eastern and its subsidiaries, taken as a whole; provided that any adverse change or event arising out of, resulting from or attributable to any of the following will be excluded in determining whether there has been a material adverse effect:

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A material adverse effect on Eastern shall be presumed if Eastern’s shareholders’ equity as of any month end prior to closing is equal to 90% or less of Eastern’s shareholders’ equity as of June 30, 2013, excluding any change in other comprehensive income.

The merger agreement also contains various representations and warranties made by ProAssurance and Acquisition Corp. that are subject, in some cases, to specified exceptions and qualifications. The representations and warranties relate to, among other things:

The representations and warranties of each of the parties to the merger agreement will expire on the closing date of the merger.

Conduct of Business Pending the Merger

Under the merger agreement, we have agreed, subject to certain exceptions or unless ProAssurance otherwise consents in writing, from the date of the merger agreement until the effective time of the merger, that we and our subsidiaries will conduct our respective businesses in the ordinary course consistent with past practice and in compliance in all material respects with applicable law and will use commercially reasonable efforts to preserve intact our current business organization, management, goodwill and relationships with third

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parties (including relationships with policyholders, insureds, producers, underwriters, insurance regulators, service providers and suppliers) and will keep available the services of current key officers and employees and maintain our and our subsidiaries’ current rights and franchises.

We have also agreed that during the same time period, and subject to certain exceptions or unless ProAssurance gives its prior written consent, neither Eastern nor any of its subsidiaries will:

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Shareholders’ Meeting and Duty to Recommend

We have agreed to call a meeting of our shareholders as soon as reasonably practicable for the purpose of considering the approval and adoption of the merger agreement. Subject to its fiduciary duties, our board of directors has agreed to recommend to our shareholders the approval and adoption of the merger agreement and the transactions contemplated by the merger agreement.

No Solicitation of Transactions

We have agreed that we will not authorize or knowingly permit any officer, director or employee of, or any representatives of, Eastern or any of its subsidiaries to, directly or indirectly, initiate, entertain, solicit, encourage, engage in or participate in negotiations with any person or group other than ProAssurance concerning any acquisition proposal.

An “acquisition proposal” is any proposal:

Notwithstanding the foregoing, nothing in the merger agreement prohibits our board of directors from furnishing information to, or entering into discussions or negotiations with any person or group regarding any acquisition proposal, or approving and recommending to our shareholders an acquisition proposal, if our board of

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directors determines in good faith that such action is appropriate in furtherance of the best interests of Eastern. We are required to disclose to ProAssurance that we are furnishing information to, or entering into discussions or negotiations with, such person or group. In addition, prior to furnishing non-public information to such third party, we are required to enter into a written agreement providing for (a) the furnishing to Eastern of information regarding such person or group that is relevant to its ability to finance and perform its obligations under its acquisition proposal, (b) the confidentiality of all nonpublic information provided to such person or group by Eastern, and (c) procedures reasonably satisfactory to Eastern designed to restrict or limit the provision of information regarding Eastern that could be used to the competitive disadvantage of Eastern or in a manner detrimental to the interests of our shareholders. We are not permitted to provide to such person or group any nonpublic information regarding ProAssurance or the merger, and we are required to keep ProAssurance informed of the status of any such discussions or negotiations.

Filings; Cooperation; Notification; Access

We and ProAssurance have made the initial filings and submissions required under the Hart-Scott-Rodino Act relating to antitrust law compliance. The Department of Justice or the FTC can request the submission of additional information at any time prior to the expiration or early termination of the applicable waiting period.

In addition, ProAssurance has filed an application with the Pennsylvania Insurance Department seeking approval for the change of control of Eastern’s subsidiaries, in each case, in accordance with applicable state insurance laws and regulations. In addition, ProAssurance has agreed to make any other filings required by insurance regulators in any other relevant jurisdiction. Each party has agreed to promptly supply any additional information and documentary material that may be requested with respect to any of the filings or notifications made with any governmental entity. The parties also agreed that each party will bear its own costs and expenses in connection with the insurance regulatory filings, the Hart-Scott-Rodino Act filings and any other similar filings required in any other jurisdictions.

ProAssurance and Eastern have agreed to give each other prompt notice of any of the following:

Subject to certain limitations, we have agreed to afford ProAssurance and its officers, employees and other authorized representatives reasonable access to our books, records, contracts, properties, plants and personnel and to furnish promptly to ProAssurance all information as it may reasonably request.

Indemnification; Directors’ and Officers’ Insurance

ProAssurance has agreed to indemnify present and former directors, officers and employees of Eastern and each of its subsidiaries, for all losses, claims, damages, expenses or liabilities arising out of acts or omissions and alleged acts or omissions occurring prior to the closing date of the merger, including entering into the merger agreement, to the same extent that such individuals were indemnified by Eastern or its subsidiaries as of the date of the merger agreement for a period of not less than six years from the closing date of the merger. ProAssurance also has agreed, for a period of at least six years after the closing date, to continue in effect the current directors’ and officers’ liability insurance policy maintained by Eastern with respect to claims arising from facts or events occurring prior to the closing date.

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Employee Matters

ProAssurance and Eastern have agreed with respect to the employees of Eastern and its subsidiaries as follows:

Agreement to Use Commercially Reasonable Efforts

ProAssurance, Acquisition Corp. and Eastern have agreed to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the transactions contemplated by the merger agreement, including using all commercially reasonable efforts to obtain all necessary waivers, consents and approvals from any governmental entity and any other third party consents and to effect all necessary registrations and filings. If, after the closing date, any further action is necessary or desirable to carry out the purposes of the merger agreement, the proper officers and/or directors of ProAssurance, Acquisition Corp. and Eastern shall, subject to any applicable limitations, take all such necessary action.

Conditions to the Merger

The obligations of ProAssurance and Eastern to complete the merger are subject to the satisfaction or waiver of the following mutual conditions:

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The obligation of Eastern to complete the merger is also subject to the satisfaction or waiver of following additional conditions:

The obligation of ProAssurance to complete the merger is also subject to the satisfaction or waiver of the following additional conditions:

Termination

Eastern and ProAssurance may agree in writing to terminate the merger agreement at any time without completing the merger, even after the shareholders of Eastern have voted to adopt the merger agreement. The merger agreement may also be terminated at any time prior to the effective time of the merger in other specified circumstances, including:

by either ProAssurance or Eastern if:

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by ProAssurance if:

by Eastern, in order to accept another acquisition proposal or if Eastern fails to recommend the merger to our shareholders or withdraws, modifies or changes in a manner adverse to ProAssurance the recommendation of the merger to our shareholders.

As used herein, “acquisition proposal” means (i) any proposal pursuant to which any person or group other than ProAssurance would acquire or participate in a merger or other business combination with Eastern or any of its subsidiaries, (ii) any proposal for a transaction or series of transactions that would result in any person or group other than ProAssurance having the right to vote 10% or more of the capital stock of Eastern or any of its subsidiaries, (iii) any proposal for a transaction or series of transactions that would result in any person acquiring 10% or more of the assets of Eastern or any of its subsidiaries, (iv) any proposal for a transaction or series of transactions that would result in any person being the beneficial owner of more than 10% of the outstanding capital stock of Eastern or any of its subsidiaries, or (v) any proposal for a transaction similar to any of the foregoing.

Effect of Termination

In the event the merger agreement is terminated as described above, the transactions contemplated by the parties under the merger agreement will be abandoned, without further action by the parties, except that certain provisions of the merger agreement, including the payment of fees and expenses, the confidential treatment of information, and, if applicable, the termination fee described below, will survive the termination.

Termination Fee

The merger agreement provides that we will be required to pay a termination fee equal to 4.0% of the merger consideration to ProAssurance if:

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If ProAssurance receives the termination fee set forth above and is reimbursed for its expenses as set forth in the following section, such payment will constitute liquidated damages and be the sole and exclusive remedy of ProAssurance.

Expenses

Except in the event of the termination of the merger agreement under the circumstances where Eastern is obligated to pay the termination fee to ProAssurance, all costs and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger shall be paid by the party incurring such expenses, provided that the filing fees under the Hart-Scott-Rodino Act will be split between Eastern and ProAssurance based on their relative total assets at December 31, 2012. In the event Eastern is required to pay the termination fee to ProAssurance, Eastern is required to reimburse ProAssurance for all reasonable out-of-pocket fees and expenses incurred or paid by or on behalf of ProAssurance in connection with the merger agreement and the transactions contemplated by the merger, including all fees and expenses of counsel, investment banking firms, accountants and consultants in an amount not to exceed $1,000,000 in the aggregate.

Amendment, Waiver and Extension of the Merger Agreement

ProAssurance, Acquisition Corp. and Eastern may not amend the merger agreement except by an instrument in writing signed on behalf of each of the parties. After the adoption of the merger agreement by our shareholders, no amendment may be made that requires the approval of our shareholders unless the required approval is obtained.

At any time prior to the closing date of the merger, ProAssurance and Eastern may:

ADDITIONAL AGREEMENTS

Severance and Retention Agreements

As a material inducement to ProAssurance to enter into the merger agreement, Michael L. Boguski, President and Chief Executive Officer, Kevin M. Shook, Executive Vice President, Treasurer and Chief Financial Officer, Robert A. Gilpin, Senior Vice President Field Operations and Marketing, Suzanne M. Emmet, Senior Vice President Claims and Corporate Compliance, Cynthia Sklar, Vice President Underwriting and Risk Management, and Harry Talbert, Chief Information Officer, entered into severance and retention agreements with ProAssurance. Pursuant to these agreements, each executive officer terminates his or her current employment agreement. Under the severance and retention agreements, such executive officers will be entitled to receive retention payments if they are still employed by ProAssurance or one of its subsidiaries, including Eastern, at certain anniversaries of the effective date of the merger and certain payments in consideration of their agreement not to compete with ProAssurance for the periods provided in such employment agreements. See the table on page      under “The Merger—Interests of Our Directors and Executive Officers in the Merger” for more information regarding the amounts of these retention and noncompetition payments.

The above description is not complete, and you should read the severance and retention agreements for a more complete understanding of their terms. The complete text of the severance and retention agreements are filed as exhibits to the Quarterly Report on Form 10-Q filed with the SEC by Eastern on November     , 2013.

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DISSENTERS’ RIGHTS

Under Pennsylvania law, shareholders whose stock is listed on a national securities exchange, like the NASDAQ Global Select Market, have no right to dissent from, and to obtain payment of the fair value of their shares in the event of, a merger as an alternative to the merger consideration. Therefore, you will not be entitled to exercise dissenters’ rights or appraisal rights in connection with the transactions contemplated by the merger agreement.

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MARKET PRICE OF COMMON STOCK

Our common stock is listed for trading on the NASDAQ Global Select Market under the symbol “EIHI.” The table below sets forth the high and low reported per share closing sale prices for our common stock and the dividends per share declared for the periods indicated.

The merger agreement does not permit Eastern to pay additional dividends on its common stock without the prior written consent of ProAssurance, provided that if ProAssurance has not obtained all required regulatory approvals on or before December 31, 2013, then Eastern may pay its regular quarterly cash dividend of $0.11 per share in January 2014 prior to the effective date of the merger.

The closing sale price for our common stock on September 20, 2013, the last trading day prior to approval of the merger agreement by the board of directors of each of Eastern and ProAssurance, was $21.09 per share. On October     , 2013, the last trading day before the date of this proxy statement, the closing sale price for our common stock was $[        ]. You are encouraged to obtain current market quotations for Eastern common stock in connection with voting your shares.

As of October     , 2013, the last trading day before the date of this proxy statement, there were [            ] record holders of Eastern common stock.

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