PRA Group (PRAA) Q3 Loss Narrows on Growing Portfolio Income
PRA Group, Inc. PRAA incurred a third-quarter 2023 loss of 31 cents per share, narrower than the Zacks Consensus Estimate of a loss of 39 cents per share. Notably, the company reported earnings of 63 cents per share in the prior-year quarter.
Total revenues of $216.4 million fell 11.6% year over year in the quarter under review. However, the top line outpaced the consensus mark by 5.9%.
The quarterly results gained from robust portfolio purchases, favorable pricing and improved operational results in Brazil and Europe. However, the upside was partially offset by increased expenses related to legal collection fees and agency fees.
PRA Group, Inc. Price, Consensus and EPS Surprise
PRA Group, Inc. price-consensus-eps-surprise-chart | PRA Group, Inc. Quote
Quarterly Operational Update
Total cash collections of PRA Group grew 1.8% year over year to $419.6 million, which beat the Zacks Consensus Estimate of $412 million and our estimate of $394.1 million. The metric benefited on the back of higher collections from Brazil and Europe.
The portfolio income of $190 million advanced 2.2% year over year in the third quarter and surpassed the consensus mark of $186 million as well as our estimate of $174.9 million. Other revenues plunged 59.4% year over year to $4.3 million, lower than the consensus mark of $5.6 million.
Total operating expenses of $173.4 million dipped 0.4% year over year but came higher than our estimate of $170 million. The metric witnessed a year-over-year decline, attributable to lower compensation and employee services, legal collection costs, and outside fees and services. However, legal collection fees and agency fees escalated 9.8% and 28.2%, respectively, on a year-over-year basis.
PRAA incurred a net loss of $8.2 million in the quarter under review against the prior-year quarter’s net income of $27.2 million. The figure also came narrower than our estimate of a loss of $13.3 million.
It purchased nonperforming loan portfolios of $311.2 million in the third quarter, which soared 69.9% year over year. The cash efficiency ratio improved 50 basis points (bps) year over year to 58.9%.
The estimated remaining collections (“ERC”) of PRA Group amounted to $6 billion at the third-quarter end.
Financial Update (As of Sep 30, 2023)
PRA Group exited the third quarter with cash and cash equivalents of $105.2 million, which climbed 26.1% from the level at 2022 end. It had $1.3 billion remaining under its credit facilities at the third-quarter end.
Total assets of $4.3 billion increased 3.7% from the 2022-end figure.
Borrowings were $2.8 billion, up 13.5% from the figure as of Dec 31, 2022. Total equity of $1.2 billion slipped 7.5% from the 2022-end level.
Forward View
Legal collection expenses continue to be forecasted in the low to mid-$20 million range in the fourth quarter of 2023. Net interest expenses are currently projected to be in the low $50 million range in the fourth quarter.
The effective tax rate is expected in the low 20% range this year.
The cash efficiency ratio is projected to remain relatively stable in the fourth quarter. The metric is likely to touch the low 60s level in the near term. PRA Group is likely to collect an ERC balance of $1.5 billion within the next 12 months.
Zacks Rank
PRA Group presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Some Other Insurers
Of the insurance industry players that have reported third-quarter results so far, AXIS Capital Holdings Limited AXS, Reinsurance Group of America, Incorporated RGA and RenaissanceRe Holdings Ltd. RNR beat the Zacks Consensus Estimate for earnings.
AXIS Capital posted third-quarter 2023 operating income of $2.34 per share, beating the Zacks Consensus Estimate by 25.8%. The bottom line increased from 3 cents in the year-ago quarter. Total operating revenues of $1.5 billion beat the consensus estimate by 3.3%. The top line rose 37.6% year over year.
Net premiums written decreased 6% to $1 billion, attributable to a 65% decline in the Reinsurance segment, partially offset by a 14% increase in the Insurance segment. Net investment income of AXS increased 75% year over year to $154 million. Its underwriting income of $147 million rebounded from the year-ago loss of $29 million. The combined ratio improved 1160 bps to 92.7%.
Reinsurance Group’s third-quarter 2023 adjusted operating earnings of $5.57 per share beat the Zacks Consensus Estimate by 30%. Moreover, the bottom line increased 42% from the year-ago quarter’s figure. RGA's operating revenues of $5.3 billion beat the consensus estimate by 21%. The top line also improved 25.5% year over year. Net premiums of $4.2 billion rose 31% year over year.
RGA's Investment income increased 19.8% from the prior-year quarter to $922 million. The average investment yield increased to 4.72% in the third quarter from 4.4% in the prior-year period due to higher yields. The Traditional segment reported a pre-tax adjusted operating income of $103 million against the year-ago quarter’s loss of $77 million.
RenaissanceRe reported third-quarter 2023 operating income of $8.33 per share, which outpaced the Zacks Consensus Estimate by 27.4%. A loss of $9.27 per share was reported in the prior-year quarter. Total operating revenues of $2,064 million advanced 7.1% year over year in the quarter under review. The top line beat the consensus mark by 1.7%.
RNR’s net premiums earned of $1,755.9 million dipped 0.6% year over year in the third quarter. Net investment income more than doubled year over year to $329.1 million, which surpassed the consensus mark of $287 million and our estimate of $205.5 million. It reported an underwriting income of $385.8 million against the prior-year quarter’s underwriting loss of $683.1 million. The combined ratio of 78% improved 6,070 bps year over year.
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