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ProAssurance (PRA) Jumps 7.1% Since Q2 Earnings Beat Estimates

·6 min read

ProAssurance Corporation’s PRA shares rose 7.1% since it reported better-than-expected second-quarter earnings on Aug 8. While costs are decreasing, boosting profits, investors might want to see PRA gain heavily from higher interest rates.

ProAssurance reported second-quarter 2022 operating earnings of 30 cents per share, beating the Zacks Consensus Estimate of 7 cents. PRA’s bottom line, however, fell from 49 cents per share a year ago.

The quarterly operating revenues of ProAssurance increased from the prior-year level of $258.9 million to $274.5 million. However, the top line missed the Zacks Consensus Estimate of $315 million.

The company reported better-than-expected second-quarter 2022 earnings due to decreased expenses. Also, higher premiums, underwriting discipline in the Specialty P&C unit and a strong performance from investment income benefited the results. The NORCAL acquisition keeps supporting its year-over-year growth. This was partially offset by weakness in the Lloyd's Syndicate and Segregated Portfolio Cell Reinsurance businesses.

ProAssurance Corporation Price, Consensus and EPS Surprise

ProAssurance Corporation Price, Consensus and EPS Surprise
ProAssurance Corporation Price, Consensus and EPS Surprise

ProAssurance Corporation price-consensus-eps-surprise-chart | ProAssurance Corporation Quote

Operational Update

Gross premiums written were up 12.9% year over year to $235.5 million, mainly on the back of the Specialty P&C segment, aided by the NORCAL acquisition. This was partially offset by lower participation in Syndicates at Lloyd. Net premiums earned were up 3.5% year over year to $247.3 million but missed the Zacks Consensus Estimate of $269.7 million.

Net investment income rose 26% year over year to $21.9 million on increased profits from investments from the NORCAL acquisition and rising interest rates. It beat the Zacks Consensus Estimate of $19 million.

Total expenses decreased 3.1% year over year to $259.4 million due to lower SPC U.S. federal income tax expense, interest expense, and improved SPC dividend income. Net losses and loss adjustment expenses also fell 2.3% year over year in the quarter under review.

Combined ratio declined 520 basis points (bps) year over year to 103.2%. Operating ratio declined 680 bps to 94.3%. Non-GAAP return on equity plunged year over year to 5.3% for the second quarter.

ProAssurance did not engage in share buybacks in the second quarter. As of Jun 30, 2022, PRA had $110 million left under its authorization for repurchases and debt retirement.

Segmental Results

Specialty P&C Insurance Segment

Total revenues of $185.5 million were up 9% from the prior-year figure. Gross premiums written rose 18.1% year over year to $167.8 million, mainly owing to the NORCAL acquisition. The segment reported a profit of $0.4 million, beating the Zacks Consensus Estimate of a loss of $6 million, but was down from the year-ago profit of $1 million. Total expenses of $185.1 million jumped 9.5% year over year. The combined ratio increased 60 bps year over year to 100.8%.

Workers' Compensation Segment

Total revenues of $42.2 million were up 1.7% year over year and beat the Zacks Consensus Estimate of $40 million. Gross premiums written were $63.6 million, up 10% from the year-earlier number. Increased audit premiums and renewal retention in traditional businesses helped the segment. On account of higher operating expenses, the segment reported a profit of $0.6 million for the second quarter, lower than the year-ago profit of $1.1 million. However, it beat the Zacks Consensus Estimate of a loss of $0.1 million. Total expenses of $41.6 million were up 2.8% year over year. The combined ratio increased 20 bps year over year to 99.8%.

Lloyd's Syndicate Segment

Gross premiums written were $4.1 million, down 52.7% from the figure recorded in the comparable quarter of last year due to decreased participation in Syndicates. Profits from the segment amounted to $0.6 million for the quarter under review, in line with the Zacks Consensus Estimate, but down from the year-ago figure of $4.3 million. Underwriting, policy acquisition and operating expenses declined 68.1% year over year to $1.5 million. Combined ratio increased 1,000 bps year over year to 85.5%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written were $16.6 million, up 3.6% from the year-earlier number. It incurred a loss of $0.4 million for the second quarter, reflecting a downside of 136.9% year over year due to a higher net loss ratio and decline in equity and fixed income markets. It also missed the Zacks Consensus Estimate of a profit of $0.2 million. Combined ratio increased 510 bps year over year to 89.5%.

Corporate Segment

Net investment income of $21.6 million was up 29.3% year over year. Improved performance on investments from the NORCAL acquisition and other factors aided the segment. It generated $2.4 million of losses, down 108.8% from the year-ago reading. Operating expenses of $9 million increased 52.1% from the prior-year level. Interest expense of $4.9 million rose 5% year over year.

Financial Position (as of Jun 30, 2022)

ProAssurance’s total investments were $4,549 million, down from $4,828.3 million registered at the 2021 end. At the second-quarter-end, PRA’s total assets were $5,891.2 million, down from the 2021-end figure of $6,191.5 million. Cash and cash equivalents declined to $34.8 million in the second quarter from $143.6 million at the fourth-quarter-end. Debt-less unamortized debt issuance costs stood at $425.9 million, marginally up from $425 million at 2021-end.

The insurer’s shareholder equity declined to $1,169.9 million from $1,428.4 million as of Dec 31, 2021. Book value was $21.63 per share, down from $26.46 as of Dec 31, 2021.

Net cash used in operations in the first half of 2022 was $3.7 million against an operating cash flow of $31 million a year ago.

Zacks Rank & Other Key Picks

ProAssurance currently sports a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the broader finance space are Berkshire Hathaway Inc. (BRK.B), SmartFinancial, Inc. SMBK and Paramount Group, Inc. PGRE, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Omaha, NE, Berkshire Hathaway is a holding company, which owns more than 90 subsidiaries in insurance, railroads, utilities, manufacturing services, retail and home building. The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 bottom line indicates 5.3% year-over-year growth.

Based in Knoxville, TN, SmartFinancial is a leading financial services provider for individuals and corporate clients. The Zacks Consensus Estimate for SMBK’s 2022 earnings indicates 18% year-over-year growth.

New York-based Paramount Group works as a fully-integrated real estate investment trust. The Zacks Consensus Estimate for PGRE’s 2022 bottom line indicates 4.4% year-over-year growth.


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