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ProAssurance's (PRA) Q3 Earnings Miss Mark, Decrease Y/Y

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Zacks Equity Research
·5 min read
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ProAssurance Corporation PRA reported third-quarter 2020 operating earnings of 5 cents per share, missing the Zacks Consensus Estimate of 14 cents by 64.3%. The company’s bottom line of 30 cents tumbled 83.3% year over year. This was mainly due to lower premiums and soaring expenses.

Further, quarterly operating revenues of ProAssurance dropped 12% to $213 million from the prior-year quarter’s level, mainly due to lower premiums. Meanwhile, the top line met the Zacks Consensus Estimate.

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

Quarterly Operational Update

Gross premiums written were down 7.7% year over year to $245 million, primarily due to decreased participation in Syndicate 1729 along with re-underwriting efforts in Specialty business. Moreover, competitive conditions in the Workers Compensation Insurance and SPCR segments contributed to this downside.

Moreover, net premiums earned were down 9.8% year over year to $194.6 million.

Net investment income fell 28.5% year over year to $16.9 million due to lower allocation to equity assets in the company’s portfolio as well as declining yields from short-term investments and corporate debt securities.

Net realized investment gain of the company was $8.8 million, soaring 679.4% year over year.

Total expenses increased 62% year over year to $374.7 million. This rise in costs mainly stemmed from higher goodwill impairment.

Combined ratio expanded 170 basis points (bps) year over year to 105.3%.

Quarterly Segmental Results

Specialty P&C Insurance Segment

Total revenues of $118 million declined 6.7% from the prior-year quarter’s figure in the segment.

Gross premiums written dipped 4.1% year over year to $158 million, reflective of the company’s strategy to boost rate levels in the Standard Physician business and re-underwriting efforts in the Specialty business along with timing differences.

Total expenses of $131 million decreased 4.6% year over year on the back of lower losses and loss adjustment expenses along with underwriting, policy acquisition and operating expenses.

Combined ratio expanded 160 basis points year over year to 111.2%.

Workers' Compensation Segment

Total revenues of $42 million decreased 14% year over year, mainly due to lower premiums earned.

Gross premiums written were $62.9 million, down 10.1% from the year-earlier period’s number, mainly due to reduction in renewal pricing and lower new business written along with weak audit premiums.

Total expenses of $41.4 million were down 12.3% year over year.

Combined ratio expanded 190 basis points year over year to 97.4%.

Lloyd's Syndicate Segment

Total revenues of $20 million decreased 11.1% year over year on the back of reduced premiums.

Gross premiums written were $23.8 million, down 21.6% from the figure acquired in the comparable quarter last year due to less participation in the operating results of Syndicate 1729.

Total expenses of $16.2 million were down 23.7% year over year.

Combined ratio contracted 1050 basis points year over year to 89.6%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written were $15.9 million, down 7.8% the year-earlier period’s number, mainly due to the premium retention for worker’s compensation business.

Combined ratio contracted 540 basis points year over year to 74.1%.

Corporate Segment

Net investment income of $15.7 million declined 29.1% year over year due to softened allocation to equities and lower yields on short-term investments and corporate debt securities.

Operating expenses of $5 million flared up 88.1% from the prior-year quarter’s level. Interest expense of $3.8 million fell 9.2% year over year.

Financial Position

As of Sep 30, 2020, ProAssurance’s total investments were $3.3 billion, down 0.7% from the number registered at 2019 end.

At third-quarter end, the company’s total assets were $4.7 billion, down 2.4% from the figure at 2019 end.

As of Sep 30, 2020, the insurer’s shareholder equity dropped 12% to $1.3 billion from the figure as of Dec 31, 2019.

Return on equity was (8.8%) against the year-ago quarter’s return on equity of 4.3%.

Book value was $24.68 per share as of Sep 30, 2020, down 12.2% from the figure as of Dec 31, 2019.

Share Repurchase & Dividend Update

The board of directors declared a regular dividend of 5 cents per share, which was paid out on Oct 9, 2020.

The company did not repurchase any shares in 2019 and has not yet in 2020 either. As of Oct 30, 2020, it has $110 million remaining under its board-authorized stock repurchase program.

Zacks Rank and Performance of Other Insurers

ProAssurance currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other players in the insurance space that already reported third-quarter earnings, the bottom-line result of The Progressive Corp. PGR beat the Zacks Consensus Estimate while that of Principal Financial Group PFG and Chubb Ltd. CB missed the mark.

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ProAssurance Corporation (PRA) : Free Stock Analysis Report
 
The Progressive Corporation (PGR) : Free Stock Analysis Report
 
Chubb Limited (CB) : Free Stock Analysis Report
 
Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report
 
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