ProAssurance Corporation PRA is poised well for growth on the back of its healthy premium income and solid capital position.
The company boasts an impressive surprise history, having managed to surpass estimates in all the trailing four quarters, the average being 10.6%.
ProAssurance’s core business has been witnessing a substantial improvement over the last few quarters. The company has been benefiting from a rise in premiums, riding on its strategic buyouts. It is also moving toward its joint marketing and shared risk programs. Gross premiums written saw a 2015-2018 CAGR of 5.6%, mainly owing to acquisitions and strength in the new physician business. Continuing with this trend, the metric further inched up 2.8% in the first nine months of 2019. We expect the addition of profitable businesses for the company’s key business line expansions to drive growth going forward.
This insurer’s inorganic growth story is also impressive. Over the years, the mergers and acquisitions have added to its capabilities. The company’s financial scale helped it in this regard. The buyouts of American Physicians Service Group, Medmarc and Eastern Insurance Holdings significantly strengthened its position in the workers’ compensation market.
The company has been enjoying significant cash flow from operating activities over the last few quarters, courtesy of its solid balance sheet. In 2018, cash flow from operating activities increased 2.3% while debt decreased 30%. In the first nine months of 2019, debt dipped 0.3% from the 2018-end level. We believe, the company’s solid financial footing will continue to buoy investor optimism.
However, ProAssurance has been persistently facing an elevated expense level. On average, expenses rose at 5.2% rate from 2015 to 2018 due to high underwriting, policy acquisition and operating costs. Expenses of the company further climbed 8% year over year in the first nine months of 2019. Such persistently rising steep operating costs could weigh on the bottom line, moving ahead.
Shares of this Zacks Rank #3 (Hold) company have lost 8.8% in a year's time against its industry's growth of 7.7%.
Stocks to Consider
People interested in the same space may consider some better-ranked stocks like Fidelity National Financial, Inc. FNF, RLI Corp. RLI and Cincinnati Financial Corporation CINF.
Fidelity National provides insurance products in the United States. The company sports a Zacks Rank #1 (Strong Buy) and came up with average four-quarter positive surprise of 8.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
RLI Corp. underwrites property and casualty insurance in the United States and across the globe. It pulled off average four-quarter positive surprise of 154.9%. The stock has a Zacks Rank of 1.
Cincinnati Financial provides property casualty insurance products in the United States. It managed to deliver a four-quarter beat of 20.8%. The stock carries a Zacks Rank #2 (Buy).
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