Why Is ProAssurance (PRA) Up 4.4% Since Last Earnings Report?

It has been about a month since the last earnings report for ProAssurance (PRA). Shares have added about 4.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ProAssurance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ProAssurance Q4 Earnings Beat on High Premiums, Up Y/Y

ProAssurance reported fourth-quarter 2021 operating earnings of 62 cents per share, beating the Zacks Consensus Estimate of 19 cents. The company’s bottom line also surged from 6 cents per share a year ago.

Quarterly total revenues of ProAssurance increased 36.4% from the prior-year level to $313.1 million. The top line also beat the Zacks Consensus Estimate of $270 million.

The strong fourth-quarter results were supported mainly by higher premiums, improved underwriting results in the Specialty P&C unit along with strong performance from investments in multiple LPs and LLCs. The NORCAL acquisition also aided the company’s results.

Full-Year 2021

Total revenues increased 28.5% year over year to $1,124.4 million. Total expenses declined 3.6% year over year to $1,052.2 million for 2021. Operating earnings for 2021 came in at $1.40 per share, improving from a loss of 52 cents in 2020.

Q4 Operational Update

Gross premiums written were up 34.8% year over year to $218.1 million, mainly on the back of the Specialty P&C segment aided by the NORCAL acquisition. This was partially offset by lower participation at Lloyd’s of London and reduced gross premiums written in the Workers’ Compensation Insurance unit. Net premiums earned were up 46% year over year to $273.1 million.

Net investment income rose 16.7% year over year to $18.8 million, thanks to increased profits from investments in LPs/LLCs and the NORCAL acquisition.

Total expenses increased 32.4% year over year to $275.3 million on the back of higher SPC U.S. federal income tax expense, interest expense, and underwriting, policy acquisition and operating expenses.

Combined ratio declined 880 basis points (bps) year over year to 97%. Operating ratio declined 710 bps to 90.1%. Return on equity jumped 620 bps year over year to 10.5% for the fourth quarter.

Q4 Segmental Results

Specialty P&C Insurance Segment

Total revenues of $207.6 million were up 84.6% from the prior-year figure. Gross premiums written rose 62.5% year over year to $166.1 million, mainly owing to the NORCAL acquisition. The segment delivered a profit of $14 million against the year-ago loss of $10.9 million, thanks to current accident year frequency reductions in the Standard Physicians business, improved operating efficiency and expense management.

Total expenses of $193.6 million surged 57% year over year. Combined ratio contracted 1,640 bps year over year to 93.6%.

Workers' Compensation Segment

Total revenues of $42.2 million were down 1.5% year over year. Gross premiums written were $45.8 million, down 3.3% from the year-earlier number, mainly owing to a decrease in new business. Due to an increase in reported loss severity, the segment incurred a loss of $1.1 million for the fourth quarter against the year-ago profit of $2.1 million.

Total expenses of $43.3 million were up 6.2% year over year. Combined ratio jumped 740 bps year over year to 103.7%.

Lloyd's Syndicate Segment

Gross premiums written were $6.3 million, down 49% from the figure recorded in the comparable quarter of last year due to lower participation in Syndicates 1729 and 6131 for the 2021 underwriting year. Profits from the segment amounted to $1.4 million for the quarter under review against the year-ago loss of $0.9 million.

Combined ratio decreased 1,950 bps year over year to 89.9%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written were $15.4 million, up 4.2% from the year-earlier number due to increased audit premium billed to policyholders and new business written, partially offset by lower renewal price. Profits declined 78.1% year over year to $0.3 million for the fourth quarter due to lower net investment gains.

Combined ratio expanded 1,150 bps year over year to 77.6%.

Corporate Segment

Net investment income of $18.3 million was up 22.4% year over year. Improved performance on investments in LPs/LLCs, the NORCAL acquisition and other factors aided the segment. It generated $21.3 million in profits, down 5.2% from a year ago. Operating expenses of $7.6 million increased 31% from the prior-year level. Interest expense of $5.5 million rose 46% year over year.

Financial Position (as of Dec 31, 2021)

ProAssurance’s total investments were $4,828.3 million, up 42.5% from the number registered at 2020-end. At fourth quarter-end, the company’s total assets were $6,191.5 million, up 33% year over year.

The insurer’s shareholder equity rose 5.9% to $1,428.4 million from the figure as of Dec 31, 2020.

Book value was $26.46 per share, up from the figure of $25.04 as of Dec 31, 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, ProAssurance has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ProAssurance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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