ProAssurance Corporation PRA is well-poised for development on the back of its inorganic growth strategy and rising premiums.
The company boasts an impressive dividend yield of 3%, much higher than its industry average of 0.4%.
Its core business has been witnessing significant gains over the last few quarters owing to buyouts that have been accretive to premiums. Gross premiums written witnessed a 2015-2018 CAGR of 5.6%, mainly on account of strategic acquisitions and strength in the new physician business. The company is also moving toward its joint marketing and shared risk programs. We expect that its constant efforts to add to its profitable business will drive its growth going forward.
Acquisitions have always been crucial to the company’s growth trajectory. Its financial strength is instrumental in this regard. The acquisitions of American Physicians Service Group, Medmarc and Eastern Insurance Holdings significantly consolidated its position in the workers’ compensation market. With further penetration, we hope the company will generate more profitable business.
ProAssurance’s solid capital position also impresses. Its cash flow from operating activities over the last few quarters is driven by its sturdy balance sheet. Moreover, it has been decreasing its debt level since 2016. Last year, the same declined 30% year over year. We believe that the company’s impressive financial foothold will continue to buoy investor optimism on the stock.
However, its deteriorating investment portfolio remains a concern. The low interest rates in the recent past kept the investment income at a lower level since 2008.
ProAssurance has been constantly enduring higher underwriting, policy acquisition and operating expenses. This persistent rise in operating expenses could weigh on the bottom line moving ahead.
Shares of this Zacks Rank #3 (Hold) company have lost 15.3% in a year’s time, wider than its industry’s decline of 3.7%.
Stocks to Consider
People interested in the same space may consider some better-ranked stocks like The Allstate Corporation ALL, Arch Capital Group Ltd. ACGL and Cincinnati Financial Corporation CINF. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Allstate offers property and casualty, and other insurance products in the United States and Canada. The company sports a Zacks Rank #1 and came up with average four-quarter positive surprise of 19.8%.
Arch Capital and units provide property, casualty and mortgage insurance and reinsurance products worldwide. It pulled off average four-quarter positive surprise of 14.4%. The stock carries a Zacks Rank #2 (Buy).
Cincinnati Financial provides property casualty insurance products. It managed to deliver four-quarter beat of 14.9%. The stock holds a Zacks Rank of 2.
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