ProAssurance Corp. PRA has been in investors' good books on the back of its strategic initiatives and a healthy balance sheet.
Here we discuss the reasons for keeping this Zacks Rank #3 (Hold) company in your investment portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Given the company’s strong fundamentals, it is well-placed for long-term growth.
The company’s core business has been witnessing significant growth over the past many quarters on the back of buyouts that have been accretive to its premiums.
Gross premiums written witnessed a CAGR of 5.1% during the 2015-2019 period, mainly owing to solid acquisitions, segmental contributions and strength in the new physician business. Although the metric declined to some extent in the first quarter of 2020 due to the pressures induced by the COVID-19 pandemic, we expect the addition of profitable businesses to the company’s key business lines to drive the same going forward.
Its inorganic growth story impresses, getting a boost from its financial flexibility. The acquisitions of American Physicians Service Group, Medmarc, Eastern Insurance Holdings among others significantly strengthened its position in the workers’ compensation market. In February 2020, ProAssurance inked a deal to buy NORCAL, which is expected to intensify its focus on Medical Professional Liability Insurance. The deal is anticipated to provide financial and strategic benefits to the company along with an expected $18-million gain in pre-tax synergies. This buyout will bolster the combined entity’s position as the nation's third-largest specialty writer of liability insurance for healthcare professionals and facilities. With further penetration, we expect the company to generate more profitable businesses.
ProAssurance has been enjoying significant cash flow from operating activities over the last few quarters, courtesy of its strong balance sheet. The company effectively reduced its debt burden over the last few years. Its debt-to-capital stands at 17.7%, lower than the industry's average of 22%. As of Mar 31, 2020, its cash and cash equivalents were worth $612 million, higher than its long-term debt load of $307 million. Set to expire in November 2024, ProAssurance also has a revolving credit facility of up to $250 million, which can be utilized to meet its debt obligations. Thus, the company's solvency level looks impressive.
Its earnings estimate for 2021 stands at 13 cents per share, indicating an upside of 115.7% from the year-ago reported figure.
Shares of this company have lost 57.7% in a year’s time, wider than its industry’s decline of 8.4%.
Stocks to Consider
Some better-ranked stocks in the insurance industry are The Allstate Corporation ALL, Palomar Holdings, Inc. PLMR and National General Holdings Corp NGHC, each carrying a Zacks Rank #2 (Buy) at present.
Allstate provides property and casualty, and other insurance products in the United States and Canada. Its earnings beat estimates in each of the trailing four quarters, the average being 18.5%.
Palomar Holdings provides specialty property insurance. Its bottom line surpassed estimates in three of the last four quarters while missing in one, the average positive surprise being 10.9%.
National General Holdings provides various insurance products and services in the United States, Bermuda, Luxembourg and Sweden. Its earnings beat estimates in two of the trailing four quarters while missing in the remaining two, the average positive surprise being 5.7%.
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The Allstate Corporation (ALL) : Free Stock Analysis Report
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