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ProAssurance Corp. PRA has been favored by investors on the back of its core business, strategic initiatives and solvency level.
Here we discuss the reasons for keeping this currently 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. The company is also moving toward its joint marketing and shared risk programs. Gross premiums written witnessed a 2015-2019 CAGR of 5.1%, mainly owing to strategic acquisitions, segmental contributions and strength in the new physician business. Although premiums in the first half declined due to financial turmoil led by the COVID-19 pandemic, we expect the same to bounce back going forward.
The company has been acquiring units over the past many quarters to boost its capabilities. Its financial size and strength helped it in this regard. In February 2020, the company inked a deal to buy NORCAL, which is expected to increase its concentration on Medical Professional Liability Insurance (MPLI). The buyout is expected to enhance the company’s size and scale in the MPLI space, making the combined entity the nation's third-largest specialty writer of liability insurance for healthcare professionals and facilities.
ProAssurance has been seeing substantial cash flow from operating activities on the back of its strong capital position. It effectively lowered its debt over the last few years. As of Jun 30, 2020, it had cash and cash equivalents worth $224 million and a revolving credit facility of up to $250 million (set to expire in November 2024), higher than its long-term debt obligation of $285.3 million. The company’s total debt to total capital of 17.2% is lower than the industry's average of 21.3%. Thus, the company's balance sheet remains impressive.
However, we are concerned about the company’s high costs, which are likely to put pressure on its margins going forward.
Shares of this property and casualty (P&C) insurer have lost 57.5% on a year-to-date basis compared with the industry’s decline of 6.4%.
Stocks to Consider
Some better-ranked stocks in the insurance space are The Allstate Corporation ALL, Fidelity National Financial, Inc. FNF and First American Financial Corporation FAF, each sporting a Zacks Rank #1 (Strong Buy) at present.
Allstate, Fidelity National Financial and First American Financial have a trailing four-quarter earnings surprise of 25.24%, 32.13% and 20.84%, on average, respectively.
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The Allstate Corporation (ALL) : Free Stock Analysis Report
ProAssurance Corporation (PRA) : Free Stock Analysis Report
First American Financial Corporation (FAF) : Free Stock Analysis Report
Fidelity National Financial, Inc. (FNF) : Free Stock Analysis Report
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