On Sep 24, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Earnings estimates for ProAssurance have been trending down,
owing to dismal second-quarter 2013 results and a reduced cash
flow. The company reported second-quarter results with a negative
earnings surprise of 20%. Additionally, this specialty insurer
underperformed the year-to-date S&P 500 index, which posed a
growth of 21.4% against ProAssurance's return of 9.2%.
On Aug 5, ProAssurance reported second-quarter operating
earnings per share of 72 cents, which lagged the Zacks Consensus
Estimate and year-ago earnings of 90 cents and 96 cents,
The downside was due to 47% year-over-year increase in loss
and loss adjusted expenses along with 6.2% decline in net
investment income and flattish growth in premiums earned. These
factors together more than offset the top-line growth of 4.2%.
While underwriting and other operating expenses were marginally
lower, combined ratio deteriorated to 81.0% from 63.6% in the
Although ProAssurance's geographic mix of insured risks scores
well with the ratings agencies, lack of growth catalysts,
sluggish premiums' growth and higher expenses pose an adverse
effect on the company's fundamentals. This is reflected by weak
ROE, operating cash outflow and various operating ratios.
Moreover, low interest rates have taken a toll on the
investment income. Intense price and product competition are
further limiting the desired upside. All these factors are making
The Zacks Consensus Estimate for 2013 decreased 9.9% to an
earnings of $3.53 per share in the last 60 days, 15.1% lower than
the 2012 figure. Moreover, the estimate for 2014 is pegged at
$3.24 a share, down 7.2% in the last 60 days and 8.2% from the
2013 estimate. Meanwhile, no upward revision in estimates was
witnessed for both the years.
Other Stocks to Consider
While we prefer to avoid ProAssurance at present, stocks that
are outperforming in the insurance sector include
Global Indemnity Plc
CNA Financial Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
CNA FINL CORP (CNA): Free Stock Analysis
GLOBAL INDEMNTY (GBLI): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
ALLEGHANY CORP (Y): Free Stock Analysis
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