ProAssurance Corporation
(
PRA
) reported third-quarter operating earnings per share of $1.71,
striding ahead of the Zacks Consensus Estimate of $1.61 and the
year-ago quarter's earnings of $1.57. Operating earnings stood at
$52.9 million, compared with $48.4 million in the prior-year
quarter.
Operating income excludes the effects of net realized
investment gains or losses, guaranty fund assessments or
recoupments, confidential settlements and debt retirement gains
or losses. These items led to a positive adjustment of 23 cents
per share to net income in the reported quarter against a
negative adjustment of 15 cents in the year-ago quarter.
Including non-recurring items, net income was reported at
$60.1 million or $1.94 per share, surging from $43.7 million or
$1.42 per share in the year-ago quarter.
During the quarter under review, total revenue of ProAssurance
increased 8.6% to $176 million from $162 million in the year-ago
quarter. Revenue also surpassed the Zacks Consensus Estimate of
$173 million.
Gross premiums written declined 10.4% year over year to $156.5
million. The year-over-year fall was largely attributable to high
competition, improved loss trends in the previous years and the
normal renewal pattern of ProAssurance's two-year policies.
Moreover, owing to the lower loss severity, arising from
accident years 2004 to 2010, the company garnered $50 million of
net favorable loss reserve development in the reported quarter
versus $52 million a year ago. Total expenses amounted to $92.4
million, declining from $99.1 million in the prior-year
quarter.
Net investment income in the quarter was $33.9 million,
skidding 0.6% from $34.1 million in the prior-year quarter. Net
investment result (sum of net investment income and equity in
earnings of unconsolidated subsidiaries) amounted to $34.1
million, climbing 6.9% from $31.9 million in the year-ago
quarter. However, net realized investment gains stood at $13.2
million in the reported quarter as against net realized
investment losses of $12.0 million in the third-quarter of
2011.
Financial Position
In the reported quarter, ProAssurance generated net cash flow
from operating activities of $28.7 million, which plummeted from
$53.4 million in the prior-year quarter. Total assets of the
company at the end of the quarter were $4.97 billion, slightly
dropping from $5.0 billion as of December 31, 2011, while
shareholders' equity was $2.35 billion, reflecting an 8.8%
increase from $2.16 billion as of December 31, 2011. Book value
per share also hiked 7.95% to $76.47 from $70.84 as on December
31, 2011.
Financial Ratios
ProAssurance's net loss ratio for the reported quarter came in
at 44.5%, compared with 46.9% in the prior-year quarter.
Additionally, expense ratio deteriorated slightly to 26.0% from
25.8% in the previous-year quarter.
The combined ratio improved to 70.5% from 72.7% in the
comparable quarter last year, while operating ratio contracted
360 basis points to 43.8% from 47.4% in the prior-year quarter.
Return on equity (ROE) for the reported quarter was 10.4%,
improving from 8.8% in the third quarter of 2011.
Debt Repayment Update
During the reported quarter, ProAssurance repaid its entire
outstanding long-term debt. Additionally, the company recognized
a loss of $22 million related to the debt retirement in the third
quarter of 2012.
Dividend Update
Consistent with the company's dividend policy, ProAssurance
paid a quarterly cash dividend of 25 cents per share in October
2012.
Peer Comparison
ProAssurance's peer
Montpelier Re Holdings Ltd.
(
MRH
) reported its third quarter 2012 operating income of 85 cents
per share, surpassing the Zacks Consensus Estimate by 20 cents.
Earnings strongly rebounded from a loss of 40 cents incurred in
the prior-year quarter. Operating income of $48.5 million,
compared favorably with loss of $24.9 million in third quarter
2011.
Zacks Rank
We retain our long term 'Neutral' recommendation on
ProAssurance. Currently, it carries a Zacks #2 Rank, implying a
short-term Buy rating.
MONTPELIER RE (MRH): Free Stock Analysis
Report
PROASSURANCE CP (PRA): Free Stock Analysis
Report
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