) reported first-quarter 2014 operating earnings per share of 73
cents, which surpassed the Zacks Consensus Estimate of 71 cents
by 2.8%. However, the reported figure decreased 24.7% year over
Operating income excluded the effects of net realized
investment gains, guaranty fund assessment or recoupment and gain
on acquisitions. These items led to a positive adjustment of 3
cents per share to net income in the reported quarter against 85
cents in the year-ago quarter.
Including non-recurring items, ProAssurance's net income was
76 cents per share, down from $1.82 in the year-ago quarter.
Losses from competitive pressures in the Worker's
Compensation, and Specialty Property and Casualty segments, along
with higher expenses mainly led to the year-over-year
ProAssurance's total revenue increased 6.7% to $208.1 million
from $194.97 million in the prior-year quarter. The figure also
surpassed the Zacks Consensus Estimate of $184 million. The
upside was driven by an increase in gross premiums written by the
Workers' Compensation segment.
Gross premiums written by ProAssurance rose 33.7% year over
year to $218.3 million.
The company recorded $48 million of net favorable reserve
development in the reported quarter.
Total expenses amounted to $146.6 million, up 54% from $95.3
million in the year-ago quarter. Higher expenses were driven by
transaction-related expenses, decline in favorable reserve
development, an increase in interest expenses associated with
debts and the integration of Eastern Alliance Insurance, which
was absent in the year-ago quarter.
Net investment income of ProAssurance came in at $29.7
million, declining from $32.1 million in the year-ago quarter.
The year-over-year decrease was due to a decline in average
investment balances. Net investment result (sum of net investment
income and equity in earnings of unconsolidated subsidiaries)
amounted to $31.5 million, down 1.3% from $31.9 million in the
prior-year quarter. Net realized investment gains came in at $2.7
million in the reported quarter, down from $26.7 million in the
prior-year quarter. This decline was largely due to gains related
to reallocations of the company's portfolio and growth in stock
market valuations in the year-ago period.
ProAssurance's cash flow from operations increased $44 million
in the first quarter of 2014 on a year-over-year basis. This was
owing to tax-related payments made in the year-ago quarter.
Meanwhile, ProAssurance's shareholder equity was $2.35 billion as
of March 31, 2014, lower than $2.39 billion as of Dec 31, 2013.
Book value per share also improved approximately 1% to $39.51 as
of March 31, 2014 from $39.13 as of Dec 31, 2013.
ProAssurance's net loss ratio for the quarter came in at 52.1%,
compared with 42.8% in the prior-year quarter. Expense ratio
deteriorated to 30.6% from 27.7% in the year-earlier quarter. The
combined ratio of ProAssurance deteriorated to 82.7% from 70.5%
in the comparable quarter last year, while operating ratio
increased to 65.4% from 46.6% in the prior-year quarter. Return
on equity (ROE) for the reported quarter was 7.9%, deteriorating
from 13.4% in the first quarter of 2013.
Share Repurchase and Dividend Update
ProAssurance spent $84 million to buy back 1.8 million shares in
the first quarter of 2014, taking the total share repurchase to 2
billion for $91 million year to date. At present, ProAssurance
has $112 million remaining under its authorization.
On March 5, 2014, ProAssurance declared a quarterly cash dividend
of 30 cents per share that was paid on April 10, 2014 to
shareholders of record as of March 28, 2014.
Performances of Other Insurers
XL Group plc
) reported its first-quarter 2014 operating net income of 85
cents per share, which beat the Zacks Consensus Estimate by
Montpelier Re Holdings Ltd.
) declared operating earnings of $1.48 per share in the first
quarter of 2014, surpassing the Zacks Consensus Estimate by
) reported operating earnings of $2.27 per share in the first
quarter of 2014, outpacing the Zacks Consensus Estimate by
ACE LIMITED (ACE): Free Stock Analysis Report
MONTPELIER RE (MRH): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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ProAssurance currently carries a Zacks Rank #4 (Sell). ACE, with
a Zacks Rank #2 (Buy), is among the better-ranked stocks in the
insurance space and therefore worth consideration.