ProAssurance Beats on Q1 Earnings, Down Y/Y - Analyst Blog

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ProAssurance Corporation ( PRA ) 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 year.

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 decline.

Operational Update

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.

Financial Position

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.

Financial Ratios

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 ( XL ) reported its first-quarter 2014 operating net income of 85 cents per share, which beat the Zacks Consensus Estimate by 19.7%.

Montpelier Re Holdings Ltd. ( MRH ) declared operating earnings of $1.48 per share in the first quarter of 2014, surpassing the Zacks Consensus Estimate by 48%.

ACE Limited ( ACE ) reported operating earnings of $2.27 per share in the first quarter of 2014, outpacing the Zacks Consensus Estimate by 6.6%.

Zacks Rank

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.

ACE LIMITED (ACE): Free Stock Analysis Report

MONTPELIER RE (MRH): Free Stock Analysis Report

PROASSURANCE CP (PRA): Free Stock Analysis Report

XL GROUP PLC (XL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: ACE , MRH , PRA , XL

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