ProAssurance Closes EIHI Buyout - Analyst Blog


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The much hyped acquisition of Eastern Insurance Holdings Inc. ( EIHI ) by leading specialty insurer ProAssurance Corporation ( PRA ) has finally closed on Jan 1, 2014, for a cash consideration of $205 million.

The deal was announced in Sep 2013 and was pending regulatory and Eastern Insurance shareholders' approval. On Dec 27, 2013, the deal received approval from the Eastern Insurance shareholders.

As previously decided, Eastern Insurance will now become a wholly owned subsidiary of ProAssurance. It will merge with a newly formed subsidiary of ProAssurance to form an entity that will enhance the medically focused product lines of ProAssurance.

The aforementioned deal will help ProAssurance to foray into the workers' compensation market that provides substantial growth opportunities. Eastern Insurance has performed impressively in healthcare workers' compensation and has delivered strong growth and underwriting profit. Thus, with the completion of the deal, ProAssurance is set to provide its policyholders with superior workers' compensation solution, which will help it to capitalize on market opportunities.  

Moreover, the acquisition will provide scope for product line diversification for the combined entity. Finally, the deal is anticipated to be moderately accretive to ProAssurance's 2014 earnings. The Zacks Consensus Estimate for full-year 2014 is currently pegged at $3.28. We expect the estimate to move up as analysts start incorporating the news in their estimates.

Our Take

ProAssurance has been undertaking strategic initiatives to establish an insurance platform that will help it to cater to prospective clients and shareholders. Thus, it seeks to acquire entities that have a promising working team and insurance expertise. We believe that the aforementioned deal will help ProAssurance to tap on alternative market opportunities in medical professional liability and workers' compensation, thus, boosting long-term growth. The overall long-term expected earnings growth rate for this stock is 7.5%.

Zacks Rank

ProAssurance currently carries a Zacks Rank #2 (Buy). Other players in the property and casualty insurance space, which look attractive at current levels, include Allied World Assurance Company Holdings, AG ( AWH ) and Aspen Insurance Holdings Ltd. ( AHL ). Both stocks sport a Zacks Rank #1 (Strong Buy).

ASPEN INS HLDGS (AHL): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

PROASSURANCE CP (PRA): 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 , Stocks
More Headlines for: AHL , AWH , PRA

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