On Mar 5, 2013, we upgraded our recommendation on
) to Outperform based on strong credit ratings, prudent capital
management and inorganic growth.
Why the Upgrade?
Despite a soft cycle in the medical liability business,
ProAssurance has significantly expanded its geographic footprint
through successful acquisitions and integration of companies. The
financial size and strength have helped this Zacks Rank #3 (Hold)
stock to become an attractive acquirer. Furthermore, its
commitment to local market needs and personal service
differentiates the company from its competitors, both in organic
growth and acquisition opportunities.
Prudent capital management is another key strength for
ProAssurance, which is reflected in the low-risk balance sheet
and healthy loss reserves. All of the subsidiaries of
ProAssurance exceed the minimum risk-based capital (RBC)
requirements specified by National Association of Insurance
Further, the company deploys capital in an effective manner
mainly through its stock buyback program and dividend payment.The
company deployed $38.4 million on quarterly dividends in 2012,
along with a special dividend of $154.1 million in Dec 2012.
Moreover, the company authorized a 2:1 stock split in Dec 2012,
which will double the total dividend payment in the future due to
the twofold increase in outstanding shares.
Moreover, ProAssurance enjoys Insurer Financial Strength (IFS)
rating of "A" from both A.M. Best and Fitch. The ratings reflect
the company's high claims paying ability, financial strength and
ability to meet its debt obligations.
Other Stocks to Consider
Apart from ProAssurance, other stocks worth considering in the
property and casualty insurance business are
XL Group plc
Navigators Group Inc.
Cincinnati Financial Corp.
). All these companies carry a Zacks Rank #1 (Strong Buy).
CINCINNATI FINL (CINF): Free Stock Analysis
NAVIGATORS GRP (NAVG): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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