) reported second-quarter operating earnings per share of $1.92,
striding ahead of the Zacks Consensus Estimate of $1.52 and the
year-ago quarter's earnings of $1.74. Operating earnings stood at
$59.5 million, compared with $53.7 million in the prior-year
Operating income excludes the effects of net realized investment
gains or losses and guaranty fund assessments or recoupments. The
positive adjustment to net income was 3 cents per share compared to
a negative adjustment of 5 cents in the year-ago quarter.
Including non-recurring items, net income was reported at $58.5
million or $1.89 per share, compared with $55.1 million or $1.79
per share in the year-ago quarter.
During the quarter under review, total revenue of ProAssurance
declined to $163.9 million from $174.8 million in the year-ago
quarter. Revenue also lagged the Zacks Consensus Estimate of $179
The decline in revenue was largely attributable to an 11.4% year
over year fall in gross premiums written to $102.2 million.
Moreover, owing to the lower loss severity, arising from accident
years 2004 to 2009, the company garnered $60 million of net
favorable loss reserve development in the reported quarter versus
$50 million a year ago.
Net investment income in the quarter was $34.5 million,
declining 5% from $36.3 million in the prior-year quarter. Net
investment result (sum of net investment income and equity in
earnings of unconsolidated subsidiaries) amounted to $32.3 million,
decreasing 5% from $33.9 million in the year-ago quarter. However,
net realized investment loss was $1.5 million in the reported
quarter as against net realized investment gains of $2.2 million in
the second-quarter of 2011.
ProAssurance generated net cash flow from operating activities
of $4.6 million in the reported quarter, declining from $28.2
million in the prior-year quarter. Total assets of the company at
the end of the quarter were $5.0 billion, at par with December 31,
2011, while shareholders' equity was $2.28 billion, reflecting a
2.8% increase from $2.16 billion as of December 31, 2011. Book
value per share also hiked 4.9% to $74.30 from $70.84 as on
December 31, 2011.
ProAssurance's net loss ratio for the reported quarter came in
at 36.6%, compared with 47.0% in the prior-year quarter.
Additionally, expense ratio deteriorated to 26.8% from 24.0% in the
The combined ratio improved to 63.4% from 71.0% in the
comparable quarter last year, while operating ratio contracted 740
basis points to 37.1% from 44.5% in the prior-year quarter. Return
on equity (ROE) for the reported quarter was 10.4%, down from 11.4%
in the second quarter of 2011.
Debt Repayment Update
In June 2012, ProAssurance decide to repay long-term debt worth
$35 million during the third quarter of 2012. Additionally, in July
2012, the company repaid $17 million worth of notes payable and
terminated a related interest rate swap, which led to a loss of
$2.5 million. This loss will be recognized in the third quarter of
Share Repurchase Update
ProAssurance did not undertake a share repurchase activity in
the reported quarter. The company has approximately $188 million
left under its $200 million authorization granted by the board in
November 2010. ProAssurance has been purchasing shares in the open
market since 2005 and has repurchased 6.1 million shares for $321
million to date.
Consistent with the company's dividend policy, ProAssurance paid
a quarterly cash dividend of 25 cents per share in July 2012.
Greenlight Capital Re, Ltd.
) reported its second-quarter operating loss of 98 cents per share,
better than the Zacks Consensus Estimate of a loss of $1.05.
However, the results compared unfavorably with loss per share of 44
cents in the year-ago quarter.
We retain our long term 'Outperform' recommendation on
ProAssurance. Currently, it carries a Zacks #1 Rank, implying a
short-term 'Strong Buy' rating.
GREENLIGHT CAP (GLRE): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
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