On Nov 22, 2013, we upgraded
) to Neutral, based on its growth in premiums, strong capital
management and geographic expansion. ProAssurance currently
carries a Zacks Rank #3 (Hold).
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Why the Upgrade?
ProAssurance's third quarter 2013 operating earnings of 88 cents
surpassed the Zacks Consensus Estimate of 82 cents and also
improved 2.3% from the year-ago period. Revenues of $181.5
million also increased 3.1% from the year-ago period and
surpassed the Zacks Consensus Estimate of $170 million.
ProAssurance's core business has been witnessing substantial
improvement over the past few quarters, mainly driven by
strategic acquisitions and geographic expansion. Further, the
launch of a new liability protection product - CAPAssurance - in
California, in association with the Cooperative of American
Physicians Inc. (CAP) should increase the premiums written, thus
boosting revenues in the upcoming quarters.
Meanwhile, the pending acquisition of Eastern Insurance Holdings
Inc. that is expected to culminate in the first quarter of 2014
should be accretive to 2014 earnings. Strong financial position
has helped ProAssurance to successfully acquire and integrate
companies and boost its operating efficiency. The strong
financial position is also reflected by ProAssurance's effective
In the long run, ProAssurance's solid competitive market
position, prudent operating and financial leverage, dependable
pricing and loss reserve practice will generate fundamental
growth. The company also scores strongly with credit rating
However, amid the positives, volatility in premium retention in
ProAssurance's physician business, declining investment income,
higher underwriting, policy acquisition and operating expenses
remain matters of concern. Moreover, time delays between premium
collection and payment of losses are affecting cash flows
adversely. As a result, ProAssurance's capital deployment and
deleveraging activities are liable to deterioration going
Other Stocks to Consider
Some better-ranked insurers include
The Allstate Corporation
Allied World Assurance Company Holdings, AG
). All these stocks hold a Zacks Rank #2 (Buy).