Strong 1Q Earnings for ProAssurance - Analyst Blog


ProAssurance Corporation ( PRA ) reported first-quarter operating earnings per share of 97 cents, striding ahead of the Zacks Consensus Estimate of 76 cents as well as the year-ago quarter's earnings of 78 cents per share. Operating earnings stood at $60 million, compared with $48 million in the prior-year quarter.

Operating income excludes the effects of net realized investment gains or losses, guaranty fund assessment or recoupment, gain on acquisition of Medmarc Mutual Insurance Company and confidential settlements. These items led to a positive adjustment of 85 cents per share to net income in the reported quarter against 12 cents in the year-ago quarter.

Including non-recurring items, ProAssurance's net income was reported at $112.9 million or $1.82 per share, increasing from $55.6 million or 90 cents per share in the year-ago quarter.

During the quarter under review, total revenue of ProAssurance increased 8% to $195 million from $180.6 million in the year-ago quarter. Revenues also surpassed the Zacks Consensus Estimate of $175 million.

Gross premiums written of ProAssurance declined 4.3% year over year to $163.2 million. Moreover, owing to the lower-than-expected loss severity, arising from accident years 2005 to 2010, the company garnered $53.1 million of net favorable loss reserve development in the reported quarter versus $47.5 million a year ago. Total expenses amounted to $95.3 million, down from $105.4 million in the year-ago quarter.

Net investment income of ProAssurance in the quarter was $32.1 million, inching down from $33.5 million in the prior-year quarter. Net investment result (sum of net investment income and equity in earnings of unconsolidated subsidiaries) amounted to $31.9 million, inching up from $31.4 million in the year-ago quarter. However, net realized investment gains stood at $26.7 million in the reported quarter, surging from $10.7 million in the first quarter of 2012.

Financial Position

In the reported quarter, ProAssurance witnessed net cash outflow from operating activities of $13.1 million, which plummeted from an inflow of $28.1 million in the prior-year quarter. Total assets of the company at the end of the quarter were $5.2 billion, increasing from $4.9 billion as of Dec 31, 2012.

Meanwhile, ProAssurance's shareholder equity was $2.4 billion, reflecting an increase from $2.3 billion as of Dec 31, 2012. Book value per share also grew 3.6% to $38.19 from $36.85 as on Dec 31, 2012.

Financial Ratios

ProAssurance's net loss ratio for the reported quarter came in at 42.8%, compared with 51.4% in the prior-year quarter. Additionally, expense ratio deteriorated slightly to 27.7% from 25.2% in the prior-year quarter.

The combined ratio of ProAssurance improved to 70.5% from 76.6% in the comparable quarter last year, while operating ratio reduced to 46.6% from 52.0% in the prior-year quarter. Return on equity (ROE) for the reported quarter was 13.4%, improving from 10.2% in the first quarter of 2012.

Dividend Update

On Apr 11, 2013, ProAssurance paid a quarterly cash dividend of 25 cents per share to shareholders of record as of Apr 1.

Zacks Rank

ProAssurance currently carries a Zacks Rank #1 (Strong Buy). Other property and casualty insurers carrying the same Zacks Rank are Montpelier Re Holdings Ltd. ( MRH ), Hilltop Holdings Inc. ( HTH ) and HCC Insurance Holdings Inc. ( HCC ).

HCC INS HLDGS (HCC): Free Stock Analysis Report

HILLTOP HLDGS (HTH): Free Stock Analysis Report

MONTPELIER RE (MRH): 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 The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: HCC , HTH , MRH , PRA

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