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ProAssurance's (PRA) Q3 Earnings in Line, Revenues Miss

ProAssurance CorporationPRA reported third-quarter 2015 operating earnings per share of 63 cents, in line with the Zacks Consensus Estimate. The figure, however, decreased from 68 cents per share earned in the year-ago quarter due to high expenses.

Including non-recurring items, ProAssurance's net income was 19 cents per share, substantially below 59 cents in the year-ago quarter.

Operational Update

ProAssurance's total revenue was $174.9 million, down 14.2% year over year. This was attributable to lower investment income. Revenues also missed the Zacks Consensus Estimate of $204 million.

Gross premiums written by ProAssurance rose 4.1% year over year to $235.9 million. The upside was attributable to improvement in Workers' Compensation segment and Lloyd's segment.

The company recorded $36.2 million of net favorable development in the reported quarter, down from $42.9 million a year ago.

Total expenses amounted to $163.5 million, up 4.5% year over year. The rise in expenses mainly stemmed from increased net losses and loss adjustment expenses.

Net investment income of ProAssurance came in at $26.9 million, down 17.9% year over year. Net investment result (sum of net investment income and equity in earnings of unconsolidated subsidiaries) amounted to $26.5 million. This reflects a decrease from $33 million in the year-earlier quarter. Net realized investment losses came in at $36.6 million in the reported quarter, wider than $8.1 million a year ago.

Financial Ratios

ProAssurance's net loss ratio for the quarter was at 59.8% as against 56.0% in the prior-year quarter. The deterioration stemmed from a decline in the net favorable reserve development.

Expense ratio improved to 29.1% from 30.6% in the year-earlier quarter.

Combined ratio deteriorated to 88.9% from 86.6% in the comparable quarter last year, while operating ratio increased to 74.1% from 68.1% in the prior-year quarter. Return on equity (ROE) for the reported quarter was 2.0% compared with 5.9% in the third quarter of 2014.

Financial Position

ProAssurance's cash flow from operations was $51.8 million in the quarter as against $72 million in the year-ago quarter. Unfavorable timing of premium collections in 2015 and significant tax-refund in 2014 led to the downside.

The company's shareholder equity was $2.01 billion as of Sep 30, 2015, slightly lower than $2.2 billion as of Dec 31, 2014. Book value per share decreased approximately 1.1% to $37.76 as of Sep 30, 2015 from $38.17 as of Dec 31, 2014.

Share Repurchase and Dividend Update

ProAssurance spent $41.9 million to buy back 0.9 million shares in the third quarter of 2015, thereby taking the share repurchase tally to 3.6 million shares for $167.5 million as of Oct 31, 2015. As of Oct 31, the company was left with shares worth $114 million under its authorization.

The company has paid a total dividend of $217.6 million so far in 2015. This also includes a special dividend worth $150 million paid on Jan 9, 2015.

Performances of Other Insurers

The bottom lines at PartnerRe Ltd. PRE , RLI Corporation RLI and Allstate Corporation ALL outperformed their respective Zacks Consensus Estimate in the third quarter.

Zacks Rank

ProAssurance currently carries a Zacks Rank #3 (Hold).

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RLI CORP (RLI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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