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ProAssurance Corp. (PRA)

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ProAssurance Corp.'s (PRA) first-quarter earnings surpassed the Zacks Consensus Estimate on the back of an improved top line. Additionally, enhanced operating cash flow and asset position aided in driving the book value of shares. Higher operating cash flow is also likely to translate into enhanced operating leverage and generation of excess capital for share repurchases.

Though the intense price and product competition, weak rate environment, loss cost trends and regulatory challenges limit the desired upside in the sector, we believe the benefits of geographic diversity, aggressive claims defense, stable ratings, improving ROE and strong financial position are likely to have a positive impact on the company over time.

Our six-month target price of $108.00 per share equates to about 15.2x our earnings estimate for 2012. Combined with the $1.00 per share annual dividend, this target price implies an expected return of 21% over that period, which is consistent with our Outperform recommendation.

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