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Why Is ProAssurance (PRA) Down 7.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for ProAssurance (PRA - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ProAssurance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

ProAssurance Reports Loss in Q2, Beats on Revenues

ProAssurance reported second-quarter 2020 operating loss per share of 60 cents, narrower than the Zacks Consensus Estimate of an operating loss of 67 cents. However, in the year-ago quarter, the company delivered an operating income of 8 cents.

Quarterly operating revenues of ProAssurance dipped 3.6% to $227.11 million from the prior-year quarter’s level, mainly due to lower premiums.
The top line, however, beat the Zacks Consensus Estimate by 0.4%.

Quarterly Operational Update

Gross premiums written were down 16.4% year over year to $185 million, primarily due to strategy to strengthen rate levels in Standard Physician business, premium credits recognition in relation to the pandemic along with re-underwriting efforts in Specialty business. Moreover, net premiums earned were down 0.9% year over year to $207.3 million.

Net investment income decreased 23% year over year to $18 million.

Net realized investment gain of the company was $19.9 million, up 114.7% year over year.

Total expenses increased 22% year over year to $278.5 million. This rise in costs mainly stemmed from higher net loss and loss adjustment expenses, and SPC dividend income.

Combined ratio expanded 1960 basis points (bps) year over year to 130.1%.

Quarterly Segmental Results

Specialty P&C Insurance Segment

Total revenues of $128 million inched up 0.6% from the prior-year quarter’s figure in the segment.

Gross premiums written declined 16.3% year over year to $107 million, reflective of the company’s strategy to strengthen rate levels in the Standard Physician business, recognitions of premium credits regarding the pandemic and re-underwriting efforts in the Specialty business along with timing differences.

Total expenses of $184 million increased 36% year over year.

Combined ratio expanded 3760 basis points year over year to 145.4%.

Workers' Compensation Segment

Total revenues of $43 million decreased 9.2% year over year, mainly due to lower premiums earned.

Gross premiums written were $57.2 million, down 10.9% from the year-earlier period’s number, mainly due to reduction in renewal pricing and retention losses along with decrease in audit premium. However, the same was offset by new business written.

Total expenses of $41.9 million were down 6.9% year over year.

Combined ratio expanded 210 basis points year over year to 98.7%.

Lloyd's Syndicate Segment

Total revenues of $22.7 million increased 21.1% year over year on the back of higher premiums.

Gross premiums written were $20.7 million, down 29.1% from the figure acquired in the comparable quarter last year due to decreased participation in the operating results of Syndicate 1729.

Total expenses of $22.6 million rose 16.7% year over year.

Combined ratio contracted 460 basis points year over year to 108.8%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written were $15 million, down 11.3% the year-earlier period’s number, mainly due to the premium retention for worker’s compensation business in the segregated portfolio cells.

Combined ratio contracted 5630 basis points year over year to 77.9%.

Corporate Segment

Net investment income of $16.7 million declined 24% year over year due to decreased allocation to equities and lower yields on short-term investments.

Operating expenses of $7.7 million increased 43.1% from the prior-year quarter’s level. Interest expense of $3.7 million decreased 12.6% year over year.

Financial Position

As of Jun 30, 2020, ProAssurance’s total investments were $3.2 billion, down 2.7% from the number registered at 2019 end.

At second-quarter end, the company’s total assets were $4.7 billion, down 0.5% from the figure at 2019 end.

As of Jun 30, 2020, the insurer’s shareholder equity slipped 2.5% to $1.4 billion from the figure as of Dec 31, 2019.

Return on equity was (5%) against the year-ago quarter’s return on equity of 2.9%.

Book value was $27.36 per share as of Jun 30, 2020, down 2.7% from the figure as of Dec 31, 2019.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 566.67% due to these changes.

VGM Scores

Currently, ProAssurance has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, ProAssurance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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