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Why Should You Hold ProAssurance (PRA) in Your Portfolio?

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ProAssurance Corporation (PRA - Free Report) has been favored by investors on the back of its strong capital position and strategic measures.

Over the past seven days, the company has witnessed its 2021 and 2022 earnings estimates move 6.1% and 4.2% north, respectively. This should instill investors' confidence in the stock.

It recently delivered first-quarter 2021 operating earnings of 4 cents per share, beating the Zacks Consensus Estimate of 2 cents by 100%. The bottom line also rebounded from the year-ago quarter’s loss of 2 cents per share, mainly on the back of lower expenses.

Here we discuss the reasons for keeping this currently Zacks Rank #3 (Hold) company in your investment portfolio. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Given the company’s strong fundamentals, it is well-placed for long-term growth.

The company recently closed the pending buyout of NORCAL for a valuation of $441 million. This takeover is expected to deepen ProAssurance’s concentration on Medical Professional Liability Insurance.
It will enhance its size and scale in the MPLI space, thus making the combined entity a leading specialty writer of liability insurance for healthcare professionals and facilities in the nation.

The company’s core business has been witnessing significant growth over the past many quarters on the back of buyouts that proved to be accretive to its premiums. Although the same is suffering due to the COVID-led turmoil, we expect things to bounce back on a host of strategic measures.

ProAssurance has been gaining from cash flow from operating activities for the past many quarters. Its solvency level impresses. The company effectively lowered its debts over the last few years. As of Mar 31, 2021, it had cash and cash equivalents worth $214.8 million and a revolving credit facility of up to $250 million (set to expire in November 2024), higher than its long-term debt obligation of $284.7 million. The company’s total debt to total capital of 17.4% is lower than the industry's average of 20.6%.

However, we are concerned about its high expenses, which are likely to put pressure on its margins going forward. Although total expenses declined 8.3% year over year to $211.5 million in the first quarter of 2021, escalating expenses over the past many years remain a concern.

The company’s 2021 earnings estimate stands at 35 cents, indicating an upside of 167.3% from the year-ago reported figure.

Price Performance

Shares of this property and casualty (P&C) insurer have gained 81.6% in the past year compared with the industry’s growth of 53.8%.

Some other stocks in the same space, such as RLI Corp. (RLI - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and American Financial Group, Inc. (AFG - Free Report) , have also gained 53%, 18.1% and 127.9%, respectively, in the same time frame. All the companies currently hold a Zacks Rank #2 (Buy).  

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