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Why Is ProAssurance (PRA) Down 8.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for ProAssurance (PRA - Free Report) . Shares have lost about 8.7% 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 the most recent earnings report in order to get a better handle on the important drivers.

ProAssurance's Q1 Earnings Beat Estimates, Surge Y/Y

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

Further, quarterly operating revenues of ProAssurance dropped 10.1% to $204 million from the prior-year quarter’s level, mainly due to lower premiums. Nonetheless, the top line came in line with the Zacks Consensus Estimate.

Quarterly Operational Update

Gross premiums written were down 14.4% year over year to $224.7 million. Moreover, net premiums earned were down 8.1% year over year to $187.3 million.

Further, net investment income fell 27.9% year over year to $15 million due to decline in corporate debt securities and weak yields from short-term investments along with lower allocation to equity. It also reflects capital planning in anticipation of the pending buyout of NORCAL.

Net realized investment losses of the company were $8.8 million, which came against the net realized investment gain of $28.6 million.

Total expenses declined 8.3% year over year to $211.5 million on the back of lower net losses and loss adjustment expenses, underwriting, policy acquisition and operating expenses, and lower interest expenses.

Combined ratio contracted 130 basis points (bps) year over year to 110%.

Quarterly Segmental Results

Specialty P&C Insurance Segment

Total revenues of $116 million declined 4.9% from the prior-year quarter’s figure.

Gross premiums written fell 11% year over year to $138.2 million, mainly due to the non-renewal of two major accounts in the Specialty Healthcare business.

Total expenses of $127.5 million decreased 9.2% year over year.

Combined ratio contracted 650 basis points year over year to 110.3%.

Workers' Compensation Segment

Total revenues of $40.4 million decreased 10.8% year over year, mainly due to lower premiums earned.

Gross premiums written were $72.3 million, down 8.7% from the year-earlier period’s number, mainly due to competitive workers’ compensation market conditions.

Total expenses of $38.4 million were down 12.4% year over year.

Combined ratio contracted 250 basis points year over year to 96.2%.

Lloyd's Syndicate Segment

Gross premiums written were $14.1 million, down 49.4% from the figure acquired in the comparable quarter last year due to higher losses from certain property and catastrophe-related events.

Combined ratio expanded 1460 basis points year over year to 123.4%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written were $25.1 million, down 7.3% from the year-earlier quarter’s number, mainly due to the premium retention for worker’s compensation market conditions.

Combined ratio expanded 590 basis points year over year to 90.9%.

Corporate Segment

Net investment income of $14 million declined 27.6% year over year due to softer allocation to equities and lower yields on short-term investments and corporate debt securities. The investment income also reflected the effect of capital planning related to the pending NORCAL buyout.

Operating expenses of $7.1 million increased 48.6% from the prior-year quarter’s level. Interest expense of $3.2 million dropped 22.2% year over year.

Financial Position (as of Mar 31, 2021)

ProAssurance’s total investments were $3.4 billion, up 0.5% from the number registered at 2020 end.

At first-quarter end, the company’s total assets were $4.6 billion, up 0.4% from the figure at 2020 end.

The insurer’s shareholder equity dipped 2.1% to $1.3 billion from the figure as of Dec 31, 2020.

Return on equity was 2.3% against the year-ago quarter’s return on equity of (6.0%).

Book value was $24.49 per share, down 2.2% from the figure as of Dec 31, 2020.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -33.33% due to these changes.

VGM Scores

At this time, ProAssurance has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

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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