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ProAssurance (PRA) Declines 12.9% Since Q3 Earnings Miss
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ProAssurance Corporation’s (PRA - Free Report) shares have declined 12.9% since it reported weak third-quarter 2022 earnings on Nov 8, 2022. Decreased profits from all its segments except the Workers' Compensation segment affected the results. This was partially offset by higher investment income and lower expenses. The NORCAL acquisition keeps supporting its growth.
PRA reported a third-quarter 2022 operating loss of 6 cents per share against the Zacks Consensus Estimate of earnings of 20 cents. PRA’s bottom line also deteriorated from earnings of 25 cents per share a year ago.
Quarterly operating revenues of ProAssurance decreased from the prior-year level of $293.9 million to $288.2 million. However, the third-quarter top line met the Zacks Consensus Estimate.
ProAssurance Corporation Price, Consensus and EPS Surprise
Gross premiums written were down 0.1% year over year to $308.4 million. Net premiums earned were down 5.1% year over year to $258.4 million and missed the Zacks Consensus Estimate of $261.2 million.
Net investment income rose 28.4% year over year to $24.7 million on increased profits from investments and rising interest rates. It also beat the Zacks Consensus Estimate of $22.1 million.
Total expenses decreased 4.3% year over year to $284.9 million due to lower interest expense, SPC dividend expense, and net losses and loss adjustment expenses. However, underwriting, policy acquisition and operating expenses increased 20.8% year over year to $80.7 million.
The combined ratio increased 130 basis points (bps) year over year to 107.9%. The operating ratio declined 120 bps to 98.3%. Non-GAAP return on equity plunged year over year to negative 1.1% for the third quarter.
ProAssurance engaged in share buybacks of $3.3 million in the third quarter. As of Sep 30, 2022, PRA had $106.4 million left under its authorization for repurchases and debt retirement.
Segmental Results
Specialty P&C Insurance Segment
Total revenues of $193.6 million were down 5.4% from the prior-year figure. Gross premiums written rose 1.3% year over year to $238 million, mainly owing to the NORCAL acquisition and pricing increases. The segment reported a loss of $12.1 million against the Zacks Consensus Estimate of a profit of $4 million and deteriorated from the year-ago loss of $8.1 million. Total expenses of $205.7 million fell 3.3% year over year. The combined ratio increased 240 bps year over year to 106.7%.
Workers' Compensation Segment
Total revenues of $42.6 million were down 0.1% year over year but beat the Zacks Consensus Estimate of $41.4 million. Gross premiums written were $63.5 million, down 1.6% from the year-earlier number. Decreased renewal and new business premiums affected the segment, partially offset by increased audit premiums. The segment reported a profit of $0.3 million for the third quarter, improving from the year-ago loss of $2.2 million. However, it missed the Zacks Consensus Estimate of a profit of $0.6 million. Total expenses of $42.3 million were down 5.8% year over year. The combined ratio decreased 580 bps year over year to 100.5%.
Lloyd's Syndicate Segment
Gross premiums written were $6.8 million, down 23.7% from the figure recorded in the comparable quarter of last year due to decreased participation in Syndicates. Loss from the segment amounted to $0.2 million for the quarter under review against the Zacks Consensus Estimate of a profit of $0.6 million and deteriorated from the year-ago profit of $0.9 million. Underwriting, policy acquisition and operating expenses declined 52.1% year over year to $1.9 million. The combined ratio increased 720 bps year over year to 105.4%.
Segregated Portfolio Cell Reinsurance Segment
Gross premiums written were $17.9 million, up 17.3% from the year-earlier number. It incurred a loss of $0.2 million for the third quarter, reflecting a downside of 146% year over year due to a higher net loss ratio and a decrease in equity and fixed-income markets. It also missed the Zacks Consensus Estimate of a profit of $1.4 million. The combined ratio increased 770 bps year over year to 95.4%.
Corporate Segment
Net investment income of $24.4 million was up 30.6% year over year. Improved performance on investments and other factors aided the segment. It generated $3 million in profits, down 86.7% from the year-ago reading. Operating expenses of $8.9 million increased 29.8% from the prior-year level. Interest expense of $5.5 million fell 5.2% year over year.
Financial Position (as of Sep 30, 2022)
ProAssurance’s total investments were $4,385.5 million, down from $4,828.3 million registered at the 2021 end. At the third-quarter-end, PRA’s total assets were $5,783.3 million, down from the 2021-end figure of $6,191.5 million. Cash and cash equivalents declined to $41.4 million in the third quarter from $143.6 million at the fourth-quarter-end. Debt-less unamortized debt issuance costs stood at $426.4 million, marginally up from $425 million at 2021-end.
The insurer’s shareholder equity declined to $1,066 million from $1,428.4 million as of Dec 31, 2021. Book value was $19.75 per share, down from $26.46 as of Dec 31, 2021.
Net cash from operations in the first nine months of 2022 was $6.7 million, down from $69.4 million a year ago.
Zacks Rank & Key Picks
ProAssurance currently has a Zacks Rank #4 (Sell).
Headquartered in Cincinnati, OH, American Financial is a major insurance holding company. The Zacks Consensus Estimate for AFG’s 2022 bottom line is pegged at $11.66 per share, which witnessed two upward estimate revisions in the past 60 days against none in the opposite direction.
New York-based StoneX Group works as a global financial services network. The Zacks Consensus Estimate for SNEX’s current year bottom line indicates 54.8% year-over-year growth.
Based in Lincoln, NE, Midwest Holding is a financial services company. The Zacks Consensus Estimate for MDWT’s 2022 earnings is pegged at 65 cents per share, signaling a 185.5% surge from a year ago.
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ProAssurance (PRA) Declines 12.9% Since Q3 Earnings Miss
ProAssurance Corporation’s (PRA - Free Report) shares have declined 12.9% since it reported weak third-quarter 2022 earnings on Nov 8, 2022. Decreased profits from all its segments except the Workers' Compensation segment affected the results. This was partially offset by higher investment income and lower expenses. The NORCAL acquisition keeps supporting its growth.
PRA reported a third-quarter 2022 operating loss of 6 cents per share against the Zacks Consensus Estimate of earnings of 20 cents. PRA’s bottom line also deteriorated from earnings of 25 cents per share a year ago.
Quarterly operating revenues of ProAssurance decreased from the prior-year level of $293.9 million to $288.2 million. However, the third-quarter top line met the Zacks Consensus Estimate.
ProAssurance Corporation Price, Consensus and EPS Surprise
ProAssurance Corporation price-consensus-eps-surprise-chart | ProAssurance Corporation Quote
Operational Update
Gross premiums written were down 0.1% year over year to $308.4 million. Net premiums earned were down 5.1% year over year to $258.4 million and missed the Zacks Consensus Estimate of $261.2 million.
Net investment income rose 28.4% year over year to $24.7 million on increased profits from investments and rising interest rates. It also beat the Zacks Consensus Estimate of $22.1 million.
Total expenses decreased 4.3% year over year to $284.9 million due to lower interest expense, SPC dividend expense, and net losses and loss adjustment expenses. However, underwriting, policy acquisition and operating expenses increased 20.8% year over year to $80.7 million.
The combined ratio increased 130 basis points (bps) year over year to 107.9%. The operating ratio declined 120 bps to 98.3%. Non-GAAP return on equity plunged year over year to negative 1.1% for the third quarter.
ProAssurance engaged in share buybacks of $3.3 million in the third quarter. As of Sep 30, 2022, PRA had $106.4 million left under its authorization for repurchases and debt retirement.
Segmental Results
Specialty P&C Insurance Segment
Total revenues of $193.6 million were down 5.4% from the prior-year figure. Gross premiums written rose 1.3% year over year to $238 million, mainly owing to the NORCAL acquisition and pricing increases. The segment reported a loss of $12.1 million against the Zacks Consensus Estimate of a profit of $4 million and deteriorated from the year-ago loss of $8.1 million. Total expenses of $205.7 million fell 3.3% year over year. The combined ratio increased 240 bps year over year to 106.7%.
Workers' Compensation Segment
Total revenues of $42.6 million were down 0.1% year over year but beat the Zacks Consensus Estimate of $41.4 million. Gross premiums written were $63.5 million, down 1.6% from the year-earlier number. Decreased renewal and new business premiums affected the segment, partially offset by increased audit premiums. The segment reported a profit of $0.3 million for the third quarter, improving from the year-ago loss of $2.2 million. However, it missed the Zacks Consensus Estimate of a profit of $0.6 million. Total expenses of $42.3 million were down 5.8% year over year. The combined ratio decreased 580 bps year over year to 100.5%.
Lloyd's Syndicate Segment
Gross premiums written were $6.8 million, down 23.7% from the figure recorded in the comparable quarter of last year due to decreased participation in Syndicates. Loss from the segment amounted to $0.2 million for the quarter under review against the Zacks Consensus Estimate of a profit of $0.6 million and deteriorated from the year-ago profit of $0.9 million. Underwriting, policy acquisition and operating expenses declined 52.1% year over year to $1.9 million. The combined ratio increased 720 bps year over year to 105.4%.
Segregated Portfolio Cell Reinsurance Segment
Gross premiums written were $17.9 million, up 17.3% from the year-earlier number. It incurred a loss of $0.2 million for the third quarter, reflecting a downside of 146% year over year due to a higher net loss ratio and a decrease in equity and fixed-income markets. It also missed the Zacks Consensus Estimate of a profit of $1.4 million. The combined ratio increased 770 bps year over year to 95.4%.
Corporate Segment
Net investment income of $24.4 million was up 30.6% year over year. Improved performance on investments and other factors aided the segment. It generated $3 million in profits, down 86.7% from the year-ago reading. Operating expenses of $8.9 million increased 29.8% from the prior-year level. Interest expense of $5.5 million fell 5.2% year over year.
Financial Position (as of Sep 30, 2022)
ProAssurance’s total investments were $4,385.5 million, down from $4,828.3 million registered at the 2021 end. At the third-quarter-end, PRA’s total assets were $5,783.3 million, down from the 2021-end figure of $6,191.5 million. Cash and cash equivalents declined to $41.4 million in the third quarter from $143.6 million at the fourth-quarter-end. Debt-less unamortized debt issuance costs stood at $426.4 million, marginally up from $425 million at 2021-end.
The insurer’s shareholder equity declined to $1,066 million from $1,428.4 million as of Dec 31, 2021. Book value was $19.75 per share, down from $26.46 as of Dec 31, 2021.
Net cash from operations in the first nine months of 2022 was $6.7 million, down from $69.4 million a year ago.
Zacks Rank & Key Picks
ProAssurance currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader finance space are American Financial Group, Inc. (AFG - Free Report) , StoneX Group Inc. (SNEX - Free Report) and Midwest Holding Inc. , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Cincinnati, OH, American Financial is a major insurance holding company. The Zacks Consensus Estimate for AFG’s 2022 bottom line is pegged at $11.66 per share, which witnessed two upward estimate revisions in the past 60 days against none in the opposite direction.
New York-based StoneX Group works as a global financial services network. The Zacks Consensus Estimate for SNEX’s current year bottom line indicates 54.8% year-over-year growth.
Based in Lincoln, NE, Midwest Holding is a financial services company. The Zacks Consensus Estimate for MDWT’s 2022 earnings is pegged at 65 cents per share, signaling a 185.5% surge from a year ago.