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ProAssurance (PRA) Incurs Q4 Loss on High Costs & Low Premium
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ProAssurance Corporation (PRA - Free Report) incurred a fourth-quarter 2023 adjusted operating loss of 5 cents per share against the Zacks Consensus Estimate of earnings of 4 cents per share. The company reported earnings of 14 cents in the year-ago period.
Operating revenues rose 0.6% year over year to $285 million in the quarter under review. The top line beat the consensus mark by 2%.
The weak fourth-quarter earnings were caused by competitive market conditions and weakening litigation trends. A decline in net premiums earned across its segments, as well as an elevated expense level, also hurt its performance. Nevertheless, the downside was partly offset by strong investment returns resulting from higher interest rates.
Gross premiums written declined 7% year over year to $208.8 million and missed our estimate of $253 million. Net premiums earned of $247.3 million fell 4.2% year over year but outpaced the Zacks Consensus Estimate of $244.3 million, as well as our estimate of $244.1 million. Net investment income climbed 16.9% year over year to $33.7 million in the fourth quarter. The reported figure beat the consensus mark of $32.9 million and our estimate of $30.1 million.
Total expenses of $287.2 million escalated 2.6% year over year and came higher than our estimate of $279.5 million. The year-over-year increase was due to higher net losses and loss adjustment expenses, interest expense and underwriting, policy acquisition and operating expenses.
ProAssurance witnessed a net income of $6.4 million in the quarter under review, lower than the prior-year quarter’s $13.9 million. The combined ratio deteriorated 780 basis points (bps) year over year to 112%.
Segmental Update
Specialty P&C Segment
The segment’s revenues declined 2.8% year over year to $195.2 million in the fourth quarter but came higher than the Zacks Consensus Estimate of $193.7 million and our estimate of $192.4 million. Net premiums earned of $193.6 million fell 3.1% year over year. The reported figure missed the consensus mark of $194 million but beat our estimate of $191.3 million. The segment was affected by weaker market conditions that prevailed during the preceding twelve months and lower retention, partially offset by price increases in all product lines and improved new business writing.
Total expenses declined 2.3% year over year to $203 million. The unit incurred a loss of $7.8 million in the quarter under review, 10.8% wider than the prior-year quarter’s loss. The combined ratio of 104.9% deteriorated 90 bps year over year.
Workers' Compensation Insurance Segment
In the fourth quarter, revenues in the unit declined 8.8% year over year to $38.6 million, lower than the consensus estimate of $41.4 million and our estimate of $41.6 million. Net premiums earned of $38.3 million tumbled 8.6% year over year due to persistent competitive market conditions and lower audit premiums. The figure lagged the Zacks Consensus Estimate of $40.9 million and our estimate of $41.1 million.
Total expenses were $51.6 million, which escalated 22.9% year over year. The unit incurred a loss of $13 million against the prior-year quarter’s profit of $0.3 million. The combined ratio of 134.8% deteriorated 3,460 bps year over year.
Segregated Portfolio Cell Reinsurance Segment
The segment recorded gross premiums written of $14.3 million, which plunged 10.7% year over year due to reduced workers’ compensation renewal and audit premiums. Net premiums earned dropped 6.5% year over year to $15.4 million in the quarter under review and met our estimate.
Underwriting, policy acquisition and operating expenses totaled $5.2 million, which rose 1.9% year over year but came lower than our estimate of $5.6 million. The unit recorded a profit of $0.2 million, declining 50.7% year over year. The combined ratio deteriorated 1,870 bps year over year to 93.2% in the fourth quarter.
Corporate Segment
Net investment income advanced 16.2% year over year to $33 million and beat our estimate of $29 million due to the high interest rate environment. The year-over-year increase stemmed from improved average book yields from PRA’s fixed maturity investments. The segment’s profit of $26.5 million increased 137.2% year over year in the quarter under review. Operating expenses increased 14% year over year to $9.2 million on the back of an increase in compensation-related costs. Interest expenses of $6.7 million jumped 21.3% year over year.
Financial Position (as of Dec 31, 2023)
ProAssurance exited the fourth quarter with cash and cash equivalents of $65.9 million, which increased from the 2022-end figure of $30 million. Total investments of $4.3 billion slipped from the $4.4 billion level at 2022 end. Total assets of $5.6 billion marginally decreased from the $5.7 billion figure at 2022 end.
Debt-less unamortized debt issuance costs were $427.1 million, which increased slightly from the $427 million figure as of Dec 31, 2022.
Total shareholders’ equity of $1.1 billion remained flat with the 2022-end level.
Net cash used in operating activities amounted to $49.9 million in 2023 compared with $29.8 million in 2022.
Book value per share was $21.82, which improved 7% year over year. Non-GAAP operating return on equity was negative 1% in the quarter under review.
Share Repurchase Update
ProAssurance did not repurchase any common shares in the fourth quarter and continued its suspension of dividend payments. A leftover capacity of $55.9 million remained in place to be utilized for common share repurchases or retirement of outstanding debt as of Dec 31, 2023.
Full Year Results
ProAssurance recorded total revenues of $1.1 billion in 2023, up 2.8% from the year-ago level. Total expenses jumped 5.7% year over year to $1.2 billion. As such, the 2023 adjusted operating loss was at 14 cents per share against earnings of 42 cents in 2022.
The Zacks Consensus Estimate for Ryan Specialty’s 2024 full-year earnings indicates a 23.4% year-over-year increase. It beat earnings estimates in two of the past four quarters and met twice, with an average surprise of 5.1%. Also, the consensus mark for RYAN’s 2024 full-year revenues suggests 19.1% year-over-year growth.
The consensus mark for Chubb’s 2024 full-year earnings is pegged at $21.23 per share, which witnessed seven upward estimates in the past month against no movement in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 23.4%. Furthermore, the consensus estimate for CB’s 2024 full-year revenues suggests 7.4% year-over-year growth.
The Zacks Consensus Estimate for Brown & Brown’s 2024 full-year earnings is pegged at $3.20 per share, which indicates 13.9% year-over-year growth. The estimate remained stable over the past week. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.2%.
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ProAssurance (PRA) Incurs Q4 Loss on High Costs & Low Premium
ProAssurance Corporation (PRA - Free Report) incurred a fourth-quarter 2023 adjusted operating loss of 5 cents per share against the Zacks Consensus Estimate of earnings of 4 cents per share. The company reported earnings of 14 cents in the year-ago period.
Operating revenues rose 0.6% year over year to $285 million in the quarter under review. The top line beat the consensus mark by 2%.
The weak fourth-quarter earnings were caused by competitive market conditions and weakening litigation trends. A decline in net premiums earned across its segments, as well as an elevated expense level, also hurt its performance. Nevertheless, the downside was partly offset by strong investment returns resulting from higher interest rates.
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Quarterly Operational Update
Gross premiums written declined 7% year over year to $208.8 million and missed our estimate of $253 million. Net premiums earned of $247.3 million fell 4.2% year over year but outpaced the Zacks Consensus Estimate of $244.3 million, as well as our estimate of $244.1 million. Net investment income climbed 16.9% year over year to $33.7 million in the fourth quarter. The reported figure beat the consensus mark of $32.9 million and our estimate of $30.1 million.
Total expenses of $287.2 million escalated 2.6% year over year and came higher than our estimate of $279.5 million. The year-over-year increase was due to higher net losses and loss adjustment expenses, interest expense and underwriting, policy acquisition and operating expenses.
ProAssurance witnessed a net income of $6.4 million in the quarter under review, lower than the prior-year quarter’s $13.9 million. The combined ratio deteriorated 780 basis points (bps) year over year to 112%.
Segmental Update
Specialty P&C Segment
The segment’s revenues declined 2.8% year over year to $195.2 million in the fourth quarter but came higher than the Zacks Consensus Estimate of $193.7 million and our estimate of $192.4 million. Net premiums earned of $193.6 million fell 3.1% year over year. The reported figure missed the consensus mark of $194 million but beat our estimate of $191.3 million. The segment was affected by weaker market conditions that prevailed during the preceding twelve months and lower retention, partially offset by price increases in all product lines and improved new business writing.
Total expenses declined 2.3% year over year to $203 million. The unit incurred a loss of $7.8 million in the quarter under review, 10.8% wider than the prior-year quarter’s loss. The combined ratio of 104.9% deteriorated 90 bps year over year.
Workers' Compensation Insurance Segment
In the fourth quarter, revenues in the unit declined 8.8% year over year to $38.6 million, lower than the consensus estimate of $41.4 million and our estimate of $41.6 million. Net premiums earned of $38.3 million tumbled 8.6% year over year due to persistent competitive market conditions and lower audit premiums. The figure lagged the Zacks Consensus Estimate of $40.9 million and our estimate of $41.1 million.
Total expenses were $51.6 million, which escalated 22.9% year over year. The unit incurred a loss of $13 million against the prior-year quarter’s profit of $0.3 million. The combined ratio of 134.8% deteriorated 3,460 bps year over year.
Segregated Portfolio Cell Reinsurance Segment
The segment recorded gross premiums written of $14.3 million, which plunged 10.7% year over year due to reduced workers’ compensation renewal and audit premiums. Net premiums earned dropped 6.5% year over year to $15.4 million in the quarter under review and met our estimate.
Underwriting, policy acquisition and operating expenses totaled $5.2 million, which rose 1.9% year over year but came lower than our estimate of $5.6 million. The unit recorded a profit of $0.2 million, declining 50.7% year over year. The combined ratio deteriorated 1,870 bps year over year to 93.2% in the fourth quarter.
Corporate Segment
Net investment income advanced 16.2% year over year to $33 million and beat our estimate of $29 million due to the high interest rate environment. The year-over-year increase stemmed from improved average book yields from PRA’s fixed maturity investments. The segment’s profit of $26.5 million increased 137.2% year over year in the quarter under review. Operating expenses increased 14% year over year to $9.2 million on the back of an increase in compensation-related costs. Interest expenses of $6.7 million jumped 21.3% year over year.
Financial Position (as of Dec 31, 2023)
ProAssurance exited the fourth quarter with cash and cash equivalents of $65.9 million, which increased from the 2022-end figure of $30 million. Total investments of $4.3 billion slipped from the $4.4 billion level at 2022 end. Total assets of $5.6 billion marginally decreased from the $5.7 billion figure at 2022 end.
Debt-less unamortized debt issuance costs were $427.1 million, which increased slightly from the $427 million figure as of Dec 31, 2022.
Total shareholders’ equity of $1.1 billion remained flat with the 2022-end level.
Net cash used in operating activities amounted to $49.9 million in 2023 compared with $29.8 million in 2022.
Book value per share was $21.82, which improved 7% year over year. Non-GAAP operating return on equity was negative 1% in the quarter under review.
Share Repurchase Update
ProAssurance did not repurchase any common shares in the fourth quarter and continued its suspension of dividend payments. A leftover capacity of $55.9 million remained in place to be utilized for common share repurchases or retirement of outstanding debt as of Dec 31, 2023.
Full Year Results
ProAssurance recorded total revenues of $1.1 billion in 2023, up 2.8% from the year-ago level. Total expenses jumped 5.7% year over year to $1.2 billion. As such, the 2023 adjusted operating loss was at 14 cents per share against earnings of 42 cents in 2022.
Zacks Rank & Other Stocks to Consider
ProAssurance currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Finance space are Ryan Specialty Holdings, Inc. (RYAN - Free Report) , Chubb Limited (CB - Free Report) and Brown & Brown, Inc. (BRO - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ryan Specialty’s 2024 full-year earnings indicates a 23.4% year-over-year increase. It beat earnings estimates in two of the past four quarters and met twice, with an average surprise of 5.1%. Also, the consensus mark for RYAN’s 2024 full-year revenues suggests 19.1% year-over-year growth.
The consensus mark for Chubb’s 2024 full-year earnings is pegged at $21.23 per share, which witnessed seven upward estimates in the past month against no movement in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 23.4%. Furthermore, the consensus estimate for CB’s 2024 full-year revenues suggests 7.4% year-over-year growth.
The Zacks Consensus Estimate for Brown & Brown’s 2024 full-year earnings is pegged at $3.20 per share, which indicates 13.9% year-over-year growth. The estimate remained stable over the past week. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.2%.