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ProAssurance Rides on Improved Premiums & Robust Liquidity
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ProAssurance Corporation (PRA - Free Report) is well-poised to gain from improved net premiums and strategic initiatives intended to boost revenues.
Let's take a look at the factors that bode well for the company.
ProAssurance continues to benefit courtesy of improved premiums, which has contributed to the top line. Net premiums have witnessed a CAGR of 5.1% in the past four years (2015-2019) primarily owing to strategic acquisitions, segmental contributions and strength in the new physician business. However, premiums are anticipated to remain under pressure due to financial turmoil induced by the COVID-19 pandemic. Nevertheless, we believe that addition of profitable businesses to expand the company’s key business lines is likely to drive the top line in the days ahead.
Moreover, ProAssurance has constantly undertaken efforts to boost inorganic growth on the back of strategic buyouts and integrations of companies. In February 2020, the company inked a deal to buy NORCAL, which is expected to enhance its proficiency in Medical Professional Liability Insurance. The deal is anticipated to provide financial and strategic benefits to the company along with an expected $18 million in pre-tax synergies. We believe such initiatives bode well for the company.
Furthermore, the company’s improved liquidity position has resulted in a strong balance sheet and cash flows. ProAssurance has sufficient cash reserves to meet short-term debt obligations. As of Mar 31, 2020, its cash and cash equivalents stood at $612 million, higher than its long-term debt obligation of $307 million. Also, as of Mar 31, 2020, the company’s total debt-to-total capital of 17.7% is lower than the industry's average of 21.8%. This is also indicative of the company’s strong solvency position.
By virtue of its financial position, we believe that ProAssurance engages in effective deployment of capital. However, its board of directors declared a regular dividend of 5 cents per share concurrent with first-quarter 2020 earnings release. This dividend reflects reduction from 31 cents paid earlier given uncertainties introduced by the COVID-19 pandemic. Nevertheless, its dividend yield of 8.6% compares favorably with the industry’s figure of 0.5%, thus making the stock an attractive pick for yield seeking investors.
However, we also remain concerned about high costs incurred at ProAssurance, which are likely to put pressure on margins going forward.
Price Performance
Shares of this Zacks Rank #3 (Hold) property and casualty (P&C) insurer have lost 60.3% on a year-to-date basis, compared with the industry’s decline of 18.5%.
American Equity Investment, Allstate and Palomar have a trailing four-quarter positive earnings surprise of 63.04%, 18.45% and 10.93%, on average, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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ProAssurance Rides on Improved Premiums & Robust Liquidity
ProAssurance Corporation (PRA - Free Report) is well-poised to gain from improved net premiums and strategic initiatives intended to boost revenues.
Let's take a look at the factors that bode well for the company.
ProAssurance continues to benefit courtesy of improved premiums, which has contributed to the top line. Net premiums have witnessed a CAGR of 5.1% in the past four years (2015-2019) primarily owing to strategic acquisitions, segmental contributions and strength in the new physician business. However, premiums are anticipated to remain under pressure due to financial turmoil induced by the COVID-19 pandemic. Nevertheless, we believe that addition of profitable businesses to expand the company’s key business lines is likely to drive the top line in the days ahead.
Moreover, ProAssurance has constantly undertaken efforts to boost inorganic growth on the back of strategic buyouts and integrations of companies. In February 2020, the company inked a deal to buy NORCAL, which is expected to enhance its proficiency in Medical Professional Liability Insurance. The deal is anticipated to provide financial and strategic benefits to the company along with an expected $18 million in pre-tax synergies. We believe such initiatives bode well for the company.
Furthermore, the company’s improved liquidity position has resulted in a strong balance sheet and cash flows. ProAssurance has sufficient cash reserves to meet short-term debt obligations. As of Mar 31, 2020, its cash and cash equivalents stood at $612 million, higher than its long-term debt obligation of $307 million. Also, as of Mar 31, 2020, the company’s total debt-to-total capital of 17.7% is lower than the industry's average of 21.8%. This is also indicative of the company’s strong solvency position.
By virtue of its financial position, we believe that ProAssurance engages in effective deployment of capital. However, its board of directors declared a regular dividend of 5 cents per share concurrent with first-quarter 2020 earnings release. This dividend reflects reduction from 31 cents paid earlier given uncertainties introduced by the COVID-19 pandemic. Nevertheless, its dividend yield of 8.6% compares favorably with the industry’s figure of 0.5%, thus making the stock an attractive pick for yield seeking investors.
However, we also remain concerned about high costs incurred at ProAssurance, which are likely to put pressure on margins going forward.
Price Performance
Shares of this Zacks Rank #3 (Hold) property and casualty (P&C) insurer have lost 60.3% on a year-to-date basis, compared with the industry’s decline of 18.5%.
Stocks to Consider
Some better-ranked stocks in the insurance space include American Equity Investment Life Holding Company (AEL - Free Report) , The Allstate Corporation (ALL - Free Report) and Palomar Holdings, Inc. (PLMR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Equity Investment, Allstate and Palomar have a trailing four-quarter positive earnings surprise of 63.04%, 18.45% and 10.93%, on average, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>