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ProAssurance (PRA) Q2 Earnings Beat, Revenues Miss Estimates

Zacks

ProAssurance Corporation’s PRA second-quarter 2017 operating earnings per share of 40 cents surpassed the Zacks Consensus Estimate by 2.6%. The bottom line, however, declined 40% year over year.

Operational Update

ProAssurance’s second-quarter operating revenues declined 41.3% to $205.6 million from the prior-year quarter. Lower investment income led to the downside. The top line also missed the Zacks Consensus Estimate.

Gross premiums written grew 5.8% year over year to $206.2 million, primarily driven by Specialty P&C and Workers' Compensation segments.


Net premiums earned increased 2% from the prior-year quarter to $180.3 million due to gains in its three operating segments, particularly Workers' Compensation and Lloyd's.

Net investment income, however, decreased 7.8% year over year to $22.7 million.

Total expenses increased 12.1% year over year to $186.4 million. The rise in costs mainly stemmed from net losses and loss adjustment expenses as well as underwriting, policy acquisition and operating expenses.

Segment Results

Specialty P&C Insurance Segment

Total revenue of $110.5 million rose 0.6% year over year on the back of higher net premiums earned.

Gross premiums written were $125 million, up 7.6% from the year-ago quarter, primarily due to increased physician premiums.

Total expenses of $102 million grew 16.4% year over year.

Workers' Compensation Segment

Total revenue of $57 million rose 3.3% year over year on the back of higher net premiums earned.

Gross premiums written were $59 million, 5% higher than the year-ago quarter, primarily driven by an increase in new business writings and solid premium retention.

Total expenses of $53 million grew 2% year over year.

Lloyd's Syndicate Segment

Total revenue of $15 million grew 5.3% year over year on the back of higher net premiums earned.

Gross premiums written in the segment were $23.3 million, down 6.8% from the year-ago quarter, primarily driven by a reduction in the Syndicate's quota share reinsurance arrangement with the Specialty P&C Segment.

Total expenses of $17.6 million grew 28% year over year.

Corporate Segment

Total revenue of $23 million declined 35% year over year due to lower net investment income

Interest expenses of $4.1 million grew 7.6% year over year.

Financial Ratios for the Quarter

Net loss ratio deteriorated 360 basis points (bps) from the prior-year quarter to 64.1%.

Expense ratio deteriorated 150 bps year over year to 32.1%.

Combined ratio deteriorated 510 bps from the year-ago quarter to 96.2%.

Operating ratio also deteriorated 640 bps to 83.6% from the year-earlier quarter.

Return on equity deteriorated 430 bps to 4.3% from the year-ago quarter.

ProAssurance Corporation Price, Consensus and EPS Surprise

Financial Position

As of Jun 30, 2017, ProAssurance’s total investments were $3.7 billion, down 4.5% from year-end 2016.

As of Jun 30, 2017, the company’s total assets were $4.9 billion, down 3.8% from year-end 2016.

As of Jun 30, 2017, the insurer’s shareholder equity was $1.8 billion, up 1.5% from Dec 31, 2016.

Book value per share increased 1.9% to $34.41 as of Jun 30, 2017 from $33.78 as of Dec 31, 2016.

Share Repurchase & Dividend Update

The company did not repurchase any shares during the first half of 2017. As of Jul 31, 2017, it had approximately $110 million available in its board-authorized stock repurchase program.

Its regular dividend, declared in May 2017 and paid in Jul 2017, was $16.5 million, bringing the total capital returned to shareholders in the form of regular and special dividends to $1.7 billion.

Zacks Rank Performances of Other P&C Insurers

ProAssurance currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Among other players from the same space that have reported their second-quarter earnings so far, the bottom lines of The Progressive Corporation PGR and The Travelers Companies, Inc. TRV missed their respective Zacks Consensus Estimate, while RLI Corp. RLI beat the same.

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