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ProAssurance (PRA) & Units Get Ratings Affirmed by A.M. Best


Credit rating agency A.M. Best has reiterated the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” for the members of the ProAssurance Corporation PRA. Additionally, the agency affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” for PACO Assurance Company, Inc. (PACO) along with confirming the FSR of A (Excellent) and the Long-Term ICRs of “a+” for the members of the Eastern Alliance Insurance Group (EAIG). These are indirect subsidiaries of the parent company.

Moreover, the rating agency has downgraded the Long-Term ICR from “a+” to “a” and reiterated the FSR of A (Excellent) for Eastern Re Ltd., S.P.C. The outlook of the ratings is stable.

The agency also undertook other actions such as affirming the Long-Term ICR of “a-” of PRA and the Long-Term Issue Credit Rating (Long-Term IR) of “a-” on the company’s $250 million 5.30% 10-year senior unsecured notes due 2023. It has also kept intact the indicative Long-Term IRs under the shelf registration of “a-” on the senior unsecured debt, “bbb+” on the senior subordinated debt and “bbb” on the preferred stock. Outlook of these ratings is stable.

Rationale Representation

This rating acknowledges the parent company’s solid balance sheet, along with its significant operational performance, impressive business profile and enterprise risk management.

Its risk-adjusted capitalization is at the strongest level as measured by Best’s Capital Adequacy Ratio apart from its solid reserves and high-quality investments. The ratings also reflect the company’s market position as one of the top medical professional liability insurers in the United States and its diversification across various disciplines, demographic areas, etc. Additionally, the ratings attest the quality of the company’s enterprise risk management.

Moreover, PACO’s and EAIG’s ratings highlight balance sheet positions, business profiles, operating excellence and the right enterprise risk management.

EAIG’s balance sheet position is recognized to be strongest, supported by its risk-adjusted capitalization.

The rating downgrade of Eastern Re mirrors a change in the agency’s assessment of its business profile mainly due to its run-off position and bleak business prospects.

The parent company's financial leverage is conservative and it possesses a strong interest coverage. It also holds cash and short-term investments outside the insurance operating companies that can be used without regulatory approval. Surplus growth at most of ProAssurance’s rating units has been restricted over the last five years due to payment of significant dividends toward the parent company. The amount has been later used in making dividend payouts and share buybacks.

Shares of this Zacks Rank #2 (Buy) have lost 10.5% in a year’s time versus its industry’s rally of 16.4%.

Other Key Picks

Investors interested in the insurance industry might also take a look at other top-ranked stocks like The Progressive Corporation PGR, Alleghany Corporation Y and The Navigators Group, Inc. NAVG, each sporting a Zacks Rank #1 (Strong Buy).

Progressive provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company managed to pull off an average trailing four-quarter positive surprise of 9.19%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Operating in the Reinsurance and Insurance segments, Alleghany Corporation offers related services in the United States as well as internationally. The company came up with an average three-quarter earnings surprise of 17.61%.

The Navigators Group and its subsidiaries underwrite marine, property and casualty plus professional liability insurance products and services in the United States and around the globe. It delivered an average three of four-quarter beat of 19.54%.

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