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ProAssurance (PRA) Up 7.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for ProAssurance (PRA - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ProAssurance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ProAssurance reported fourth-quarter 2020 operating earnings of 6 cents per share, beating the Zacks Consensus Estimate of 4 cents by 50%. The company’s bottom line rebounded from the year-ago quarter’s loss of $1.27 per share, mainly on the back of lower expenses.
Further, quarterly operating revenues of ProAssurance dropped 10.5% to $214 million from the prior-year quarter’s level, mainly due to lower premiums. Nonetheless, the top line beat the Zacks Consensus Estimate by 1.9%.
Quarterly Operational Update
Gross premiums written were down 19.4% year over year to $161.8 million, primarily due to decreased participation in Syndicate 1729 along with the strategy to strengthen rate levels in the Specialty P&C segment. Moreover, competitive conditions in the Workers Compensation Insurance and SPCR segments induced this downside.
Moreover, net premiums earned were down 12.8% year over year to $187 million.
Further, net investment income fell 30.6% year over year to $16.1 million due to lower allocation to equity, decline in corporate debt securities and weak yields from short-term investments.
Net realized investment gain of the company was $15.5 million, rising 21.2% year over year.
Total expenses declined 38.6% year over year to $208 million on the back of lower net losses and loss adjustment costs, SPC U.S. federal income tax expense and SPC dividend expense.
Combined ratio contracted 4840 basis points (bps) year over year to 105.8%.
Quarterly Segmental Results
Specialty P&C Insurance Segment
Total revenues of $112.4 million declined 10% from the prior-year quarter’s figure.
Gross premiums written fell 13.7% year over year to $102.2 million, reflective of renewal timing differences, strategy to strengthen rate levels in the Standard Physicians business and the re-underwriting efforts in its Specialty business, etc.
Total expenses of $123.3 million decreased 49.1% year over year. Combined ratio contracted 8590 basis points year over year to 110%.
Workers' Compensation Segment
Total revenues of $42.8 million decreased 10.2% year over year, mainly due to lower premiums earned.
Gross premiums written were $47.3 million, down 13.6% from the year-earlier period’s number, mainly due to reduction in renewal pricing and lower new business written along with weak audit premiums.
Total expenses of $40.7 million were down 3.6% year over year.
Combined ratio expanded 680 basis points year over year to 96.3%.
Lloyd's Syndicate Segment
Gross premiums written were $12.3 million, down 55.6% from the figure acquired in the comparable quarter last year due to less participation in the operating results of Syndicate 1729.
Combined ratio expanded 1560 basis points year over year to 109.4%.
Segregated Portfolio Cell Reinsurance Segment
Gross premiums written were $14.8 million, down 10.9% the year-earlier period’s number, mainly due to the premium retention for worker’s compensation business.
Combined ratio contracted 2410 basis points year over year to 66.1%.
Corporate Segment
Net investment income of $14.9 million declined 30.8% year over year due to softened allocation to equities and lower yields on short-term investments and corporate debt securities.
Operating expenses of $5.8 million decreased 10.4% from the prior-year quarter’s level. Interest expense of $3.8 million dipped 0.2% year over year.
Financial Position
As of Dec 31, 2020, ProAssurance’s total investments were $3.3 billion, down 0.03% from the number registered at 2019 end.
At fourth-quarter end, the company’s total assets were $4.7 billion, down 3.1% from the figure at 2019 end.
As of Dec 31, 2020, the insurer’s shareholder equity dropped 10.8% to $1.3 billion from the figure as of Dec 31, 2019.
Return on equity was 4.3% against the year-ago quarter’s return on equity of (15.3%).
Book value was $25.04 per share as of Dec 31, 2020, down 10.9% from the figure as of Dec 31, 2019.
Share Repurchase & Dividend Update
The board of directors declared a regular dividend of 5 cents per share, which was paid out on Jan 7, 2021.
The company did not repurchase any shares in 2019 and 2020. As of Feb 19, 2021, it has $110 million remaining under its board-authorized stock repurchase program.
2020 Update
The company reported an operating loss of 52 cents per share for the full year, narrower than the Zacks Consensus Estimate of a loss of 54 cents. Total revenues for 2020 dropped 12.5% year over year to $874.9 million, comparing favorably with the consensus estimate of $866.43 million. Total expenses for the year shot up 6.2% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -33.33% due to these changes.
VGM Scores
At this time, ProAssurance has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ProAssurance has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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ProAssurance (PRA) Up 7.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for ProAssurance (PRA - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ProAssurance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ProAssurance's Q4 Earnings Beat Estimates, Improve Y/Y
ProAssurance reported fourth-quarter 2020 operating earnings of 6 cents per share, beating the Zacks Consensus Estimate of 4 cents by 50%. The company’s bottom line rebounded from the year-ago quarter’s loss of $1.27 per share, mainly on the back of lower expenses.
Further, quarterly operating revenues of ProAssurance dropped 10.5% to $214 million from the prior-year quarter’s level, mainly due to lower premiums. Nonetheless, the top line beat the Zacks Consensus Estimate by 1.9%.
Quarterly Operational Update
Gross premiums written were down 19.4% year over year to $161.8 million, primarily due to decreased participation in Syndicate 1729 along with the strategy to strengthen rate levels in the Specialty P&C segment. Moreover, competitive conditions in the Workers Compensation Insurance and SPCR segments induced this downside.
Moreover, net premiums earned were down 12.8% year over year to $187 million.
Further, net investment income fell 30.6% year over year to $16.1 million due to lower allocation to equity, decline in corporate debt securities and weak yields from short-term investments.
Net realized investment gain of the company was $15.5 million, rising 21.2% year over year.
Total expenses declined 38.6% year over year to $208 million on the back of lower net losses and loss adjustment costs, SPC U.S. federal income tax expense and SPC dividend expense.
Combined ratio contracted 4840 basis points (bps) year over year to 105.8%.
Quarterly Segmental Results
Specialty P&C Insurance Segment
Total revenues of $112.4 million declined 10% from the prior-year quarter’s figure.
Gross premiums written fell 13.7% year over year to $102.2 million, reflective of renewal timing differences, strategy to strengthen rate levels in the Standard Physicians business and the re-underwriting efforts in its Specialty business, etc.
Total expenses of $123.3 million decreased 49.1% year over year.
Combined ratio contracted 8590 basis points year over year to 110%.
Workers' Compensation Segment
Total revenues of $42.8 million decreased 10.2% year over year, mainly due to lower premiums earned.
Gross premiums written were $47.3 million, down 13.6% from the year-earlier period’s number, mainly due to reduction in renewal pricing and lower new business written along with weak audit premiums.
Total expenses of $40.7 million were down 3.6% year over year.
Combined ratio expanded 680 basis points year over year to 96.3%.
Lloyd's Syndicate Segment
Gross premiums written were $12.3 million, down 55.6% from the figure acquired in the comparable quarter last year due to less participation in the operating results of Syndicate 1729.
Combined ratio expanded 1560 basis points year over year to 109.4%.
Segregated Portfolio Cell Reinsurance Segment
Gross premiums written were $14.8 million, down 10.9% the year-earlier period’s number, mainly due to the premium retention for worker’s compensation business.
Combined ratio contracted 2410 basis points year over year to 66.1%.
Corporate Segment
Net investment income of $14.9 million declined 30.8% year over year due to softened allocation to equities and lower yields on short-term investments and corporate debt securities.
Operating expenses of $5.8 million decreased 10.4% from the prior-year quarter’s level. Interest expense of $3.8 million dipped 0.2% year over year.
Financial Position
As of Dec 31, 2020, ProAssurance’s total investments were $3.3 billion, down 0.03% from the number registered at 2019 end.
At fourth-quarter end, the company’s total assets were $4.7 billion, down 3.1% from the figure at 2019 end.
As of Dec 31, 2020, the insurer’s shareholder equity dropped 10.8% to $1.3 billion from the figure as of Dec 31, 2019.
Return on equity was 4.3% against the year-ago quarter’s return on equity of (15.3%).
Book value was $25.04 per share as of Dec 31, 2020, down 10.9% from the figure as of Dec 31, 2019.
Share Repurchase & Dividend Update
The board of directors declared a regular dividend of 5 cents per share, which was paid out on Jan 7, 2021.
The company did not repurchase any shares in 2019 and 2020. As of Feb 19, 2021, it has $110 million remaining under its board-authorized stock repurchase program.
2020 Update
The company reported an operating loss of 52 cents per share for the full year, narrower than the Zacks Consensus Estimate of a loss of 54 cents.
Total revenues for 2020 dropped 12.5% year over year to $874.9 million, comparing favorably with the consensus estimate of $866.43 million.
Total expenses for the year shot up 6.2% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -33.33% due to these changes.
VGM Scores
At this time, ProAssurance has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ProAssurance has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.