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ProAssurance (PRA) Down 7.9% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for ProAssurance (PRA - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ProAssurance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ProAssurance Q1 Earnings Beat on Specialty P&C Unit
ProAssurance reported a first-quarter 2024 adjusted operating income of 8 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 100%. An adjusted operating loss of 14 cents per share was incurred in the prior-year quarter.
Operating revenues of $282 million improved 4.1% year over year. The top line surpassed the consensus mark by 4.7%.
The results benefited on the back of strong underwriting results in the Specialty P&C segment and robust growth in investment income. A decline in the overall expense level also contributed to the upside. However, the upside was partly offset by a lower profit level generated by the Segregated Portfolio Cell Reinsurance unit as well as continued average claim costs in the Workers' Compensation Insurance segment.
Quarterly Operational Update
Gross premiums written amounted to $311.3 million, which dipped 1.4% year over year. Net premiums earned advanced 1.8% year over year to $244.2 million on the back of new business growth and solid renewal pricing increases in the medical professional liability business. The reported figure came higher than the Zacks Consensus Estimate of $232 million and our estimate of $225.9 million.
Net investment income of $33.9 million advanced 11.8% year over year but fell short of the consensus mark of $34.5 million and our estimate of $34.6 million.
Total expenses dipped 0.6% year over year to $279.4 million but came higher than our estimate of $262.9 million. The year-over-year decline resulted from a decline in net losses and loss adjustment expenses.
The net income of ProAssurance was $4.6 million against the prior-year’s quarter’s loss of $6.2 million. The combined ratio of 111.6% improved 230 basis points (bps) year over year.
Segmental Update
Specialty P&C Segment
The segment generated revenues of $190.2 million in the first quarter, which grew 3% year over year and beat the Zacks Consensus Estimate of $179 million and our estimate of $172 million. Net premiums earned increased 2.8% year over year to $188.9 million, higher than the consensus mark of $182 million. The metric was aided by prudent pricing decisions, new business growth and strong customer retention rates.
Total expenses of $204 million slid 2.2% year over year. The segment incurred a loss of $13.8 million, narrower than the prior-year quarter’s loss of $24 million but wider than our estimate of $12.6 million. The combined ratio improved 560 bps year over year to 108%.
Workers' Compensation Insurance Segment
Revenues of the unit inched up 0.5% year over year to $41.6 million and beat the Zacks Consensus Estimate and our estimate of $41 million. Net premiums earned were $41.1 million, up 0.7% year over year on the back of new business writings and strong retention rates in its traditional business. The reported figure surpassed the consensus mark of $40.5 million and our estimate of $40.6 million.
Total expenses of $46.1 million increased 5.3% year over year. The unit incurred a loss of $4.6 million, wider than the prior-year quarter’s loss of $2.4 million. The combined ratio deteriorated 490 bps to 112.3% due to elevated average claim costs.
Segregated Portfolio Cell Reinsurance Segment
The segment recorded gross premiums written of $15.9 million, which dropped 30.4% year over year due to the non-renewal of two Segregated Portfolio Cell programs and declining renewal rates. The metric also lagged our estimate of $20.4 million. Net premiums earned of $14.2 million fell 7.4% year over year, lower than the Zacks Consensus Estimate of $15.1 million and our estimate of $14.9 million.
Underwriting, policy acquisition and operating expenses declined 6.4% to $4.7 million. The unit witnessed a quarterly profit of $0.5 million, which plunged 44.4% year over year. The combined ratio of 104.3% deteriorated 1,630 bps year over year.
Corporate Segment
Net investment income in the unit amounted to $33.2 million, which improved 11.1% year over year but fell short of our estimate of $34 million. Improved average book yields from PRA’s fixed maturity investments benefited investment results.
Operating expenses of $8.7 million escalated 5.9% year over year due to elevated compensation-related costs. The segment’s profit of $22.5 million rose 22.3% year over year. Interest expenses increased 3.6% to $5.7 million.
Financial Position (as of Mar 31, 2024)
ProAssurance exited the first quarter with cash and cash equivalents of $65.4 million, which dipped 0.8% from the 2023-end level. Total investments of $4.3 billion slid 0.4% from the figure at 2023 end. Total assets were $5.7 billion, up 0.3% from the 2023-end level.
Debt-less unamortized debt issuance costs amounted to $427.8 million, which inched up 0.2% from the figure as of Dec 31, 2023.
Total shareholders’ equity of $1.1 billion inched up marginally from the level at 2023 end.
Net cash used in operating activities amounted to $11.6 million compared with $29.8 million of cash usage in the prior-year quarter.
Book value per share was $21.82, which remained flat from the 2023-end level. Adjusted operating return on equity was 1.5% while the metric was a negative 2.6% in the prior-year quarter.
Share Repurchase Update
ProAssurance did not repurchase any common shares in the first quarter. A leftover capacity of $55.9 million remained in place to be utilized for common share repurchases or retirement of outstanding debt as of Mar 31, 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 58.33% due to these changes.
VGM Scores
Currently, ProAssurance has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ProAssurance has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
ProAssurance is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Arch Capital Group (ACGL - Free Report) , a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended March 2024 more than a month ago.
Arch Capital reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of +21.7%. EPS of $2.45 for the same period compares with $1.73 a year ago.
For the current quarter, Arch Capital is expected to post earnings of $2.21 per share, indicating a change of +15.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Arch Capital. Also, the stock has a VGM Score of A.
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ProAssurance (PRA) Down 7.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for ProAssurance (PRA - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ProAssurance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
ProAssurance Q1 Earnings Beat on Specialty P&C Unit
ProAssurance reported a first-quarter 2024 adjusted operating income of 8 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 100%. An adjusted operating loss of 14 cents per share was incurred in the prior-year quarter.
Operating revenues of $282 million improved 4.1% year over year. The top line surpassed the consensus mark by 4.7%.
The results benefited on the back of strong underwriting results in the Specialty P&C segment and robust growth in investment income. A decline in the overall expense level also contributed to the upside. However, the upside was partly offset by a lower profit level generated by the Segregated Portfolio Cell Reinsurance unit as well as continued average claim costs in the Workers' Compensation Insurance segment.
Quarterly Operational Update
Gross premiums written amounted to $311.3 million, which dipped 1.4% year over year. Net premiums earned advanced 1.8% year over year to $244.2 million on the back of new business growth and solid renewal pricing increases in the medical professional liability business. The reported figure came higher than the Zacks Consensus Estimate of $232 million and our estimate of $225.9 million.
Net investment income of $33.9 million advanced 11.8% year over year but fell short of the consensus mark of $34.5 million and our estimate of $34.6 million.
Total expenses dipped 0.6% year over year to $279.4 million but came higher than our estimate of $262.9 million. The year-over-year decline resulted from a decline in net losses and loss adjustment expenses.
The net income of ProAssurance was $4.6 million against the prior-year’s quarter’s loss of $6.2 million. The combined ratio of 111.6% improved 230 basis points (bps) year over year.
Segmental Update
Specialty P&C Segment
The segment generated revenues of $190.2 million in the first quarter, which grew 3% year over year and beat the Zacks Consensus Estimate of $179 million and our estimate of $172 million. Net premiums earned increased 2.8% year over year to $188.9 million, higher than the consensus mark of $182 million. The metric was aided by prudent pricing decisions, new business growth and strong customer retention rates.
Total expenses of $204 million slid 2.2% year over year. The segment incurred a loss of $13.8 million, narrower than the prior-year quarter’s loss of $24 million but wider than our estimate of $12.6 million. The combined ratio improved 560 bps year over year to 108%.
Workers' Compensation Insurance Segment
Revenues of the unit inched up 0.5% year over year to $41.6 million and beat the Zacks Consensus Estimate and our estimate of $41 million. Net premiums earned were $41.1 million, up 0.7% year over year on the back of new business writings and strong retention rates in its traditional business. The reported figure surpassed the consensus mark of $40.5 million and our estimate of $40.6 million.
Total expenses of $46.1 million increased 5.3% year over year. The unit incurred a loss of $4.6 million, wider than the prior-year quarter’s loss of $2.4 million. The combined ratio deteriorated 490 bps to 112.3% due to elevated average claim costs.
Segregated Portfolio Cell Reinsurance Segment
The segment recorded gross premiums written of $15.9 million, which dropped 30.4% year over year due to the non-renewal of two Segregated Portfolio Cell programs and declining renewal rates. The metric also lagged our estimate of $20.4 million. Net premiums earned of $14.2 million fell 7.4% year over year, lower than the Zacks Consensus Estimate of $15.1 million and our estimate of $14.9 million.
Underwriting, policy acquisition and operating expenses declined 6.4% to $4.7 million. The unit witnessed a quarterly profit of $0.5 million, which plunged 44.4% year over year. The combined ratio of 104.3% deteriorated 1,630 bps year over year.
Corporate Segment
Net investment income in the unit amounted to $33.2 million, which improved 11.1% year over year but fell short of our estimate of $34 million. Improved average book yields from PRA’s fixed maturity investments benefited investment results.
Operating expenses of $8.7 million escalated 5.9% year over year due to elevated compensation-related costs. The segment’s profit of $22.5 million rose 22.3% year over year. Interest expenses increased 3.6% to $5.7 million.
Financial Position (as of Mar 31, 2024)
ProAssurance exited the first quarter with cash and cash equivalents of $65.4 million, which dipped 0.8% from the 2023-end level. Total investments of $4.3 billion slid 0.4% from the figure at 2023 end. Total assets were $5.7 billion, up 0.3% from the 2023-end level.
Debt-less unamortized debt issuance costs amounted to $427.8 million, which inched up 0.2% from the figure as of Dec 31, 2023.
Total shareholders’ equity of $1.1 billion inched up marginally from the level at 2023 end.
Net cash used in operating activities amounted to $11.6 million compared with $29.8 million of cash usage in the prior-year quarter.
Book value per share was $21.82, which remained flat from the 2023-end level. Adjusted operating return on equity was 1.5% while the metric was a negative 2.6% in the prior-year quarter.
Share Repurchase Update
ProAssurance did not repurchase any common shares in the first quarter. A leftover capacity of $55.9 million remained in place to be utilized for common share repurchases or retirement of outstanding debt as of Mar 31, 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 58.33% due to these changes.
VGM Scores
Currently, ProAssurance has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ProAssurance has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
ProAssurance is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Arch Capital Group (ACGL - Free Report) , a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended March 2024 more than a month ago.
Arch Capital reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of +21.7%. EPS of $2.45 for the same period compares with $1.73 a year ago.
For the current quarter, Arch Capital is expected to post earnings of $2.21 per share, indicating a change of +15.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Arch Capital. Also, the stock has a VGM Score of A.