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ProAssurance (PRA) Down 0.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for ProAssurance (PRA). Shares have lost about 0.8% 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 the most recent earnings report in order to get a better handle on the important drivers.

ProAssurance's Q3 Earnings Miss Estimates

ProAssurance reported a third-quarter 2022 operating loss of 6 cents per share against the Zacks Consensus Estimate of earnings of 20 cents. PRA’s bottom line also deteriorated from earnings of 25 cents per share a year ago.

Quarterly operating revenues of ProAssurance decreased from the prior-year level of $293.9 million to $288.2 million. However, the third-quarter top line met the Zacks Consensus Estimate.

Operational Update

Gross premiums written were down 0.1% year over year to $308.4 million. Net premiums earned were down 5.1% year over year to $258.4 million and missed the Zacks Consensus Estimate of $261.2 million.

Net investment income rose 28.4% year over year to $24.7 million on increased profits from investments and rising interest rates. It also beat the Zacks Consensus Estimate of $22.1 million.

Total expenses decreased 4.3% year over year to $284.9 million due to lower interest expense, SPC dividend expense, and net losses and loss adjustment expenses. However, underwriting, policy acquisition and operating expenses increased 20.8% year over year to $80.7 million.

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The combined ratio increased 130 basis points (bps) year over year to 107.9%. The operating ratio declined 120 bps to 98.3%. Non-GAAP return on equity plunged year over year to negative 1.1% for the third quarter.

ProAssurance engaged in share buybacks of $3.3 million in the third quarter. As of Sep 30, 2022, PRA had $106.4 million left under its authorization for repurchases and debt retirement.

Segmental Results

Specialty P&C Insurance Segment

Total revenues of $193.6 million were down 5.4% from the prior-year figure. Gross premiums written rose 1.3% year over year to $238 million, mainly owing to the NORCAL acquisition and pricing increases. The segment reported a loss of $12.1 million against the Zacks Consensus Estimate of a profit of $4 million and deteriorated from the year-ago loss of $8.1 million. Total expenses of $205.7 million fell 3.3% year over year. The combined ratio increased 240 bps year over year to 106.7%.

Workers' Compensation Segment

Total revenues of $42.6 million were down 0.1% year over year but beat the Zacks Consensus Estimate of $41.4 million. Gross premiums written were $63.5 million, down 1.6% from the year-earlier number. Decreased renewal and new business premiums affected the segment, partially offset by increased audit premiums. The segment reported a profit of $0.3 million for the third quarter, improving from the year-ago loss of $2.2 million. However, it missed the Zacks Consensus Estimate of a profit of $0.6 million. Total expenses of $42.3 million were down 5.8% year over year. The combined ratio decreased 580 bps year over year to 100.5%.

Lloyd's Syndicate Segment

Gross premiums written were $6.8 million, down 23.7% from the figure recorded in the comparable quarter of last year due to decreased participation in Syndicates. Loss from the segment amounted to $0.2 million for the quarter under review against the Zacks Consensus Estimate of a profit of $0.6 million and deteriorated from the year-ago profit of $0.9 million. Underwriting, policy acquisition and operating expenses declined 52.1% year over year to $1.9 million. The combined ratio increased 720 bps year over year to 105.4%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written were $17.9 million, up 17.3% from the year-earlier number. It incurred a loss of $0.2 million for the third quarter, reflecting a downside of 146% year over year due to a higher net loss ratio and a decrease in equity and fixed-income markets. It also missed the Zacks Consensus Estimate of a profit of $1.4 million. The combined ratio increased 770 bps year over year to 95.4%.

Corporate Segment

Net investment income of $24.4 million was up 30.6% year over year. Improved performance on investments and other factors aided the segment. It generated $3 million in profits, down 86.7% from the year-ago reading. Operating expenses of $8.9 million increased 29.8% from the prior-year level. Interest expense of $5.5 million fell 5.2% year over year.

Financial Position (as of Sep 30, 2022)

ProAssurance’s total investments were $4,385.5 million, down from $4,828.3 million registered at the 2021 end. At the third-quarter-end, PRA’s total assets were $5,783.3 million, down from the 2021-end figure of $6,191.5 million. Cash and cash equivalents declined to $41.4 million in the third quarter from $143.6 million at the fourth-quarter-end. Debt-less unamortized debt issuance costs stood at $426.4 million, marginally up from $425 million at 2021-end.

The insurer’s shareholder equity declined to $1,066 million from $1,428.4 million as of Dec 31, 2021. Book value was $19.75 per share, down from $26.46 as of Dec 31, 2021.

Net cash from operations in the first nine months of 2022 was $6.7 million, down from $69.4 million a year ago.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -77% due to these changes.

VGM Scores

Currently, ProAssurance has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 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 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.

Performance of an Industry Player

ProAssurance belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Allstate (ALL), has gained 1.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Allstate reported revenues of $13.38 billion in the last reported quarter, representing a year-over-year change of +8.1%. EPS of -$1.56 for the same period compares with $0.73 a year ago.

For the current quarter, Allstate is expected to post earnings of $1.48 per share, indicating a change of -46.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -15.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Allstate. Also, the stock has a VGM Score of B.

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