Yahoo Finance ProAssurance (PRA) Down 11.3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for ProAssurance (PRA). Shares have lost about 11.3% 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 catalysts.
ProAssurance Beats Q4 Estimates on Strong Retention
ProAssurance reported fourth-quarter 2022 operating earnings of 6 cents per share, beating the Zacks Consensus Estimate of 5 cents. However, PRA’s bottom line deteriorated from earnings of 62 cents per share a year ago.
An increase in net investment income benefited fourth-quarter results. Also, strong policyholder retention and its ability to charge higher premiums supported the company. However, the ongoing inflationary pressure on expenses and lower net premiums earned partially offset the positives.
Quarterly operating revenues of ProAssurance decreased from the prior-year level of $294 million to $283.3 million, missing the Zacks Consensus Estimate by 1.3%.
Operational Update
Gross premiums written were up 2.9% year over year to $224.5 million. Net premiums earned were down 5.4% year over year to $258.2 million and missed the Zacks Consensus Estimate of $259 million.
Net investment income rose 53.3% year over year to $28.8 million on increased profits from investments and rising interest rates. It also beat the Zacks Consensus Estimate of $24.4 million.
Total expenses increased 1.7% year over year to $280 million due to higher SPC dividend expense and underwriting, policy acquisition and operating expenses. However, net losses and loss adjustment expenses and federal income tax expenses decreased 2.9% and 48.9%, respectively.
The combined ratio increased 720 basis points (bps) year over year to 104.2%. The operating ratio increased 290 bps to 93%. Non-GAAP return on equity plunged year over year to 1.3% for the fourth quarter.
As of Feb 22, 2023, PRA had $106.4 million left under its authorization for repurchases and debt retirement. It did not repurchase any shares in the fourth quarter of 2022.
Segmental Results
Specialty P&C Insurance Segment
Total revenues of $196.7 million were down 5.2% from the prior-year figure. Gross premiums written rose 4.2% year over year to $173.1 million, mainly owing to improved premium retention, pricing increases and the NORCAL acquisition.
The segment reported a loss of $6 million narrower than the Zacks Consensus Estimate of $9.6 million but deteriorated from the year-ago profit of $14 million. Total expenses of $202.7 million rose 4.7% year over year. The combined ratio increased 1,010 bps year over year to 103.7%.
Workers' Compensation Segment
Total revenues of $42.4 million were up 0.4% year over year and beat the Zacks Consensus Estimate of $41.4 million. Gross premiums written were $47.8 million, up 4.5% from the year-earlier number, reflecting increased audit premiums partially offset by competitive workers’ compensation market conditions.
The segment reported a profit of $0.3 million for the fourth quarter, improving from the year-ago loss of $1.1 million. However, it missed the Zacks Consensus Estimate of a profit of $0.4 million. Total expenses of $42 million were down 2.9% year over year. The combined ratio decreased 350 bps year over year to 100.2%.
Lloyd's Syndicate Segment
Gross premiums written were $3.5 million, down 44.3% from the figure recorded in the comparable quarter last year due to decreased participation in Syndicates. Loss from the segment amounted to $0.9 million for the quarter under review against the Zacks Consensus Estimate of a profit of $0.4 million and deteriorated from the year-ago profit of $1.4 million.
Underwriting, policy acquisition and operating expenses improved 51.6% year over year to $1.3 million. The combined ratio increased 2,650 bps year over year to 116.4%.
Segregated Portfolio Cell Reinsurance Segment
Gross premiums written were $16.1 million, up 4.3% from the year-earlier number. It reported a profit of $0.5 million for the fourth quarter, reflecting an upside of 36% year over year due to improved underwriting results for this segment. It also beat the Zacks Consensus Estimate of $2.6 million. The combined ratio decreased 310 bps year over year to 74.5%.
Corporate Segment
Net investment income of $28.3 million was up 54.4% year over year. Improved performance on investments and other factors aided the segment. It generated $11 million in profits, down 48.3% from the year-ago reading. Operating expenses of $8.1 million increased 6.1% from the prior-year level. Interest expense of $5.5 million fell 0.3% year over year.
Financial Position (as of Dec 31, 2022)
ProAssurance’s total investments were $4,387.6 million, down from $4,828.3 million registered at 2021-end. At 2022-end, PRA’s total assets were $5,700 million, down from the 2021-end figure of $6,191.5 million. Cash and cash equivalents declined to $29.9 million in the fourth quarter from $143.6 million at 2021-end.
Debt-less unamortized debt issuance costs stood at $426.9 million, marginally up from $425 million at 2021-end.
The insurer’s shareholder equity declined to $1,104 million from $1,428.4 million as of Dec 31, 2021. Book value was $20.46 per share, down from $26.46 as of Dec 31, 2021.
Net cash used in operations in 2022 was $29.8 million, deteriorating from cash provided by operations of $74 million a year ago.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, ProAssurance has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, 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 F. 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 Corporation (PRA) : Free Stock Analysis Report
