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ProAssurance (PRA) Incurs Q1 Loss, Revenues Down Y/Y

ProAssurance Corporation PRA incurred a first-quarter 2023 operating loss of 15 cents per share against the Zacks Consensus Estimate of earnings of 15 cents per share. Notably, earnings of 14 cents per share were reported in the prior-year quarter.

Operating revenues of $271 million fell 6.2% year over year in the quarter under review. The top line missed the consensus mark by 1.1% but came higher than our estimate of $258.1 million.

The quarterly results grappled with lower-than-expected claim costs that put a strain on workers’ compensation rates, thereby affecting the Workers’ Compensation Insurance unit. Cost headwinds, prevailing amid the medical professional liability market, have also impacted the Specialty Property and Casualty (P&C) segment. Nevertheless, the downside was partly offset by growing net investment income and a declining expense level.

ProAssurance Corporation Price, Consensus and EPS Surprise

 

ProAssurance Corporation Price, Consensus and EPS Surprise
ProAssurance Corporation Price, Consensus and EPS Surprise

ProAssurance Corporation price-consensus-eps-surprise-chart | ProAssurance Corporation Quote

 

Operational Update

Gross premiums written decreased 5.9% year over year to $315.8 million in the first quarter, higher than our estimate of $295.5 million. Net premiums earned of $239.8 million dropped 9.8% year over year in the first quarter and lagged the Zacks Consensus Estimate of $244 million. Yet, the figure surpassed our estimate of $229.9 million.

Net investment income surged 48.3% year over year to $30.3 million on the back of improved average book yields stemming from fixed maturity investments. The figure came higher than the consensus mark of $27.2 million and our estimate of $24.2 million.

Total expenses of $281 million declined 2.6% year over year in the quarter under review mainly due to reduced net losses and loss adjustment expenses, underwriting, policy acquisition and operating expenses coupled with the decline in SPC dividend expense. The reported figure stood higher than our estimate of $255.3 million.

The combined ratio deteriorated 810 basis points (bps) year over year to 113.9%.

Segmental Results

Specialty P&C Segment

Total revenues amounted to $180.3 million in the segment, which decreased 9.4% from the prior-year figure and matched the Zacks Consensus Estimate. Gross premiums written of $238.9 million slipped 7.3% year over year in the first quarter, due to prevalent competitive market conditions that called for rate hikes in the prior-year quarter. Yet, the reported figure beat our estimate of $221 million.

The segment incurred a loss of $24.7 million, wider than the prior-year quarter’s loss of $9.9 million and the consensus mark of a loss of $10.5 million. Total expenses inched up 1.8% year over year to $205 million in the quarter under review. The combined ratio of 114.3% deteriorated 880 bps year over year.

Workers' Compensation Insurance Segment

The segment’s revenues inched up marginally year over year to $41.4 million in the first quarter and came higher than the Zacks Consensus Estimate of $41.3 million. Gross premiums written of $73.4 million grew 1.8% year over year, thanks to improved audit premium and new business growth. The reported figure came higher than our estimate of $71.1 million.

A segmental loss of $2.4 million was incurred in the quarter under review against the prior-year quarter’s profit of $1.2 million. Total expenses escalated 9% year over year to $43.8 million. The combined ratio of 107.4% deteriorated 850 bps year over year.

Lloyd's Syndicates Segment

Gross premiums written of $3.5 million plunged 40% year over year in the first quarter but beat our estimate of $3.4 million. The unit recorded a profit of $0.9 million, which increased nearly four-fold year over year. Underwriting, policy acquisition and operating expenses of $1.7 million decreased 36.5% year over year. The combined ratio improved 1,130 bps year over year to 85.2% and came lower than the Zacks Consensus Estimate of 98%.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums written tumbled 19.3% year over year to $22.9 million in the first quarter and fell short of our estimate of $26 million. The metric suffered due to a decline in healthcare professional liability premiums.

It reported a profit of $0.9 million against the prior-year quarter’s loss of $0.2 million. The combined ratio of 88% deteriorated 590 bps year over year in the quarter under review and stood higher than the Zacks Consensus Estimate of 86%.

Corporate Segment

The segment’s net investment income soared 47.6% year over year to $29.7 million, attributable to improved interest rates. The reported figure outpaced our estimate of $23.5 million. A segmental profit of $18.2 million increased more than three-fold year over year in the first quarter. Operating expenses decreased 6.1% year over year to $8.2 million.  Interest expense of $5.5 million escalated 23% year over year.

Financial Position (as of Mar 31, 2023)

ProAssurance exited the first quarter with cash and cash equivalents of $56.4 million, which soared 88.4% from the 2022-end level. Total investments of $4,381.6 million dipped 0.1% from the figure at 2022-end.

Total assets of $5,747.9 million inched up 0.8% from the 2022-end figure.

Debt-less unamortized debt issuance costs came in at $427.5 million, up 0.1% from the figure as of Dec 31, 2022.

Total shareholder equity of $1,138.3 million grew 3.1% from the figure at 2022 end.

In the reported quarter, net cash used in operating activities stood at $29.8 million. Operating cash flows of $14.3 million were generated in the prior-year quarter.

Book value per share increased 3% from the 2022-end level to $21.07. Non-GAAP operating return on equity came in at a negative figure of 2.9% at the first-quarter end.

Capital Deployment Update

ProAssurance did not buy back shares in the first quarter. A leftover amount of $106.4 million could be utilized for common share repurchases or retirement of outstanding debt as of Mar 31, 2023.

Zacks Rank

ProAssurance currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Insurers

Of the other insurance industry players that have reported first-quarter 2023 results so far, the bottom-line results of Chubb Limited CB, Arch Capital Group Ltd. ACGL and AXIS Capital Holdings Limited AXS beat the respective Zacks Consensus Estimate.

Chubb reported first-quarter 2023 core operating income of $4.41 per share, which outpaced the Zacks Consensus Estimate by 0.9%. The bottom line improved 15.1% from the year-ago quarter. Net premiums written of CB improved 16.6% year over year to $10.7 billion in the quarter. Net investment income was $1.11 billion, up 34.7%. The figure was higher than our estimate of $957.3 million. P&C underwriting income was $1.21 billion, down 5.5% from the year-ago quarter.

Arch Capital’s first-quarter 2023 operating income of $1.73 per share surpassed the Zacks Consensus Estimate by 14.6%. Earnings also came ahead of our estimate of $1.42 per share. The bottom line increased 57.3% year over year. ACGL’s operating revenues of $3.1 billion rose 41.1% year over year. It beat the Zacks Consensus Estimate by 8.7% and came ahead of our estimate of $2.9 billion. Net premiums written climbed 30% year over year to $3.4 billion. Net investment income increased 9.9% year over year to $199 million and beat our estimate of $81 million. Higher net investment income reflects higher interest rates growth in invested assets. Underwriting income increased 24.5% year over year to $570 million.

AXIS Capital posted a first-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 23.2%. The bottom line increased 11.5% year over year. Total operating revenues of $1.3 billion missed the Zacks Consensus Estimate by 6.7%. The top line however rose 0.6% year over year on higher net investment income. The net investment income of AXS increased 47.2% year over year to $134 million, primarily attributable to an increase in income from fixed maturities due to increased yields. Underwriting income of $139.4 million increased 0.4% year over year.

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