ProAssurance Corporation PRA reported second-quarter 2015 operating earnings per share of 64 cents, which surpassed the Zacks Consensus Estimate of 61 cents. The figure, however, decreased from 69 cents per share earned in the year-ago quarter due to high expenses.
Including non-recurring items, ProAssurance’s net income was 60 cents per share, substantially down from 84 cents in the year-ago quarter.
Operational Update
ProAssurance’s total revenue was $203.4 million, down 9% year over year. This was attributable to net realized investment losses, which compared unfavorably with year-ago net realized investment gains. Revenues also missed the Zacks Consensus Estimate of $204 million.
Gross premiums written by ProAssurance rose 3.8% year over year to $194.1 million. The upside was attributable to the improvement in Workers’ Compensation segment and Lloyd’s segment.
The company recorded $33.6 million of net favorable reserve development in the reported quarter, down 18.6% year over year.
Total expenses amounted to $162.4 million, up 3.9% year over year. The rise in expenses mainly resulted from increased net losses and loss adjustment expenses as well as underwriting, policy acquisition and operating costs.
Net investment income of ProAssurance came in at $27.96 million, down 7.5% year over year. Net investment result (sum of net investment income and equity in earnings of unconsolidated subsidiaries) amounted to $30.2 million decreasing from $30.8 million in the year-earlier quarter. Net realized investment losses came in at $3.8 million in the reported quarter comparing unfavorably with gains of $13.0 million a year ago.
Financial Ratios
ProAssurance’s net loss ratio for the quarter came in at 59.3% as against 56.1% in the prior-year quarter. The deterioration stemmed from a decline in the net favorable reserve development.
Expense ratio deteriorated to 30.5% from 29.6% in the year-earlier quarter.
Combined ratio of ProAssurance deteriorated to 89.8% from 85.7% in the comparable quarter last year, while operating ratio increased to 73.9% from 68.6% in the prior-year quarter. Return on equity (ROE) for the reported quarter was 6.3% compared with 8.5% in the second quarter of 2014.
Financial Position
ProAssurance’s cash flow from operations were $16.9 million in the quarter, comparing favorably with an outflow in the year ago quarter. The upside was driven by lower payments for losses and taxes along with positive cash flows from Lloyd’s Syndicatethat were absent in 2014.
The company’s shareholder equity was $2.1 billion as of Jun 30, 2015, lower than $2.2 billion as of Dec 31, 2014. Book value per share decreased approximately 0.2% to $38.09 as of Jun 30, 2015 from $38.17 as of Dec 31, 2014.
Share Repurchase and Dividend Update
ProAssurance spent $66.1 million to buy back 1.5 million shares in the second quarter of 2015, thereby taking the total share repurchase to 3.1 million shares for $140 million as of Jul 31, 2015. As of Jul 31, the company was left with shares worth $142 million under its authorization.
The company has paid a total dividend of $201 million so far in 2015. This includes a special dividend payment worth $150 million on Jan 9, 2015 and quarterly dividend of $51 million (31 cents per share).
Performances of Other Insurers
The bottom lines at PartnerRe Ltd. PRE, RLI Corporation RLI and ACE Limited ACE outperformed their respective Zacks Consensus Estimate in the second quarter.
Zacks Rank
ProAssurance currently carries a Zacks Rank #3 (Hold).
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