In order to boost shareholders’ value, ProAssurance Corporation (PRA) increased its quarterly dividend by 3.3%. This translates into a quarterly cash dividend of 31 cents per share, up from 30 cents paid on Oct 9, 2014. The raised dividend will be paid on Jan 9, 2015, to shareholders of record as of Dec 30, 2014.
Based on the closing share price of $45.50 as of Dec 3, 2014, the increased dividend implies a dividend yield of 2.73%. ProAssurance’s current dividend yield is better than the industry yield of 1.94% and that of some other property and casualty insurers – RLI Corp. (RLI) with a yield of 1.57%, Allied World Assurance Company Holdings, AG (AWH) with 2.39% and Montpelier Re Holdings Limited (MRH) with 2.30%.
Additionally, board of directors of ProAssurance approved a special dividend of $2.65 per share reflecting its intentions to share more profits with its shareholders.
ProAssurance’s board of directors also approved a $100 million share repurchase program. This authorization is an extension to the previous share buyback program under which $98 million was remaining. With this increase, the company’s total authorization currently stands at $198 million.
The dividend hike and the new share repurchase program reflect the financial strength of the company. ProAssurance will require $18.6 million every quarter for the dividend payment, based on the outstanding share count of 60 million as of Sep 30, 2014. The company has ample liquidity for the payment, with total cash and cash equivalents of $248 million as of Sep 30, 2014 that would support both quarterly and special dividend payout.
ProAssurance has always been active in taking up strategic initiatives to gain investor confidence, be it through share repurchases, dividend hikes, special dividends, or debt repayment. In December last year, ProAssurance hiked its quarterly dividend by 20% to 30 cents per share. As for buybacks, so far in 2014, the company deployed $206 million toward share repurchases. This marks a significant level of capital deployment as this is the highest amount that has been returned in any single year by ProAssurance since its inception. With the latest endeavors of the company, share repurchases and dividends declared by ProAssurance in 2014 will amount to more than $427 million. In fact, the company’s proactive capital deployment strategy is evident from the $1 billion paid back to shareholders through buybacks and dividends over the past seven years.
ProAssurance delivered operating earnings per share of 68 cents in the third quarter of 2014 that lagged the Zacks Consensus Estimate and also declined year over year. We expect the aforementioned share buyback authorization to help the company recover earnings through a decrease in share count, while the dividend payouts should boost investor confidence and thus help in stock price appreciation.
ProAssurance currently carries a Zacks Rank #3 (Hold).
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