To return more value to its shareholders, the board of directors of ProAssurance Corporation PRA has authorized an increase in its share repurchase program by $100 million. This amount might also be used for debt retirement.
In Dec 2014, ProAssurance approved a $100 million extension to its existing share repurchase program, taking the authorization to $198 million. The company bought back shares worth $57.2 million in the first quarter of 2015 and subsequently $37.2 million through May 22. As of this date, ProAssurance had shares worth $86.6 million remaining to be repurchased. Thus, including the latest $100 million, the outstanding authorization amounts to nearly $187 million as of May 27.
Additionally, the company declared its quarterly cash dividend of 31 cents per share that will be paid on Jul 9, to shareholders on record as of Jun 25, 2015. During the fourth quarter of 2014, the company increased its quarterly dividend by 3.3% from 30 cents. This was paid along with a special dividend of $2.65 per share on Jan 9. The total dividend payout has been worth $185 million so far in 2015, comprising $150 million special dividends paid on Jan 9, and $35 million regular dividends paid on Jan 9, and Apr 8. If the historical numbers are taken into account, ProAssurance has increased its quarterly cash dividend at a three-year CAGR (2011–2014) of 7.4%, which reflects its commitment to increase shareholders’ worth.
ProAssurance’s financial strength allows it to continuously execute buybacks and pay dividends. The company’s cash from operations increased $6.4 million in the first quarter of 2015. The increased repurchase authorization and steady dividend payouts are expected to boost investors’ confidence in the stock. Meanwhile, a decrease in share count owing to increased repurchases should spur bottom-line growth.
On the other hand, the balance sheet at the end of the first quarter reflects a 40% rise in the long-term debt of the company from that at year-end 2014. If the latest $100 million is deployed for debt retirement, the debt levels should come down, thereby positively impacting the company’s creditworthiness.
ProAssurance currently carries a Zacks Rank #4 (Sell). Better-ranked stocks from the property & casualty insurance space include Endurance Specialty Holdings Ltd. ENH, Markel Corp. MKL and White Mountains Insurance Group, Ltd. WTM. All three stocks sport a Zacks Rank #1 (Strong Buy).
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