ProAssurance's Growth Prospects Dull Amid High Expenses

On May 27, 2016, we issued an updated research report on ProAssurance Corporation (NYSE:PRA) .

The property and casualty (P&C) insurer’s first-quarter 2016 earnings were in line with the Zacks Consensus Estimate but declined year over year mainly due to higher expenses.

ProAssurance faces a major risk with regard to its investment portfolio, which primarily consists of fixed income securities. The declining interest rate forces the company to reinvest its matured investments at comparatively low rates. This leads to declining investment income, which in turn, is likely to weigh on the top line going ahead.

Also, the net investment income of the company has been decreasing over the past couple of years and the first quarter was no exception. Investment income declined 6.8% year over year to $25.4 million during the first quarter, due to the deterioration in fixed income portfolio. This, in turn, is attributable to low yields. Given the persistently low yields on fixed income portfolio, this weakness is likely to remain in the upcoming period as well.

Further, the company has been witnessing rising underwriting, policy acquisition and operating expenses, which in turn, led to the deterioration of underwriting ratio.

However, ProAssurance boasts of a robust capital position. Further, the company undertakes effective capital deployment through its stock buyback programs and dividend payments. As of Apr 29, 2016, the company was left with shares worth $110.1 million under its authorization.

In addition, the company’s solid competitive market position, prudent operating and financial leverage, responsible pricing, loss reserve practice and conservative investments in assets will likely generate fundamental growth.

Zacks Rank and Stocks to Consider

Currently, ProAssurance carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry are Cincinnati Financial Corp. (NASDAQ:CINF) , Markel Corp. (NYSE:MKL) and NMI Holdings, Inc. (NASDAQ:NMIH) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

CINCINNATI FINL (CINF): Free Stock Analysis Report

PROASSURANCE CP (PRA): Free Stock Analysis Report

MARKEL CORP (MKL): Free Stock Analysis Report

NMI HOLDINGS-A (NMIH): Free Stock Analysis Report

Original post

Zacks Investment Research