Why Is ProAssurance (PRA) Down 22% Since Last Earnings Report?

A month has gone by since the last earnings report for ProAssurance (PRA). Shares have lost about 22% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ProAssurance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ProAssurance's Q4 Earnings and Revenues Beat Estimates

ProAssurance’s fourth-quarter 2019 operating loss per share of $1.27 was narrower than the Zacks Consensus Estimate of a loss of $1.65. Meanwhile, the bottom line came in against the year-ago earnings per share of 18 cents. This downside is mainly due to lower gross premiums reported in the quarter under review. Quarterly operating revenues rose 4.4% to $239 million from the prior-year period. The top line also beat the Zacks Consensus Estimate by 0.8%.

Quarterly Operational Update

Gross premiums written decreased 5.1% year over year to $200.8 million due to soft contribution from the Specialty P&C Segment, Workers’ Compensation Insurance segment and Segregated Portfolio Cell Reinsurance. Also, net premiums earned rose 6.1% year over year to $214 million on solid Specialty P&C segment contribution, which in turn, was driven by rate increases. Net investment income decreased 4% year over year. Total expenses rose 55.3% year over year to $338.6 million due to higher net losses and loss adjustment expenses, underwriting, policy acquisition and operating expenses.

Quarterly Segment Results

Specialty P&C Segment

Total revenues of $125 million improved 8.4% year over year. Gross premiums written were $118.4 million, down 2.2% year over year due to decline in healthcare facilities premiums. Total expenses of $242.3 million soared 101.5% year over year on account of high net losses and loss adjustment expenses, underwriting, policy acquisition and operating expenses.

Workers' Compensation Segment

Total revenues of $47.7 million declined 7.3% year over year. Gross premiums written were $54.8 million in the quarter under review, down 15.6% year over year. This was due to renewal rate decreases and a decline in new business writings, all reflecting a very competitive workers’ compensation marketplace. Total expenses of $42.3 million fell 5.7% year over year, mainly on the back of lower net losses and loss adjustment expenses.

Segregated Portfolio Cell Reinsurance Segment

Gross premiums of $16.6 million from this segment slid 1.5% year over year.

Lloyd's Syndicate Segment

Total revenues of $24.5 million improved 28.4% year over year. Gross premiums written were $27.6 million, up 7.2% from the figure acquired in the comparable quarter last year. This upside can be attributed to volume expansion in renewal business and renewal pricing increases, new business written, etc. Total expenses of $21.9 million decreased 22.8% year over year on the back of lower net losses and loss adjustment expenses, underwriting, policy acquisition and operating costs.

Corporate Segment

Total revenues of $30.3 million improved 236.3% year over year. Operating expenses of $6.4 million flared up 89.4% from the year-ago level due to some one-time compensation-related costs and a hike in employee health plan expenses. Interest expense of $3.8 million decreased 22% year over year.

Financial Position

As of Dec 31, 2019, ProAssurance’s total investments of $3.4 billion inched up 1.2% from the number registered at 2018 end. At fourth-quarter end, the company’s total assets of $4.8 billion were up 4.5% from the level at 2018 end. As of Dec 31, 2019, this insurer’s shareholder equity slipped 0.7% to $1.5 billion from the level on Dec 31, 2018.

Share Repurchase & Dividend Update

The company did not buy back any shares in 2019. As of Feb 14, 2020, it had approximately $110 million of shares available under its board-authorized stock repurchase program. In December 2019, the company’s board members approved a regular dividend of 31 cents, paid out on Jan 14, 2020.

Full-Year Update

In 2019, the company reported total revenues of $999 million, up 12.8% year over year. For the year ended Dec 31, 2019, the company incurred operating loss per share of 81 cents versus 2018’s earnings per share of $1.48.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 350% due to these changes.

VGM Scores

At this time, ProAssurance has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ProAssurance has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.