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1. Company Snapshot

1.a. Company Description

ProAssurance Corporation, through its subsidiaries, provides property and casualty insurance, and reinsurance products in the United States.The company operates through Specialty Property and Casualty, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance, and Lloyd's Syndicate segments.It offers professional liability insurance for healthcare providers and institutions, and attorneys; liability insurance for medical technology and life sciences risks; and workers' compensation insurance, such as guaranteed cost policies, policyholder dividend policies, retrospectively rated policies, and deductible policies, as well as alternative market solutions that include program design, fronting, claims administration, risk management, SPC rental, asset management, and SPC management services for individual companies, agencies, groups, and associations.


The company also participates in Lloyd's of London Syndicate 1729, which underwrites property and casualty insurance, and reinsurance.It markets its products through independent agencies and brokers, as well as an internal sales force.The company was founded in 1976 and is headquartered in Birmingham, Alabama.

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1.b. Last Insights on PRA

ProAssurance Corporation's recent performance was driven by a strong Q4 2024 earnings beat, with net income of $16.2 million, or $0.31 per diluted share, and operating income of $18.3 million, or $0.36 per diluted share. The company's improved net investment income and lower expenses contributed to the earnings surprise. Additionally, ProAssurance's Q4 results benefited from growing investment income and lower costs, partially offset by lower premiums in the Specialty P&C segment. The company's ability to navigate the challenging market conditions and maintain its profitability is a positive development. Furthermore, ProAssurance's recent upgrade to a Zacks Rank #2 (Buy) and the analyst's Market Outperform rating with a price target of $20 suggest a positive outlook for the company.

1.c. Company Highlights

2. ProAssurance Corporation Delivers Steady Financial Performance Amid Challenging Market Conditions

ProAssurance Corporation reported its fourth-quarter and full-year 2024 results, showcasing a mix of progress and caution as the company navigates a competitive insurance landscape. For the quarter, the company achieved improved operating earnings, though top-line growth remained subdued. The Specialty P&C segment reported a combined ratio of 101% for the quarter and 104% for the full year, reflecting disciplined underwriting and favorable prior-year reserve development. This improvement highlights the company's efforts to balance profitability and growth, particularly in its medical professional liability (MPL) and workers' compensation segments.

Publication Date: Mar -08

📋 Highlights
  • Specialty P&C Segment Performance:: The Specialty P&C segment reported a combined ratio of 101% for Q4 and 104% for the full year, benefiting from favorable prior accident year reserve development, showing progress in underwriting discipline.
  • Accident Year Loss Ratio Improvement:: The company achieved a 20-point improvement in the accident year loss and LAE ratio since 2019, highlighting the success of rate increases and re-underwriting efforts.
  • Renewal Pricing Strength:: Renewal premium increases were 10% for standard MPL and 8% for specialty MPL, with cumulative increases since 2018 nearing 70%, though new business remained lower due to a focus on rate adequacy.
  • Workers' Compensation Segment Update:: The workers' compensation segment reported a combined ratio of 114% for Q4, improved from 2023, supported by technology and analytics investments, though medical loss trends remain a challenge.
  • Investment Income Growth:: Investment income rose 9% for the quarter and 12% for the year, driven by a strong fixed maturity portfolio and contributions from limited partnerships, contributing positively to net income.

Segment Performance and Operational Highlights

The MPL segment saw renewal premium increases of 10% for standard MPL and 8% for specialty MPL, marking a cumulative increase of nearly 70% since 2018. However, new business remained lower as the company prioritized rate adequacy over volume. The workers' compensation segment also showed resilience, with a combined ratio of 114% for the quarter, supported by investments in technology and analytics. Despite higher medical loss trends, the segment benefited from improved renewal pricing and higher audit premiums.

Management Insights and Strategic Focus

During the earnings call, Ned Rand emphasized the company's commitment to profitability over growth, noting that "we remain cautious on rate adequacy, especially in workers' compensation, where loss cost declines pose challenges." This cautious approach is reflected in ProAssurance's disciplined underwriting and focus on technology to manage severity trends, which have become a primary concern in the workers' compensation segment. Dana Hendricks also highlighted the impact of the Lloyd's Syndicate runoff, which reduced Q4 net income by $5.3 million, and reiterated the company's focus on capital efficiency and maintaining a strong RBC ratio.

Valuation Analysis

ProAssurance's current valuation reflects a mix of stability and caution. The company's price-to-book (P/B) ratio of 0.65 suggests that investors are pricing in the challenges of maintaining profitability in a competitive environment. The combined ratio improvements and disciplined underwriting provide some comfort, but the lack of meaningful top-line growth and ongoing market pressures may limit near-term upside. With a dividend yield of 0.0%, the stock's appeal remains tied to its ability to sustain profitability and navigate the complexities of its core segments.

3. NewsRoom

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214,228 Shares in ProAssurance Corporation $PRA Acquired by Groupe la Francaise

Dec -04

Source: defenseworld.net

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ProAssurance Corporation (NYSE:PRA) Receives Average Recommendation of “Reduce” from Analysts

Nov -18

Source: defenseworld.net

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ProAssurance Q3 Earnings Miss Estimates on Weak Specialty P&C Unit

Nov -07

Source: zacks.com

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ProAssurance (PRA) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates

Nov -05

Source: zacks.com

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ProAssurance (PRA) Q3 Earnings and Revenues Miss Estimates

Nov -05

Source: zacks.com

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Envestnet Portfolio Solutions Inc. Buys New Holdings in ProAssurance Corporation $PRA

Oct -22

Source: defenseworld.net

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3 P&C Insurance Stocks That Have Rallied More Than 25% YTD

Sep -24

Source: zacks.com

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Qaelon Medical Welcomes New Members to Data Advisory Board for Surgical Leak Detection

Aug -13

Source: https://www.prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.73%)

6. Segments

Specialty Property and Casualty

Expected Growth: 6.67%

ProAssurance Corporation's Specialty Property and Casualty segment growth of 6.67% is driven by increasing demand for medical professional liability insurance, expansion into new markets, and strategic partnerships. Additionally, the company's focus on underwriting discipline, risk management, and claims handling efficiency has contributed to the growth.

Workers' Compensation Insurance

Expected Growth: 4.73%

ProAssurance Corporation's 4.73% growth in Workers' Compensation Insurance is driven by increasing demand from small to medium-sized businesses, expansion into new markets, and a rise in premium rates. Additionally, the company's focus on underwriting discipline, effective claims management, and strategic partnerships have contributed to this growth.

Corporate Segment

Expected Growth: 8.5%

ProAssurance Corporation's Corporate Segment growth of 8.5% is driven by increasing demand for medical professional liability insurance, expansion into new markets, and strategic acquisitions. Additionally, the segment benefits from a strong underwriting discipline, favorable reserve development, and a diversified investment portfolio.

Segregated Portfolio Cell Reinsurance

Expected Growth: 8.5%

ProAssurance Corporation's Segregated Portfolio Cell Reinsurance growth of 8.5% is driven by increasing demand for tailored risk management solutions, expansion into new markets, and strategic partnerships. Additionally, the company's strong underwriting discipline, diversified portfolio, and effective capital management also contribute to its growth.

Inter-segment Eliminations

Expected Growth: 4.83%

ProAssurance Corporation's 4.83% inter-segment eliminations growth is driven by increased premiums from its Specialty Property and Casualty Insurance segment, coupled with a rise in net realized investment gains. Additionally, the company's strategic acquisitions and expansion into new markets have contributed to the growth, while a decrease in operating expenses has further boosted the segment's performance.

7. Detailed Products

Professional Liability Insurance

Provides financial protection for healthcare professionals in the event of a malpractice lawsuit.

Workers' Compensation Insurance

Covers employees' medical expenses and lost wages in the event of a work-related injury or illness.

Cyber Liability Insurance

Protects healthcare organizations from financial losses resulting from cyber attacks and data breaches.

Risk Management Services

Provides healthcare organizations with risk management consulting, education, and training to reduce risk and improve patient safety.

Claims Management Services

Handles claims from initial reporting to resolution, providing expert guidance and support throughout the process.

8. ProAssurance Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

ProAssurance Corporation operates in a niche market, and there are limited substitutes for its medical professional liability insurance products. However, the company faces competition from other insurers and alternative risk management solutions.

Bargaining Power Of Customers

ProAssurance Corporation's customers, primarily healthcare providers, have limited bargaining power due to the company's specialized products and services. However, large healthcare systems may have some negotiating power.

Bargaining Power Of Suppliers

ProAssurance Corporation has a diversified supplier base, and no single supplier has significant bargaining power. The company's reinsurance agreements are also diversified, reducing dependence on any one supplier.

Threat Of New Entrants

The medical professional liability insurance market has high barriers to entry, including regulatory hurdles and capital requirements. New entrants would need significant resources and expertise to compete with ProAssurance Corporation.

Intensity Of Rivalry

The medical professional liability insurance market is highly competitive, with several established players. ProAssurance Corporation competes with other specialty insurers, and the company's market share is subject to fluctuations.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 27.91%
Debt Cost 5.05%
Equity Weight 72.09%
Equity Cost 5.05%
WACC 5.05%
Leverage 38.71%

11. Quality Control: ProAssurance Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Kingstone

A-Score: 6.0/10

Value: 7.7

Growth: 6.4

Quality: 9.0

Yield: 1.0

Momentum: 9.5

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
Root

A-Score: 5.5/10

Value: 6.6

Growth: 8.6

Quality: 7.2

Yield: 0.0

Momentum: 9.5

Volatility: 1.0

1-Year Total Return ->

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Stock-Card
American Coastal Insurance

A-Score: 5.3/10

Value: 7.5

Growth: 4.9

Quality: 5.8

Yield: 6.0

Momentum: 3.5

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
ProAssurance

A-Score: 5.2/10

Value: 6.1

Growth: 2.9

Quality: 7.1

Yield: 0.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Hagerty

A-Score: 5.1/10

Value: 3.0

Growth: 8.4

Quality: 6.6

Yield: 0.0

Momentum: 7.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
NI Holdings

A-Score: 4.0/10

Value: 4.5

Growth: 4.1

Quality: 5.0

Yield: 0.0

Momentum: 2.0

Volatility: 8.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

23.9$

Current Price

23.9$

Potential

-0.00%

Expected Cash-Flows