Why Should You Add ProAssurance (PRA) to Your Portfolio?
Riding on inorganic growth and cost-curbing measures, ProAssurance (PRA) holds the potential to reap benefits for investors.
ProAssurance Corporation PRA is continuously favored by investors on the back of its growing revenues, cost-cutting initiatives and strategic measures. Operational and investment excellence also drive the stock.
Over the past seven days, the stock has witnessed its 2021 earnings estimate move 2.1% north.
Here we discuss the reasons for adding this currently Zacks Rank #2 (Buy) ProAssurance to your investment portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Given PRA’s strong fundamentals, it is well-placed for long-term growth.
ProAssurance achieved significant inorganic growth via successful acquisitions and integrations of companies. Its financial size and strength helped it in this regard.
PRA also completed the NORCAL Mutual buyout, which intensified its focus on the Medical Professional Liability Insurance (MPLI) space and enhanced its size and scale in the same. This makes the combined entity the nation's third-largest specialty writer of liability insurance for healthcare professionals and facilities. The integration plan is expected to be concluded by 2022.
The insurer witnessed solid gross premiums over a period, evident from its 2015-2019 revenue stream. The metric, however, declined in 2020 due to lower premiums across the Specialty P&C segment, Workers’ Compensation Insurance segment and the Segregated Portfolio Cell Reinsurance segment. In the first nine months of 2021, gross premiums written improved 22.5% from the prior-year comparable period’s level on the back of higher new business written and strong retention rates.
ProAssurance is making concerted efforts to reduce its overall costs. Total expenses declined 12.1% in the first nine months of 2021 from the prior-year comparable period’s tally. PRA’s expense ratio fell in all segments in the first nine months of 2021, barring Segregated Portfolio Cell Reinsurance.
PRA has a good solvency position on the back of cash inflows. As of Sep 30, 2021, it had cash and cash equivalents of $203 million, a revolving credit facility of up to $250 million and the possibility of a $50-million accordion feature. The insurance company has robust cash-generating abilities in place, which enabled it to pursue growth-related initiatives and prudently deploy capital through share repurchases and dividend payments.
ProAssurance is poised well for growth owing to solid volumes and a diversified footprint.
However, we are concerned about its high expenses, which are likely to put pressure on its margins going forward.
The insurer’s 2021 earnings estimate stands at 97 cents, indicating an upside of 286.5% from the year-ago reported figure.
Shares of this property and casualty (P&C) insurer have gained 30.2% year to date compared with the industry’s growth of 9.3%.
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Other top-ranked stocks in the insurance space are Berkshire Hathaway (BRK.B), RLI Corp. RLI and Kinsale Capital Group KNSL. While Berkshire Hathaway and RLI Corp. currently have a Zacks Rank #2 (Buy), Kinsale Capital sports a Zacks Rank #1 (Strong Buy).
Berkshire Hathaway owns more than 90 subsidiaries in insurance, rail roads, utilities, manufacturing services, retail and home building. BRK.B managed to deliver trailing a four-quarter surprise of 5.53%. Its shares have gained 21.7% year to date.
RLI Corp. is a specialty property-casualty (P&C) underwriter that caters primarily to the niche markets through its main operating subsidiary RLI Insurance Company. RLI’s shares have gained 6.3% in the past year. RLI’s earnings managed to surpass estimates in all the trailing four quarters, the average being 39.84%.
Kinsale Capital offers various insurance and reinsurance products across all 50 states of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the U.S. Virgin Islands. KNSL came up with a trailing four-quarter surprise of 37.6%, on average, and the stock has gained 3.6% year to date.
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