ProAssurance Grows On Buyouts, Financial Health Strengthens

The Birmingham-based insurer, ProAssurance Corporation (NYSE:PRA) operates as a holding company for many property and casualty insurance firms. It continues to grow on robust inorganic growth and a strong capital position. The company has boosted investors’ value by undertaking share buybacks as well as quarterly and special dividend payments. In addition, prudent operating and financial leverage, discplined pricing, loss reserve practice and conservative investments in assets also bolster the company’s growth potential.

On the back of all these positives, shares of ProAssurance have gained 8% year to date, outperforming a 6% rally of the Zacks categorized Property & Casualty Insurance industry. Let us have a detailed discussion on the company’s tailwinds in order to understand the reasons for the stock’s price performance.

Increasing Revenues: ProAssurance’s core business has been witnessing substantial improvement over the past few quarters on the back of its strategic acquisitions that have been accretive to premiums. The company’s gross premiums written increased at a compound annual growth rate of 8.8% from 2010 to 2016. Along with the premiums, its operating revenues have also been rising consistently.

Inorganic Growth: As already mentioned, the company has achieved inorganic growth via successful acquisitions and integration of companies. It already acquired major firms like American Physicians Service Group, Medmarc and Eastern Insurance Holdings. These buyouts have enabled the company to strengthen its position in the workers’ compensation market. ProAssurance expects to generate more profits through further penetration and is also trying to boost its operating efficiency by merging its subsidiaries to simplify its business structure.

Operational Excellence: The company’s solid competitive market position, prudent operating and financial leverage, responsible pricing, loss reserve practice and conservative investments in assets have been driving growth for a long time. In 2012, opening of two new claims processing further bolstered the company’s processing capacity and customer service. It aims at boosting its competitive strength and earnings and book value by launching new products to capture a larger market share. Its liability protection product, CaPAssurance has been generating new business and higher premiums as well.

Strong Capital Position: The company’s financial position impresses. It deploys capital effectively through its stock buyback programs and dividend payments. We believe that the company will be able to continue its capital deployment activities in the coming quarters on the back of its substantial cash inflow, thereby retaining shareholders’ confidence in the stock.

Zacks Rank and Other Stocks to Consider

ProAssurance currently holds a Zacks Rank #2 (Buy). Some other stocks worth considering in the insurance industry include The Progressive Corp. (NYSE:PGR) , Cigna Corporation (NYSE:CI) and FBL Financial Group, Inc. (NYSE:FFG) . Progressive sports a Zacks Rank #1 (Strong Buy) whereas the other two stocks hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Progressive offers risk management solutions for Property & Casualty markets worldwide. The company has delivered positive surprises in two of the last four quarters with an average beat of 4.95%.

Cigna provides insurance plus related products and services in the United States and internationally. The company has delivered positive surprises in three of the last four quarters with an average beat of 1.35%.

FBL Financial sells individual life insurance and annuity products. The company has delivered positive surprises in two of the last four quarters with an average beat of 1.98%.

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