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On Tuesday, JMP Securities analyst Matthew Carletti maintained a Market Outperform rating on ProAssurance Corporation (NYSE:PRA) with a steady price target of $20.00. The insurance provider, currently trading at $14.11, appears fairly valued according to InvestingPro analysis, with a market capitalization of $720 million and a P/E ratio of 17x. Carletti highlighted the company’s fourth-quarter 2024 performance, noting that ProAssurance’s operating earnings per share (EPS) of $0.36 surpassed both JMP’s estimate of $0.25 and the consensus estimate of $0.17. This strong performance aligns with InvestingPro data showing two analysts revising their earnings upward for the upcoming period. For deeper insights into ProAssurance’s financial health and growth prospects, including exclusive analyst forecasts and valuation models, investors can access the comprehensive Pro Research Report on InvestingPro.
The better-than-expected results were largely attributed to higher favorable prior period development (PPD (NASDAQ:PPD)) and stronger limited partnership investments. Specifically, the Specialty Property and Casualty (P&C) segment reported $11.3 million in favorable PPD, exceeding the estimated $4.4 million, and limited partnership investments contributed $5.8 million, significantly above the $1.5 million estimate.
The analyst also pointed out that ProAssurance’s higher expense ratio of 34% was due to increased compensation costs and adjustments to prior period segregated portfolio cell ceding commissions. This was a notable increase from the estimated 29%.
In terms of specific segments, the core Specialty P&C segment, which focuses on medical malpractice (med mal), reported an accident-year loss ratio consistent with estimates at 83%. This figure reflects a continued cautious stance on loss severity trends, particularly in select jurisdictions. The Workers’ Compensation segment also met expectations with a 77% loss ratio, which included ongoing elevated medical loss trends.
Carletti noted that gross written premiums (GWP) in the core Specialty P&C segment remained flat, aligning with estimates. This stability was attributed to cautious underwriting amid competitive market conditions, alongside solid renewal pricing, which saw an 8% increase, and a retention rate of 84%. Meanwhile, the Workers’ Compensation segment experienced a 6% rise in GWP, primarily due to higher audit premiums, though this was partially offset by a decrease in new business from $5.0 million a year ago to $3.0 million.
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