Piper Jaffray Comments On ProAssurance Corp. After Easily Beating Earnings Estimates

ProAssurance Corp PRA reported operating EPS of $1.46 in 1Q11, beating the Street's estimate of $1.16 and PJC's $1.30. Favorable reserve development of $40.0M led to a 53.3% loss ratio, driving the upside again this quarter. Net investment income of $36.2M reported slightly lower than expected. Excellent underwriting results offset disappointing premium growth, which fell short of expectations. Net Premiums Earned increased 7.0% Y/Y, lower than forecast, to $132.1M and Net Premiums Written rose 3.2% in 1Q to $149.9M. Results fell short of PJC's NPW forecast of approximately $183.1M. APS contributed $20.0M to GPW in the quarter, offsetting a decline of $17.0M elsewhere. Meanwhile, rates on renewal business for PRA's medical liability book reported 4% lower relative to last year. Retention increased Y/Y from 89.0% to 90.0% in 1Q11, but fell 2.0% sequentially. Key risks include: further price softening, increasing competition, lower interest rates, adverse reserve development, adverse legal developments, and loss of rating. Piper Jaffray has a $79 PT and Overweight rating on PRA PRA closed Wednesday at $66.39