ProAssurance Q2 Earnings: Profit Climb or Slippery Slope?

ProAssurance Corporation PRA is set to report its second-quarter 2024 results on Aug 8, after the closing bell.

The Zacks Consensus Estimate for second-quarter earnings is currently pegged at 8 cents per share, implying a decline of 50% from the year-ago reported number. The estimate remained stable over the past month. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at almost $273.7 million, suggesting a 3.1% fall from the year-ago actuals.

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ProAssurance beat the consensus estimate for earnings in two of the trailing four quarters and missed twice, with the average surprise being negative 42.9%, as you can see below.

Q2 Earnings Whispers

Our proven model does not conclusively predict an earnings beat for ProAssurance this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at 8 cents per share, in line with the Zacks Consensus Estimate.

Zacks Rank: ProAssurance currently carries a Zacks Rank #3.

Now, let's see how things have shaped up before the second-quarter earnings announcement.

Q2 Key Predictions

ProAssurance's second-quarter results are expected to have been affected by lower premiums, weaker contributions from the segments and deteriorating ratios. The negatives are likely to have been partially offset by growth in investment income.

The Zacks Consensus Estimate for net premiums earned indicates a 5.2% year-over-year decline, whereas our estimate suggests a 6.1% fall. The consensus mark for Specialty P&C Segment's operating loss is pegged at $14.3 million, while our model estimate stands at a loss of $12.9 million.

Similarly, the consensus estimate for Workers' Compensation operating loss is pegged at $6.4 million, wider than the year-ago level of $2.5 million. Also, the consensus estimate and our model estimate for Segregated Portfolio Cell Reinsurance's profits indicate around 36% year-over-year fall. The renewal rate is expected to have declined in the second quarter.

The consensus mark for the combined ratio is pegged at 112.35%, while our estimate suggests 112.37% compared with the year-ago level of 108.20%. A higher combined ratio suggests that the company has less premium left after claim settlements.

The consensus mark for the underwriting expense ratio is pegged at 31.62%, while our estimate stands at 31.91% compared with the year-ago level of 31.10%. These factors are expected to have positioned the company for a year-over-year decline in profits, making an earnings beat uncertain.

Nevertheless, higher investment income due to the high-interest rate environment is likely to have provided some breathing room. The Zacks Consensus Estimate for net investment income indicates an 8.9% year-over-year increase, while our estimate suggests 8.1% growth.

Price Performance

ProAssurance'sstock has lost 16.2% year to date, against the industry's rally of 17.3%. The S&P 500 Index registered a 10% gain during this time. In comparison, its peers like Universal Insurance Holdings, Inc. UVE and Ambac Financial Group, Inc. AMBC increased 16.9% and decreased 36.9%, respectively, during the same period.

YTD Price Performance

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What Should Investors Do Now?

Given ProAssurance's cost-control and inorganic growth efforts and rising investment income, current investors may consider holding onto the stock and closely monitoring the upcoming earnings results. The decline in stock price has improved its valuation as compared with the industry average. However, it faces several challenges, including increasing competition, an anticipated decline in premiums and profits and a high leverage ratio. These headwinds suggest that new investors might want to wait and observe how the company navigates these challenges before making any investment decisions.

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