ProAssurance Corp. – Value Analysis (NYSE:PRA) : August 15, 2017

Capitalcube gives ProAssurance Corp. a score of 68.

Our analysis is based on comparing ProAssurance Corp. with the following peers – Markel Corporation, W. R. Berkley Corporation, Alleghany Corporation, Loews Corporation, Aspen Insurance Holdings Limited, Travelers Companies, Inc., RLI Corp., AmTrust Financial Services Inc. and Hallmark Financial Services, Inc. (MKL-US, WRB-US, Y-US, L-US, AHL-US, TRV-US, RLI-US, AFSI-US and HALL-US).

Fundamental Overview

ProAssurance Corp. has a fundamental score of 68 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (1.61).
  • PRA-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • PRA-US‘s relatively high profit margins are burdened by capital inefficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, PRA-US‘s return on equity has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • PRA-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s equity capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • PRA-US has the financial and operating capacity to borrow quickly.

Drivers of Margin

  • Margins suggest relatively better discipline in both writing policies and controlling operating costs.
  • The company’s comparatively high underwriting margin (i.e. premiums earned minus insurance losses, expressed as a percentage of premiums earned) of 38.01% versus a peer median of 25.15% suggests that PRA-US follows either a differentiated strategy with pricing advantages and/or a disciplined strategy in writing policies versus peers. Further, PRA-US‘s pre-tax margins are above the peer median (pre-tax margin of 18.75% compared to 11.17%) suggesting relatively tight control on operating costs.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

ProAssurance Corp. is a holding company for property and casualty insurance companies. The company operates through four segments: Specialty Property and Casualty, Workers’ Compensation, Lloyd’s Syndicate and Corporate. The Specialty Property and Casualty segment includes professional liability business and medical technology and life sciences business. The Workers’ Compensation segment includes the workers’ compensation business which the company provides for employers, groups and associations. The Lloyd’s Syndicate segment includes operating results from participation in Lloyd’s Syndicate 1729. The Corporate segment includes investing operations managed at the corporate level, non-premium revenues generated outside of insurance entities, and corporate expenses, including interest and U.S. income taxes. ProAssurance was founded in June 2001 and is headquartered in Birmingham, AL.