ProAssurance Corporation (NYSE: PRA) reports net income of $10.6 million, or $0.20 per diluted share, and operating income(1) of $8.6 million, or $0.16 per diluted share, for the three months ended June 30, 2023.
Highlights - Second Quarter 2023(2)
- Gross premiums written of $238 million (+1%)
- New business written increased to $19 million (+58%)
- Favorable prior accident year reserve development of $6 million
- Consolidated combined ratio of 108.2%
- Consolidated operating ratio of 95.4%
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Net investment income of $32 million (+44%)
- Net investment income increased by $10 million compared to 2022
- Adjusted book value per share(1) of $26.31 as of June 30, 2023. Adjusted book value per share was $25.99 as of December 31, 2022.
(1) | Represents a Non-GAAP financial measure. See a reconciliation to its GAAP counterpart under the heading “Non-GAAP Financial Measures” that follows. | |
(2) | Comparisons are to the second quarter of 2022. |
Management Commentary & Results of Operations
Our second quarter results for 2023 reflect operating income of $8.6 million, largely driven by strong investment returns. Underwriting results reflect the ongoing competition and pressures in losses and premiums in our core business. Net loss ratios improved from the first quarter of the year in both our Specialty P&C and Workers’ Compensation Insurance segments. Compared to last year, favorable reserve development is lower, pushing the combined ratio higher.
“The lines of business in which we operate continue to face challenges, and we are responding in ways that will benefit all of our constituencies over the long-term,” said Ned Rand, President and Chief Executive Officer of ProAssurance. “Our underwriting teams continue their disciplined focus on account selection and pricing, while our claims handling professionals work diligently to manage losses and mitigate the impact of social inflation prevalent in the claims environment.”
New business written was noteworthy this quarter in several of our lines of business. The healthcare professional liability, life sciences, and traditional workers compensation lines all produced new business exceeding expectations in the quarter.
Rand commented, “The new business we wrote across multiple lines is a testament to the hard work our team members have performed in keeping the market aware of the value proposition that ProAssurance offers. We believe that our financial position and reputation for standing with our insureds is attractive in the competitive marketplace.”
Net investment income showed substantial growth this quarter, increasing by 44% to $32 million. This continues a trend of higher investment income as a result of higher interest rates. We expect this trend to continue, as reinvestment rates are now considerably higher than the average book yield of maturing investments. Strong performance from investments in LPs/LLCs also contributed to an increase in book value in the quarter.
Our book value per share at quarter end was $21.24, up 4% from the December 31, 2022 book value of $20.46. Adjusted book value per share, which excludes Accumulated Other Comprehensive Income (AOCI), is $26.31 as of June 30, 2023 as compared to $25.99 as of December 31, 2022. Share repurchases during the second quarter contributed a $0.32 per share increase to adjusted book value.
CONSOLIDATED INCOME STATEMENT HIGHLIGHTS | |||||||||||||||||||||
Selected consolidated financial data for each period is summarized in the table below. | |||||||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||||||||||
($ in thousands, except per share data) | 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||
Revenues | |||||||||||||||||||||
Gross premiums written(1) | $ | 237,928 | $ | 235,475 | 1.0 | % | $ | 553,722 | $ | 571,082 | (3.0 | %) | |||||||||
Net premiums written | $ | 214,046 | $ | 210,151 | 1.9 | % | $ | 498,955 | $ | 521,066 | (4.2 | %) | |||||||||
Net premiums earned | $ | 247,862 | $ | 247,271 | 0.2 | % | $ | 487,649 | $ | 512,982 | (4.9 | %) | |||||||||
Net investment income | 31,650 | 21,944 | 44.2 | % | 61,960 | 42,387 | 46.2 | % | |||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | 6,632 | 5,180 | 28.0 | % | 5,511 | 12,799 | (56.9 | %) | |||||||||||||
Net investment gains (losses)(2) | 2,946 | (23,884 | ) | 112.3 | % | 5,858 | (37,390 | ) | 115.7 | % | |||||||||||
Other income (loss)(1) | 2,741 | 5,314 | (48.4 | %) | 3,528 | 8,119 | (56.5 | %) | |||||||||||||
Total revenues(1) | 291,831 | 255,825 | 14.1 | % | 564,506 | 538,897 | 4.8 | % | |||||||||||||
Expenses | |||||||||||||||||||||
Net losses and loss adjustment expenses | 191,058 | 177,670 | 7.5 | % | 396,354 | 387,093 | 2.4 | % | |||||||||||||
Underwriting, policy acquisition and operating expenses(1) | 76,976 | 77,333 | (0.5 | %) | 144,764 | 149,109 | (2.9 | %) | |||||||||||||
SPC U.S. federal income tax expense | 994 | 349 | 184.8 | % | 1,526 | 991 | 54.0 | % | |||||||||||||
SPC dividend expense (income) | 3,747 | (854 | ) | 538.8 | % | 5,689 | 1,513 | 276.0 | % | ||||||||||||
Interest expense | 5,502 | 4,919 | 11.9 | % | 10,965 | 9,360 | 17.1 | % | |||||||||||||
Total expenses(1) | 278,277 | 259,417 | 7.3 | % | 559,298 | 548,066 | 2.0 | % | |||||||||||||
Income (loss) before income taxes | 13,554 | (3,592 | ) | 477.3 | % | 5,208 | (9,169 | ) | 156.8 | % | |||||||||||
Income tax expense (benefit) | 2,927 | (1,933 | ) | 251.4 | % | 755 | (3,950 | ) | 119.1 | % | |||||||||||
Net income (loss) | $ | 10,627 | $ | (1,659 | ) | 740.6 | % | $ | 4,453 | $ | (5,219 | ) | 185.3 | % | |||||||
Non-GAAP operating income (loss) | $ | 8,562 | $ | 16,328 | (47.6 | %) | $ | 490 | $ | 24,008 | (98.0 | %) | |||||||||
Weighted average number of common shares outstanding | |||||||||||||||||||||
Basic | 53,815 | 54,068 | 53,900 | 54,040 | |||||||||||||||||
Diluted | 53,918 | 54,186 | 54,017 | 54,165 | |||||||||||||||||
Earnings (loss) per share | |||||||||||||||||||||
Net income (loss) per diluted share | $ | 0.20 | $ | (0.03 | ) | $ | 0.23 | $ | 0.08 | $ | (0.10 | ) | $ | 0.18 | |||||||
Non-GAAP operating income (loss) per diluted share | $ | 0.16 | $ | 0.30 | $ | (0.14 | ) | $ | 0.01 | $ | 0.44 | $ | (0.43 | ) | |||||||
(1) | Consolidated totals include inter-segment eliminations. The eliminations affect individual line items only and have no effect on net income (loss). See Note 12 of the Notes to Condensed Consolidated Financial Statements in our June 30, 2023 report on Form 10-Q for amounts by line item. | |
(2) | This line item typically includes both realized and unrealized investment gains and losses, investment impairments losses, and, for the current period, the change in the fair value of the contingent consideration in relation to the NORCAL acquisition. Detailed information regarding the components of net investment gains (losses) are included in Note 3 of the Notes to Condensed Consolidated Financial Statements in our June 30, 2023 report on Form 10-Q. | |
The abbreviation “nm” indicates that the information or the percentage change is not meaningful. | ||
BALANCE SHEET HIGHLIGHTS | |||||||
($ in thousands, except per share data) | June 30, 2023 | December 31, 2022 | |||||
Total investments | $ | 4,315,417 | $ | 4,387,683 | |||
Total assets | $ | 5,657,412 | $ | 5,699,999 | |||
Total liabilities | $ | 4,537,698 | $ | 4,595,981 | |||
Common shares (par value $0.01) | $ | 636 | $ | 634 | |||
Retained earnings | $ | 1,425,038 | $ | 1,423,286 | |||
Treasury shares | $ | (439,185 | |||||
