Birmingham, AL – ProAssurance Corporation (NYSE: PRA) recently reported Third Quarter 2014 results, “Our insurance operations produced positive and profitable results in the third quarter, despite the challenges of an extremely competitive market. Our Workers’ Compensation and Lloyd’s segments made meaningful contributions to our top line, renewal pricing in our largest segments continued to move higher, retention in key lines increased and favorable reserve development was strong. We continue to make investments in our infrastructure and intellectual resources and while this does increase our expense ratio, it is helping ensure that ProAssurance is prepared to serve the needs of an evolving healthcare industry,” said W. Stancil Starnes, Chairman and Chief Executive Officer of ProAssurance. Mr. Starnes also noted ProAssurance’s strong capital position and profitability has enabled the Company to confidently return a record amount of capital to shareholders over the course of the year.
Gross premiums written increased 37% quarter-over-quarter, principally due to new business derived from our acquisition of Eastern Alliance Insurance Group (Eastern) and our investment in Lloyd’s Syndicate 1729. For the nine months ended September 30, 2014, the premium from Eastern and Syndicate 1729 drove a 40% year-over-year increase in Gross Premiums Written.
Third quarter 2014 total revenue was $204 million and $634 million for the three and nine months ended September 30, 2014, respectively. This represents an increase over prior year periods of 12% and 16%, respectively, and is also largely attributable to our Eastern acquisition.
Total expenses for the third quarter of 2014 were $157 million, with the largest portion of the increase in expenses coming from the addition of Eastern. Approximately $2 million of the increase in operating expenses is due to the establishment of a reserve related to discontinued operations and costs associated with technology initiatives designed to enhance our ability to serve an increasingly complex and evolving customer base.
Net favorable reserve development was $43 million in the third quarter of 2014, compared to $49 million in the same quarter in 2013. Specialty P&C development was approximately $42 million, the remainder was from our Workers’ Compensation segment. Year-to-date net favorable development was $133 million, compared to $141 million in the year-ago period. Specialty P&C development was $130 million for the nine months, and the remainder was from our Workers’ Compensation segment.
The current accident year net loss ratio was 80.3% for the quarter and 80.2% for the year-to-date, a decrease of 2.8 points over prior year periods, again largely attributable to the addition of Eastern.
Net income was $35 million in the third quarter, including $8 million of realized losses, and Net Income per Diluted Share was $0.59. Third quarter 2014 Operating Income was $40 million and Operating Income per diluted share was $0.68. For the nine months ended September 30, 2014, Net Income was $131 million and Net income per diluted share was $2.19; Operating Income for the same period was $126 million or $2.10 per diluted share.
Operating cash flow was $72 million in the quarter, an increase of $36 million, due to a $31 million tax refund and positive cash flows provided by our Eastern acquisition. Year-to-date operating cash flow is $101 million.
During the third quarter of 2014 we purchased 999,269 shares of our common stock on the open market at a total cost of $45 million. Through October 31, 2014, our year-to-date share repurchase, largely conducted under the auspices of consecutive 10b5-1 Plans, has totaled approximately 4.3 million shares at a total cost of $192 million. Approximately $112 million remains in the stock repurchase program authorized by our Board of Directors.
The complete earnings release is available here: ProAssurance Third Quarter 2014 Results