Birmingham, AL – ProAssurance Corporation (NYSE: PRA) recently reported results for the three months ended March 31, 2017.
First Quarter 2017 Highlights
A 4.9% quarter-over-quarter increase in gross premiums written was driven primarily by new business written in our Lloyd’s and Workers’ Compensation segments, which were up 84.4% and 7.9%, respectively.
Net premiums earned increased 3.0% quarter-over-quarter, with gains in all three operating segments with our Specialty P&C and Lloyd’s segments accounting for the majority of the increase.
Our coordinated sales and marketing efforts produced $7.7 million of direct premium in the quarter as we continue to demonstrate the value of the additional insurance solutions we can bring to insureds already served by our Specialty P&C or Workers’ Compensation segments.
Net favorable development was $28.8 million in the quarter, compared to $28.7 million in the year-ago period. This continues to reflect a lower than anticipated claims severity trend for accident years 2009 through 2014. Net favorable development in our Specialty P&C segment was $25.3 million, our Workers’ Compensation segment experienced net favorable development of $2.4 million, and net favorable development in our Lloyd’s segment was $1.1 million.
The consolidated current accident year net loss ratio was 2.3 points higher than in the first quarter of 2016, primarily due to a 19.8 point increase in our Lloyd’s segment.
The decrease in the 2017 consolidated underwriting expense ratio was predominately driven by the effect of a change in the second quarter of 2016 in how the management fee was considered and allocated to losses and loss adjustment expenses, which resulted in a 0.8 point decrease in our consolidated underwriting expense ratio in 2017 when compared to 2016. This decrease was entirely offset by a 0.8 point increase in our consolidated net loss ratio, and therefore had no effect on net income in either period. We believe this change better reflects the involvement of senior management at a corporate level and their oversight of the claims process at the segment level.
Net realized investment gains were $13.3 million in the first quarter, compared to net realized investment losses of $8.4 million in the prior-year quarter.
The results of our equity investments in unconsolidated subsidiaries were $1.8 million, an increase of $5.4 million from the first quarter of 2016. However, net investment income declined $2.3 million quarter-over-quarter primarily due to a reduction in earnings from our fixed income portfolio.
Taxes decreased $2.6 million, quarter-over-quarter, primarily reflecting the excess tax benefit on share-based compensation, resulting from the application of revised accounting guidance which was effective January 1, 2017 and, to a lesser extent, the effect of our investment in various tax credits and tax exempt income.
“This was another strong quarter with solid premium growth driven by continued success from our strategic initiatives and coordinated marketing programs designed to further meet the needs of the evolving healthcare market. Retention of existing business was also a highlight in the quarter, underscoring our ability to maintain hard-won, well-underwritten business in the face of strong competition,” said W. Stancil Starnes, Chairman and Chief Executive Officer of ProAssurance. Mr. Starnes also highlighted non-operating success in our Corporate Segment, which benefited from changes in the value of certain investments, net realized investment gains and a lower tax rate. Importantly our Return on Equity in the quarter was 9.1% and Book Value per Share grew to $34.19.
The complete results release is available here: ProAssurance First Quarter 2017 Results