Birmingham, AL – ProAssurance Corporation (NYSE: PRA) recently reported results for the three and six months ended June 30, 2017.
“Our overall results were dampened this quarter by isolated events that mask the solid success we achieved in our operations during the quarter. We continued to grow premiums in both our healthcare professional liability and workers’ compensation segments despite a difficult competitive environment, aided by solid retention, largely stable pricing and a strong flow of new business,” said W. Stancil Starnes, Chairman and Chief Executive Officer of ProAssurance.
Second Quarter 2017 Highlights
As disclosed in our announcement of preliminary results on August 1, 2017, we recognized a $5.2 million pre-tax expense for previously unrecognized segregated portfolio cell dividend expenses for the cumulative earnings of unrelated parties that have owned segregated portfolio cells in our Bermuda captive facility at various times since 2003. This charge properly expenses previously unrecognized segregated portfolio cell dividend expense attributable to those cells. This is unrelated to the captive operations of our Eastern Re subsidiary.
Also as disclosed on August 1, 2017, the results of our Specialty P&C segment this quarter reflected the confidential settlement of a lawsuit over a claims-related matter. Although much of the settlement will be recovered from our reinsurers, this loss falls within a reinsurance treaty that is loss sensitive, and our anticipated recovery will be largely offset by approximately $3.2 million of premium ceded to reinsurers.
The 5.8% quarter-over-quarter increase in gross premiums written was driven primarily by our Specialty P&C and Workers’ Compensation segments, which were up 7.6% and 5.1%, respectively.
Net premiums earned increased 2.0% quarter-over-quarter, with increases in all three operating segments. Our Workers’ Compensation and Lloyd’s segments accounted for the majority of the increase.
We produced $1.5 million of direct premium in the quarter through our coordinated sales & marketing programs that provide additional insurance solutions for our insureds and additional products for selected distribution partners.
Net favorable development was $29.0 million in the quarter, compared to $36.8 million in the year-ago period. This continues to reflect a lower than anticipated claims severity trend for accident years 2010 through 2014. Net favorable development in our Specialty P&C segment was $26.5 million and our Workers’ Compensation segment experienced net favorable development of $2.9 million.
The consolidated current accident year net loss ratio was 1.1 points lower than the year-ago quarter of 2016, primarily due to a 12.1 point decrease in our Lloyd’s segment.
Our consolidated underwriting expense ratio increased 1.5 points over the second quarter of 2016, primarily due to an increase in the expense ratio in our Lloyd’s segment and the effect of a change in the second quarter of 2016 in how management fees in our Corporate segment were allocated between losses and loss adjustment expenses as well as underwriting expenses. This change better reflected the involvement of senior management at a corporate level and their oversight of the claims process at the segment level.
Net realized investment losses were $2.2 million in the second quarter of 2017, compared to net realized investment gains of $10.9 million in the prior-year quarter with the primary driver being unrealized losses in our securities trading portfolio.
The results of our equity investments in unconsolidated subsidiaries were $2.5 million, an increase of $2.1 million from the second quarter of 2016. However, net investment income declined $1.9 million quarter-over-quarter primarily due to a reduction in earnings from our fixed income portfolio.
Taxes decreased $5.7 million, quarter-over-quarter, primarily driven by net realized investment losses recognized during the period relative to the decline in quarterly pre-tax net income and, as in the first quarter, the effect of our investment in various tax credits and tax exempt income.
The complete results release is available here: ProAssurance Results Second Quarter 2017
Source: Pro Assurance