Birmingham, AL – ProAssurance Corporation (NYSE: PRA) recently reported results for the three and nine months ended September 30, 2018.
Third Quarter 2018 Highlights
Consolidated gross premiums written increased by $14.2 million, a 5.8% increase over the third quarter of 2017. In our Specialty P&C segment, gross premiums written were $167.6 million, $1.4 million higher than in the prior year’s third quarter. Gross premiums written in our Workers’ Compensation Insurance segment were $65.7 million, a $5.9 million increase over the third quarter of 2017. In our Segregated Portfolio Cell Reinsurance segment, which reflects the operating results of SPCs that assume workers’ compensation insurance, healthcare professional liability insurance or a combination of the two, gross premiums written were $16.8 million, approximately $500,000 higher than in the year-ago quarter. Finally, gross premiums written in our Lloyd’s Syndicates segment were $26.4 million, a $5.4 million increase over the same quarter last year.
The quarter-over-quarter increase in net premiums earned was $13.8 million, or 7.2%. In our Specialty P&C segment, the increase was $3.5 million, in our Workers’ Compensation Insurance segment the increase was $5.8 million, in our Segregated Portfolio Cell Reinsurance segment the increase was $1.8 million and net premiums earned increased $2.7 million in our Lloyd’s Syndicates segment.
We produced $2.8 million of business through our coordinated sales & marketing programs, essentially unchanged quarter-over-quarter.
Our consolidated current accident year loss ratio improved two points from the prior-year quarter primarily due to the effect of storm-related losses recognized in the third quarter of 2017 in our Lloyd’s Syndicates segment. That improvement was partially offset by a higher net loss ratio in our Specialty P&C segment due to changes in premium on loss sensitive policies and an increase in expected losses in our excess and surplus lines business.
Net favorable development was $21.5 million in the third quarter of 2018, compared to $32.3 million in the third quarter of 2017. By segment, net favorable development was $14.4 million in Specialty P&C, $2.8 million in Workers’ Compensation Insurance, $3.7 million in our Segregated Portfolio Cell Reinsurance segment, and approximately $600,000 in our Lloyd’s Syndicates segment.
The consolidated underwriting expense ratio was 30.0%, essentially unchanged as compared to the third quarter of 2017.
Net realized investment gains totaled $12.4 million in the quarter, an increase of $4.6 million compared to the prior year quarter, primarily reflecting mark-to-market adjustments in our equity trading portfolio.
Our consolidated net investment result was $28.5 million, approximately $600,000 higher than in the third quarter of 2017. This primarily reflected an increase in the earnings from our unconsolidated subsidiaries due to the impact of the required adoption of a new accounting standard as of the first quarter of 2018; net investment income was $23.3 million, a 2% decrease, quarter-over-quarter, due to lower investment balances.
We had a tax benefit of approximately $200,000 in the quarter, compared to a tax expense of $6.0 million in the year ago quarter, primarily due to lower pre-tax income, a lower corporate tax rate, a portion of our investment income being tax-exempt and our ability to utilize tax credits in the current tax year as well as the previous tax year through carryback provisions of the tax law.
Management Commentary
“Premiums increased in all four operating segments in the quarter, helping drive profitability in our Workers’ Compensation Insurance segment, our newly introduced Segregated Portfolio Cell Reinsurance segment and our Lloyd’s Syndicates segment. Profitability in our Corporate segment was driven by strong investment performance. Results in these segments more than balanced results in our Specialty P&C segment which experienced continued lower favorable development than in previous periods. Additionally, our concern about the possibility of deteriorating loss trends in the broader healthcare professional liability lines led to higher loss ratios for certain business within that segment,” said W. Stancil Starnes, Chairman and Chief Executive Officer of ProAssurance.
Mr. Starnes again stressed that ProAssurance is not seeing the worsening loss trends in its paid losses within the Specialty P&C segment and he cited the higher pricing on policy renewals, strong retention, along with new business growth in Specialty P&C as evidence that the segment continues to perform well in the current environment.
The complete results release is available here: ProAssurance Results for Third Quarter 2018
Source: ProAssurance