Birmingham, AL – ProAssurance Corporation (NYSE: PRA) recently reported results for the three and nine months ended September 30, 2019.
Management commented: “Once again, our Workers’ Compensation Insurance and Segregated Portfolio Cell Reinsurance segments were substantial contributors to the bottom line, while operating in a marketplace that continues to be highly competitive,” said Ned Rand, President and Chief Executive Officer of ProAssurance. Turning to the Specialty P&C segment, Mr. Rand said, “Our medical professional liability products, which make up the largest line of business in the segment, continue to build upon a strong book of business despite a loss environment that affects our current accident year loss picks and influences our analysis of reserves for prior year losses. These headwinds affected overall premiums in the segment, but we were able to implement renewal rate increases for another consecutive quarter with only a modest impact to retention, while adding new business at higher rates than in 2018.”
Mr. Rand continued, “While we are pleased to report higher operating earnings for the third quarter of 2019 than for the previous two quarters, the increase is largely the effect of a tax benefit in the period. We continue to expect loss severity trends perceived in the broader healthcare professional liability marketplace to weigh on operating performance for the remainder of the year, and into 2020. Our view of these trends, and the intensely competitive property casualty landscape, demand caution as we strive to create long-term value for our customers and shareholders. This is not the time to aggressively seek market share and top line growth. We are willing to walk away from business where it makes sense to do so, rather than chase under-priced business into dangerous territory. Instead, we continue to focus on improving underwriting results and managing expenses, applying our deep expertise to strengthen our position as a market leader in the lines in which we specialize.”
Third Quarter 2019
- The increase in consolidated gross premiums written was driven by our Workers’ Compensation Insurance segment (up 6.6% quarter-over-quarter), our Segregated Portfolio Cell Reinsurance segment (up 2.9% quarter-over-quarter), and our Lloyd’s Syndicates segment (up 15.3% quarter-over-quarter). Our Specialty P&C segment saw gross premiums written decline 1.6% quarter-over-quarter.
- Consolidated net premiums earned for third quarter of 2019 increased 4.7% over the prior-year quarter with all of our operating segments contributing to the increase, primarily driven by our Specialty P&C segment due to the addition of a loss portfolio transfer (“LPT”) resulting in $2.7 million of premium being written and fully earned in the quarter, as well as the pro rata effect of higher premiums written during the preceding twelve months.
- Our consolidated current accident year net loss ratio for the third quarter of 2019 was 82.3% as compared to 82.1% in the year-ago period, effectively unchanged quarter-over-quarter.
- Our consolidated underwriting expense ratio was 28.7% for the third quarter of 2019 as compared to 30.0% in the year-ago period, primarily due to a decrease in share-based compensation and other incentive-related compensation costs in our Corporate segment and a decrease in operating expenses in our Lloyd’s Syndicates segment.
- Net favorable prior accident year reserve development was $15.9 million in the third quarter of 2019, compared to $21.5 million in the prior-year quarter. While our perception of increasing claim severity in the broader healthcare professional liability industry has not changed from recent quarters, our reserves for prior accident years continue to develop favorably as current severity trends are somewhat more favorable than the severity assumptions we used to establish those initial reserves. This allows for continuing net favorable development relating to prior accident years.
- Our consolidated combined ratio for the quarter was 103.6%, a two percentage point increase quarter-over-quarter, primarily due to changes in the mix of premiums earned and a lower amount of prior accident year favorable development due to our perception of loss trends in the healthcare professional liability market.
- Our consolidated net investment result was $22.4 million, a decline of $6.1 million compared to the year-ago quarter, primarily due to a $6.5 million quarter-over-quarter decline in earnings from our unconsolidated subsidiaries, driven by lower reported earnings from two limited partnership (“LP”) investments.
- Net realized investment gains were $1.1 million compared to $12.4 million in the third quarter of 2018, reflecting a decrease in realized gains from the sale of equity investments and the change from unrealized holding gains to unrealized holding losses in our equity portfolio.
- We recorded a tax benefit of approximately $6.7 million in the quarter, primarily the result of $4.6 million in tax credits recognized in the third quarter of 2019 and a $2.0 million adjustment to align our actual effective tax rate with our projected effective tax rate.
The complete results release is available here: ProAssurance Reports Results for Third Quarter 2019