Birmingham, AL – ProAssurance Corporation (NYSE: PRA) recently reported a net loss of $9.1 million, or $0.17 per diluted share, and an operating loss(1) of $3.0 million, or $0.06 per diluted share, for the three months ended September 30, 2022.
Highlights – Third Quarter 2022(2)
- Gross premiums written of $308 million in the quarter, in line with a year ago and driven by strong premium retention and renewal pricing increases in the Specialty P&C segment
- Favorable prior accident year reserve development of $7 million
- Consolidated combined ratio of 107.9%, up 1.3 points
- Consolidated operating ratio of 98.3%, improving 1.2 points
- Net investment income of $25 million, an increase of 28%
- Equity in losses of unconsolidated subsidiaries of $6.9 million, reflecting lower market valuations in LP/LLC investments
- Adjusted book value per share(1) of $25.75, down $0.21 and $0.41 per share from June 30, 2022 and December 31, 2021, respectively
Management Commentary & Results of Operations
Third quarter results for our operating segments reflect the competitive underwriting environment in our primary lines of business as well as the continued trends toward higher interest rates in the investment markets. Compared to the third quarter of 2021, our combined ratio increased by 1.3 points, while our operating ratio improved 1.2 points to 98.3%. For the 9 months ended September 30, 2022, our combined ratio improved by 2.4 points to 105.7% and the operating ratio improved by 3.7 points to 97.0%.
Ned Rand, President and Chief Executive Officer of ProAssurance, commented on the results of the quarter. “This quarter’s results were noteworthy for the strong client retention and improved pricing in the Specialty P&C segment, which produced an increase in gross written premium. Our reputation for client service is a differentiator that delivers value for our policyholders and provides loyalty in a competitive market.
“We were also pleased to see the improvement in the Workers Compensation Insurance segment results, as our team at Eastern recognized the developing trends, and their quick action brought about notable progress in the net loss ratio compared to last year. Understanding subtle shifts in the business and timely responding to them should contribute to better results over time.”
Net investment income showed substantial growth this quarter, increasing by 28% to $25 million for the quarter. This continues a trend of higher investment income as a result of rising interest rates. We expect this to continue, as reinvestment rates are now considerably higher than the average book yield of maturing investments.
Mr. Rand noted: “A sustained move higher in interest rates should provide a significant and sustainable tailwind to our investment income. The investment leverage in our $4.4 billion investment portfolio is expected to provide a substantial improvement in book yield through the rest of this year and into 2023. We are pleased to see the fixed income markets return to more normalized environment that offers a reasonable return to bond owners.”
Our book value per share of $19.75 declined approximately 9% since June 30, 2022, as interest rates continued to increase in the current quarter. This resulted in after-tax unrealized holding losses of $90 million from our fixed maturity portfolio and net investment losses of $8.3 million, primarily unrealized holding losses from our convertible and equity securities. Adjusted book value per share, which excludes Accumulated Other Comprehensive Income (AOCI), is $25.75 as of September 30, 2022 as compared to $25.96 as of June 30, 2022.
The complete results release is available here: ProAssurance Reports Results for Third Quarter 2022
(1) Represents a Non-GAAP financial measure. See a reconciliation to its GAAP counterpart under the heading “Non-GAAP Financial Measures” that follows
(2) Comparisons are to the third quarter of 2021