Birmingham, AL – ProAssurance Corporation (NYSE: PRA) reports a net loss of $49.4 million, or $0.95 per diluted share, and an operating loss of $3.7 million, or $0.07 per diluted share, for the three months ended September 30, 2023.
Third Quarter 2023
- Gross premiums written: $320 million (+4%)
- New business written: $29 million (+82%)
- Unfavorable prior accident year reserve development of $8 million related to our Workers’ Compensation Insurance business.
- Consolidated combined ratio of 116.7%
- Consolidated operating ratio of 103.2%
- Net investment income of $33 million (+32%)
- Adjusted book value per share of $25.67 as of September 30, 2023 a decrease of $0.32 per share since December 31, 2022.
- Comparisons are to the third quarter of 2022.
Management Commentary & Results of Operations
“Market conditions and judicial trends in our lines of business continue to be a significant headwind to our efforts to return to our desired level of underwriting profitability. We are meeting those challenges head on in the marketplace by taking appropriate rate actions, maintaining our underwriting criteria, effectively managing claims and providing the best-in-class service that has allowed us to attract well-priced new business,” said Ned Rand, President and Chief Executive Officer of ProAssurance. He added, “With our decades of experience in medical professional liability and workers’ compensation we know there is no shortcut to building sustained profitability that can ride out turbulent markets and create profitability over the long term. These are two highly cyclical lines of insurance, and the actions we are taking now will allow us to thrive as market conditions improve over time.”
Driving the operating loss in the quarter was net unfavorable prior accident year reserve development of $7.7 million. This was due to $8.1 million of unfavorable development in our Workers’ Compensation Insurance segment, driven by higher-than-expected loss trends as the average medical cost per claim increased in the third quarter as compared to what we observed in the first two quarters of the year. Also at play was a reduction in net earned premiums in all our operating segments, both of which we discuss in our segment commentary.
The unfavorable development in the quarter was the primary reason our consolidated combined ratio increased 8.8 points quarter-over-quarter. However, the 32% improvement in our net investment income produced a higher investment income ratio, leading to a smaller increase in our operating ratio.
There were significant gains in new business acquired in the quarter, all of which reflected our disciplined pricing and underwriting strategy. That drove increases in gross premiums written, as did strong renewal price increases in our Specialty P&C segment, which also saw strong retention even in the face of continued market pressure.
During the quarter we made the decision to no longer participate in the results of Syndicate 1729, beginning with the 2024 underwriting year. Due to the quarter lag, our ceased participation in Syndicate 1729 will not be reflected in our results until the second quarter of 2024. The results from our participation from open underwriting years prior to 2024 will continue to earn out pro rata over the entire policy period of the underlying business. Furthermore, we entered into an agreement to sell our remaining ownership interest in the underwriting and operations entity associated with Syndicate 1729 to an unrelated third party, which is contingent upon certain approvals. Approval of this sale will not impact our decision to no longer participate in the results of Syndicate 1729.
Market conditions affecting actual and projected results of our Workers’ Compensation Insurance segment during the quarter also affected our analysis of goodwill related to that segment. As a result, we recognized a non-cash $44.1 million impairment of goodwill during the third quarter of 2023.
Book value per share at quarter end was $19.85, down 3% from the December 31, 2022 book value of $20.46. Adjusted book value per share, which excludes our Accumulated Other Comprehensive Loss, is $25.67 as of September 30, 2023 as compared to $25.99 as of December 31, 2022. Share repurchases year-to-date have contributed a $0.59 per share increase to adjusted book value per share.
The complete results release is available here: ProAssurance Results for Third Quarter 2023