Zacks_Analysts' Blog : ProAssurance Gets Endorsement - Analyst Blog

Yesterday, ProAssurance Corp. (PRA) stated that the financial strength ratings (FSR) of the company and its subsidiaries have been asserted by rating agency A.M. Best.

Accordingly, the rating agency has affirmed the "A” (Excellent) rating, which was assigned to ProAssurance Group, ProAssurance Casualty, ProAssurance Indemnity, ProAssurance Specialty, American Physicians Insurance Company (APS) and the Podiatry Insurance Company of America.

Additionally, the company’s other subsidiaries, namely, ProAssurance National Casualty, ProAssurance Wisconsin and PACO Assurance were affirmed at "A-" (Excellent). The outlook for the FSR of ProAssurance National has further been upgraded to positive from stable.

The ratings are based on ProAssurance’s financial strength, unmatched expertise in claims handling, skilled underwriting, and innovative risk management has provided significant support in the changing healthcare scenario.

Moreover, the acquisition of APS is expected to be accretive to its 2011 earnings. We also anticipate the acquisition to provide superior quality insurance protection for the policyholders of APS. ProAssurance also believes that this will prove to be a strategic expansion, which will, in turn, help to grow its business and boost its top line in 2011.

In addition, ProAssurance’s loss severity trends continue to negate the previous expectations, helping in offsetting the continuing regulatory challenges and threats of price competition. Moreover, the benefits of geographic diversity and strong financial position are likely to have a positive impact over time.

Meanwhile, the ratings agency substantiated that the sustained underwriting capabilities, earnings growth, aggressive claims defence and excellent risk-adjusted capitalization have been strengthening the company’s balance sheet. ProAssurance further benefits from expert risk management, diversification and superior awareness across all its operating regions.

These factors confirm ProAssurance’s strong long-term growth prospects in order to maintain its competitive position and generate enhanced shareholder value. Hence, we retain an Outperform stance on the stock. The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no directional pressure on the shares over the near term.

Overall, although the price competition, loss cost trends and regulatory challenges limit the desired upside in the sector, we believe the benefits of geographic diversity and strong financial position are likely to have a positive impact over time.

On Tuesday, the shares of ProAssurance closed at $68.61, up 0.8%, at the New York Stock Exchange.