By Chris Munro

Feb 25 - (The Insurer) - ProAssurance shares rose more than 16% on Tuesday morning as investors responded to a comfortable Q4 2024 earnings beat, which included a 5.6 percentage point improvement in the insurer’s ex-Lloyd’s combined ratio to 106.6%.

• Investors respond positively to improved Q4 performance

• Combined ratio, ex-Lloyd’s business, improved 5.6 points YoY to 106.6%

• Operating income per diluted share of $0.36 well ahead of Wall Street consensus

• Specialty P&C combined ratio improves 3.9 points YoY to 100.9%, driven by higher favourable PYD

• Workers' comp combined improves 17.2 points YoY to 117.6%

Shares in the Birmingham, Alabama-based business were trading at $15.96 at 10:27am in New York on Tuesday morning, up 16.1% from Monday’s close of $14.05.

ProAssurance booked operating income of $18.3 million for the final three months of 2024, compared with an operating loss of $2.8 million in the prior-year period.

The insurer reported operating income per diluted share of $0.36, an improvement on the deficit of $0.05 booked in Q4 2023 and well ahead of the $0.19 consensus forecast of four analysts, as compiled by S&P Capital IQ.

ProAssurance’s Q4 2024 combined ratio, excluding its run-off Lloyd’s operations, was 106.6%, down from the prior-year period’s 112.2%.

The firm’s current accident year net loss ratio deteriorated by 40 basis points to 80.4%, but that was more than offset by 4.7 points of favourable reserve development on prior accident years, compared with 1.1 points of positive development in the prior-year period.

ProAssurance’s net loss ratio for 2024’s fourth quarter improved by 3.2 points to 75.7%.

Including its Lloyd’s operations in run-off, ProAssurance’s combined ratio totalled 109.3% for the final quarter of last year, compared with 112.0% in Q4 2023.

Across ProAssurance’s operations, the company generated gross premiums written (GPW) of $207.7 million in Q4 2024, a decrease of 0.5% year on year.

Its net premiums written $(NPW.SI)$ for 2024’s fourth quarter totalled $188.5 million, an increase of 3.3% from Q4 2023.

Net investment income increased 9.2% year on year to $36.8 million in 2024’s fourth quarter.

SPECIALTY P&C CR IMPROVES 3.9 PTS

The core specialty P&C combined ratio improved 3.9 points year on year to 100.9% in the fourth quarter of 2024.

That decrease was driven by favourable reserve development, which cut 8.7 points from the Q4 2024 combined ratio, compared with 1.2 points of positive development in Q4 2023.

The positive development largely reflected favourable claims-closing trends in the medical professional liability business, the company said.

“We are benefiting from our continued focus on price adequacy and disciplined underwriting as well as our ability to target segments within healthcare where there are opportunities to write business that we believe will meet our profitability objectives,” ProAssurance said.

Specialty P&C GPW fell 0.1% year on year to $161.6 million in Q4 2024, while the segment’s NPW was down 4.1% to $148.3 million.

The unit’s renewal pricing “remained strong” at 8% in 2024’s fourth quarter, while new business in the period fell as the company said it focused on risk selection and pricing levels that support progress toward its profitability targets.

“(Specialty P&C), which is largely made up of our medical professional liability line of business, represents more than 75% of total earned premium,” said Ned Rand, ProAssurance’s president and CEO.

“We believe we are ahead of many in this space in achieving rate levels that put us on track to outpace severity trends that remain challenging.

“Specialty P&C renewal premium increases of 8% this quarter are part of the cumulative +65% premium change we have accomplished since 2018,” Rand noted.

“We continue to forgo renewal and new business opportunities that we believe do not meet our expectation of rate adequacy in the current loss environment, although retention for the specialty P&C segment was a solid 84% for 2024, including 87% for our standard physicians medical professional liability book of business.

“In this loss environment, we will continue to focus on our targeted healthcare market segments with disciplined claims management and underwriting,” Rand added.

WORKERS' COMP CR IMPROVES 17.2 PTS

ProAssurance’s workers' compensation unit posted a combined ratio of 117.6% for the final quarter of 2024, compared with 134.8% in the prior-year period.

“We continue to observe and reflect the higher medical loss cost trends that we initially saw in the second half of 2023, although they have begun to moderate this year,” the carrier said.

Workers’ compensation GPW fell 2.0% year on year to $46.1 million, while the segment’s NPW increased 5.5% to $29.6 million.

Higher audit premiums were the primary reason for the NPW increase in Q4 2024, ProAssurance said.

“We continue to carefully manage our underwriting appetite due to market conditions.

“Retention in the fourth quarter was 83% although we saw improved renewal pricing. New business in our traditional book was $3.0 million, down from $5.0 million in last year’s fourth quarter,” the company noted.

“We are confident that the cyclical insurance markets we have served for many years will respond to our efforts,” Rand said.

“However, before turning our focus to growth, we believe it is prudent to continue to shrink in some areas where market conditions remain a headwind, which will help us reach our target for long-term sustained profitability across all business segments,” he added.