ProAssurance Corporation’s (PRA) first-quarter operating earnings of $1.21 per share were 10 cents ahead of the Zacks Consensus Estimate of $1.11. This also compares favorably with the earnings of 99 cents in the prior-year quarter.
Earnings for the quarter benefited from a 25.2% year-over-year growth in revenues, primarily due to recent acquisitions. However, the better-than-expected top-line was partly offset by an 18.1% increase in total expenses.
Net income in the quarter was $38.1 million or $1.16 per share, compared with $28.4 million or 84 cents in the prior-year quarter. Operating income excludes the after-tax effects of net realized gains or losses and guaranty fund assessments or recoupments. During the reported quarter, the effect of adjustment to net income was 5 cents per share, compared with 15 cents in the year-ago quarter.
Gross written premiums for the quarter increased 1.7% year over year to $157.2 million. ProAssurance’s retention of its existing business in its historical medical liability book was 88% in the reported quarter. The PICA Group’s (PICA) retention rate for its medical professional liability business was 91%.
ProAssurance experienced $25.0 million of favorable net loss reserve development in the reported quarter, compared with $18.5 million a year ago. The favorable development was primarily from accident years 2004 to 2007.
Net investment income for the quarter increased 8.8% year over year to $37.6 million. ProAssurance’s net investment result for the reported quarter increased primarily due to improved returns on its treasury inflation protected securities.
ProAssurance wrote $6.3 million of new premium in the reported quarter, which was not attributable to acquisitions. Acquisitions accounted for a total of $21.3 million of new business, led by PICA, which became part of ProAssurance on April 1, 2009.
ProAssurance’s net loss ratio for the reported quarter came in at 63.8%, compared with 66.5% in the prior-year quarter. Expense ratio during the quarter was 24.6%, up from 22.8% in the prior-year quarter. Combined ratio slightly improved to 88.4% from 89.3% in the prior-year quarter.
Return on equity (ROE) improved to 8.8% from 7.9% in the prior-year quarter. Book value increased to $54.07 per share as of March 31, 2010 compared with  $52.59 as of December 31, 2009.
There are inherent threats associated with the medical professional liability insurance sector as a whole, stemming from price competition, legislative reform, loss cost trends and regulatory challenges. However, we anticipate the results of ProAssurance to continue to benefit from acquisitions, geographic diversity and strong financial position.

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