ProAssurance sees growth in Q3 but combined ratio rises

ProAssurance’s consolidated combined ratio for Q3 is 103.6 percent, a two-percentage point increase quarter-over-quarter. The company said this was primarily due to changes in the mix of premiums earned and a lower amount of prior accident year favourable development due to its perception of loss trends in the healthcare professional liability market.

An increase in consolidated gross premiums written was driven by its workers’ compensation Insurance segment (up 6.6 percent quarter-over-quarter), its segregated portfolio cell reinsurance segment (up 2.9 percent quarter-over-quarter), and its Lloyd’s Syndicates segment (up 15.3 percent quarter-over-quarter). The company’s specialty P&C segment saw gross premiums written decline 1.6 percent quarter-over-quarter.

Consolidated net premiums earned for Q3 increased 4.7 percent over the prior-year quarter with all of the company’s operating segments contributing to the increase, primarily driven by its specialty P&C segment due to the addition of a loss portfolio transfer resulting in $2.7 million of premium being written and fully earned in the quarter, as well as the pro rata effect of higher premiums written during the preceding twelve months.

ProAssurance’s consolidated current accident year net loss ratio for the third quarter of 2019 was 82.3 percent as compared to 82.1 percent in the year-ago period.

The company said a decline in its consolidated underwriting expense ratio to 28.7 percent as compared to 30 percent in the year-ago period was primarily due to a decrease in share-based compensation and other incentive-related compensation costs in its corporate segment and a decrease in operating expenses in its Lloyd’s Syndicates segment.

Net favourable prior accident year reserve development was $15.9 million in the third quarter of 2019, compared to $21.5 million in the prior-year quarter.

“While our perception of increasing claim severity in the broader healthcare professional liability industry has not changed from recent quarters, our reserves for prior accident years continue to develop favourably as current severity trends are somewhat more favourable than the severity assumptions we used to establish those initial reserves,” the company said.

ProAssurance’s consolidated net investment result was $22.4 million, a decline of $6.1 million compared to the year-ago quarter, primarily due to a $6.5 million quarter-over-quarter decline in earnings from our unconsolidated subsidiaries, driven by lower reported earnings from two limited partnership investments.

Net realized investment gains were $1.1 million compared to $12.4 million in Q3 2018.

“Once again, our workers’ compensation insurance and segregated portfolio cell reinsurance segments were substantial contributors to the bottom line, while operating in a marketplace that continues to be highly competitive,” said Ned Rand, the company’s president and CEO. Turning to the Specialty P&C segment, he said: “Our medical professional liability products, which make up the largest line of business in the segment, continue to build upon a strong book of business despite a loss environment that affects our current accident year loss picks and influences our analysis of reserves for prior year losses. These headwinds affected overall premiums in the segment, but we were able to implement renewal rate increases for another consecutive quarter with only a modest impact to retention, while adding new business at higher rates than in 2018.

“While we are pleased to report higher operating earnings for the third quarter of 2019 than for the previous two quarters, the increase is largely the effect of a tax benefit in the period. We continue to expect loss severity trends perceived in the broader healthcare professional liability marketplace to weigh on operating performance for the remainder of the year, and into 2020. Our view of these trends, and the intensely competitive property casualty landscape, demand caution as we strive to create long-term value for our customers and shareholders. This is not the time to aggressively seek market share and top line growth. We are willing to walk away from business where it makes sense to do so, rather than chase under-priced business into dangerous territory. Instead, we continue to focus on improving underwriting results and managing expenses, applying our deep expertise to strengthen our position as a market leader in the lines in which we specialize.”

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