Medical professional liability (MPL) specialist insurer ProAssurance Corporation reported net income of $15.5 million, or $0.30 per diluted share, for the quarter ending June 30. The company also recorded operating income of $11.5 million, or $0.23 per diluted share, for the same period.
The company says that it accounted for nearly 90% of the specialty P&C segment’s gross written premiums in 2023. The ratio improved by 1.1 percentage points compared to the same period last year, driven primarily by a lower net loss ratio. This was attributed to a continued focus on price adequacy, cautious underwriting, and targeting segments within healthcare with profitable opportunities.
Renewal pricing for the specialty P&C segment increased by 9% in the second quarter, up from 7% in the first quarter of 2024. The segment reported a retention rate of 84%, though new business declined to $5.0 million as the company maintained a focus on pricing that supports profitability targets.
The current accident year net loss ratio improved by 1.4 percentage points over the previous year, reflecting the underwriting actions and pricing adjustments made over the past year. Net favorable prior accident year reserve development amounted to $6.2 million, positively impacting the net loss ratio by 3.3 percentage points.
The workers’ compensation insurance segment reported an improved combined ratio for the second quarter of 2024, down by 8 percentage points compared to the full-year 2023 ratio, according to ProAssurance.
However, the ratio was higher than last year’s second quarter due to rising medical costs per claim that began to emerge in the latter half of 2023. New business in this segment totaled $4.5 million, a decrease from $7.1 million in the same period last year, reflecting the company’s constrained underwriting appetite due to market conditions.
ProAssurance’s segregated portfolio cell reinsurance segment, which includes underwriting profit or loss and investment results net of US federal income taxes of SPCs, reported a profit of $167,000 for the quarter, down from $797,000 in the second quarter of 2023. This decline was primarily due to elevated reported loss activity, lower favorable prior accident year development, and an increase in the allowance for credit losses on a lower earned premium base.
The corporate segment, which includes investment results for the specialty P&C and workers’ compensation insurance segments, saw a 6.7% increase in earnings for the quarter. Net investment income benefited from the current interest rate environment, with an increase driven by higher average book yields on fixed maturity investments.
The company reinvested at an average new money rate of approximately 6%, exceeding the rate on maturing assets and the average book yield of 3.5%.
Equity in earnings of unconsolidated subsidiaries continued to produce strong returns in the quarter. ProAssurance noted that its tax credit partnership investments are nearing the end of their lifecycle, with amortization of partnership operating losses and associated tax benefits expected to be nominal going forward. However, the company benefited from a decrease in the estimate of its allocable share of partnership operating losses during the quarter.
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“Operating earnings for the second quarter reflected strong net investment income and an improved – although not yet satisfactory – net loss ratio in our specialty P&C segment. In this segment, which is largely made up of our medical professional liability line of business and represents more than 75% of total earned premium, renewal pricing increases of 9% are part of the cumulative +65% premium change we have implemented since 2018,” said CEO Ned Rand (pictured above).
Rand emphasized the company’s focus on disciplined underwriting and managing claims in a challenging loss environment, noting that ProAssurance continues to forgo renewal and new business opportunities that do not meet its rate adequacy expectations.
He also highlighted the company’s long history in the insurance markets, expressing confidence that these cyclical lines will respond to focused efforts, though current market conditions present challenges that necessitate a prudent approach to growth.
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