Credit rating agency A.M. Best has reiterated the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of aa- for the members of the ProAssurance Corporation PRA. Additionally, the agency affirmed the FSR of A- (Excellent) and the Long-Term ICR of a- for PACO Assurance Company, Inc. (PACO) along with confirming the FSR of A (Excellent) and the Long-Term ICRs of a+ for the members of the Eastern Alliance Insurance Group (EAIG). These are indirect subsidiaries of the parent company.
Moreover, the rating agency has downgraded the Long-Term ICR from a+ to a and reiterated the FSR of A (Excellent) for Eastern Re Ltd., S.P.C. The outlook of the ratings is stable.
The agency also undertook other actions such as affirming the Long-Term ICR of a- of PRA and the Long-Term Issue Credit Rating (Long-Term IR) of a- on the companys $250 million 5.30% 10-year senior unsecured notes due 2023. It has also kept intact the indicative Long-Term IRs under the shelf registration of a- on the senior unsecured debt, bbb+ on the senior subordinated debt and bbb on the preferred stock. Outlook of these ratings is stable.
This rating acknowledges the parent companys solid balance sheet, along with its significant operational performance, impressive business profile and enterprise risk management.
Its risk-adjusted capitalization is at the strongest level as measured by Bests Capital Adequacy Ratio apart from its solid reserves and high-quality investments. The ratings also reflect the companys market position as one of the top medical professional liability insurers in the United States and its diversification across various disciplines, demographic areas, etc. Additionally, the ratings attest the quality of the companys enterprise risk management.
Moreover, PACOs and EAIGs ratings highlight balance sheet positions, business profiles, operating excellence and the right enterprise risk management.
EAIGs balance sheet position is recognized to be strongest, supported by its risk-adjusted capitalization.
The rating downgrade of Eastern Re mirrors a change in the agencys assessment of its business profile mainly due to its run-off position and bleak business prospects.
The parent company's financial leverage is conservative and it possesses a strong interest coverage. It also holds cash and short-term investments outside the insurance operating companies that can be used without regulatory approval. Surplus growth at most of ProAssurances rating units has been restricted over the last five years due to payment of significant dividends toward the parent company. The amount has been later used in making dividend payouts and share buybacks.
Shares of this Zacks Rank #2 (Buy) have lost 10.5% in a years time versus its industrys rally of 16.4%.
Other Key Picks
Investors interested in the insurance industry might also take a look at other top-ranked stocks like The Progressive Corporation PGR, Alleghany Corporation Y and The Navigators Group, Inc. NAVG, each sporting a Zacks Rank #1 (Strong Buy).
Progressive provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company managed to pull off an average trailing four-quarter positive surprise of 9.19%. You can seethe complete list of todays Zacks #1 Rank stocks here.