ProAssurance Corporation’s (PRA) fourth quarter operating earnings of $2.42 per share were substantially ahead of the Zacks Consensus Estimate of $1.29. This also compares favorably with the earnings of $2.36 in the prior-year quarter.

Earnings for the quarter were benefited by a 34.8% year-over-year growth in revenues, primarily due to recent acquisitions. However, the better-than-expected top-line was partly offset by a 141.0% increase in total expenses.

Net income in the quarter was $84.6 million or $2.58 per share, compared to $76.3 million or $2.26 in the prior-year quarter.

Gross written premiums for the quarter increased 22.8% year-over-year to $119.2 million. ProAssurance’s retention of its existing business in its historical medical liability book increased to 89% in 2009 from 88% in 2008. The PICA Group’s (PICA) retention rate for its medical professional liability business remained steady at 93% in 2009.

Net investment income for the quarter increased 5.4% year-over-year to $38.1 million. ProAssurance’s overall investment result for 2009, excluding realized gains and losses, was higher by $2.0 million, reflecting improved results from its investment in unconsolidated subsidiaries.

ProAssurance wrote $28 million of new premium in 2009, which was not attributable to acquisitions. Acquisitions accounted for a total of $95 million of new business, led by The PICA Group, which contributed $77 million of new premium after it became part of ProAssurance.

ProAssurance’s net loss ratio for the reported quarter came in at 18.9%, compared to a negative 1.0% in the prior-year quarter. Expense ratio during the quarter was 23.3%, up from 22.2% in the prior-year quarter. Combined ratio significantly deteriorated to 42.2% from 21.2% in the prior-year quarter.

Return on equity (ROE) deteriorated to 20.2% from 22.1% in the prior-year quarter. Book value increased to $52.59 per share at the end of Dec 31, 2009, compared to $42.69 at the end of Dec 31, 2008.

There are inherent threats associated with the medical professional liability insurance sector as a whole, which relate to 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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