ProAssurance shares fall with downgrade

Shares of ProAssurance Corp. slipped Tuesday after a Raymond James & Associates Inc. analyst cut his rating on the medical malpractice insurer's stock, citing the likelihood of more medical claims being made in coming months.

ProAssurance stock fell $3.61, or 7.8 percent, to $42.66 in afternoon trading.

Analyst David O. Lewis lowered his rating on the company to "Market Perform" from "Outperform." Lewis wrote that the number of medical claims being made with the insurer will likely start rising in coming months, after hitting a recent low.

A higher number of claims bodes poorly for the industry, since it typically boosts the amount insurers must pay out.

Frank O'Neil, a spokesman for ProAssurance, said the company disagrees with Lewis' interpretation that claims and losses are likely to start climbing again.

"Nobody knows why claims go down," O'Neil said.

Despite the lowered rating, Lewis sounded several positive notes about the insurer. ProAssurance has one of the strongest reserve positions in the industry and maintains a conservative and diversified investment portfolio, Lewis wrote.

O'Neil said that ProAssurance has always maintained a conservative cash position even when claims and losses are down.

"Other companies that are too aggressive could find themselves in trouble in the future," he said.

Meanwhile, Suntrust Robinson Humphrey analyst Mark Hughes maintained his "Buy" position on the company, based on the company's cash reserves.

Lewis expects the company to earn $4.40 per share in 2009 and $4.20 in 2010. On average, analysts polled by Thomson Reuters anticipate profit of $4.42 per share in 2009 and $4.51 per share the following year.