PRA - Earnings call transcript Q2 2019 | ProAssurance Corporation

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Operator

Good morning everyone. Welcome to ProAssurance's Conference Call to discuss the Company's Results for the Second Quarter of 2019. These results were reported in a news release issued on August 7, 2019. Included in that release were cautionary statements about the significant risks, uncertainties and other factors that are out of the company's control and could affect ProAssurance's business and alter expected results. Please, review those statements.

U.S. statements and call forward-looking explicitly the of make estimates with statements to meaning expectations and identifies the expects on dealing this projections, within Management these as Safe Federal Harbor Securities subject Laws to protection. and applicable

reference The content only X, not or and information XXXX update undertake law as is and as by any ProAssurance non-GAAP disclosed on or part obligation a ProAssurance required to of numbers to these also August company's counterparts. The except regulation, management this of call statements. accurate reconciliation will GAAP non-GAAP expressly provides during disclaims alter of team items recent forward-looking The these to release call. their today's expects news of

remind there I being call Now, turn please you prepared be Ken will over this the McEwen, McEwen, Mr. call of time go the recorded, conclusion Mr. ahead. after is for like remarks. questions and as to that a to I would

Ken McEwen

Ned you, our Nicole. Financial and Operations. our are Hendricks; call Shook, Officer, Casualty today Thank and On Compensation Boguski, of of President Property our Rand; Kevin Dana Lines; Specialty Chief Workers' Mike President CEO, President

will Ned, start off? please us you

Ned Rand

you, Thank Ken.

as contributions XX Chairman. by forward As first want ProAssurance begin as his Executive to earnings work thanking continuing to years his his to innumerable role Stan in CEO, this to during new of leadership. for look I call my is I him with

what each accomplish their brings Shook call. became insight I will the congratulate roles of experience like effective Kevin quarter our Boguski in forward our and new after look to for I'm first also Executive would to you the to table, and team, shortly we welcome on and together. and excited Leadership which Mike

secure Property to our I couple modest we additional appropriate can created And result will rate release by items, comparisons with some one-time see our Kevin provide these a positives our through earnings if do underwriting, otherwise our of sure this in to and that risk details. our were out our employees assume laid make would a shareholders. our good this only quarter. There get segment is the noise think and Behind of a was quarter. quarter-over-quarter exposure disciplined dedication in XX-Q. our and enough that retention. We detail a making Dana to are these business are increases can customers Specialty we only able tricky of that's presented. items across and write to premium the Casualty impact compromise This security To the

a that data. paid increasing these professional on Net I'll not of reserve in development market. again the risk focus we're as result the our of trends in seeing healthcare declined favorable severity emphasize trends liability broader our

roll caps the and jury continued take integrity ensure damage greater of the number our verdicts, we increasing and higher the However, of plaintiffs specific necessary sheet. awards, the demand state demands, of attorney large back to balance steps

those we one the The the companies likewise prepared increasing increase who all in risk of exemplifies ratio in can combined so achieve the loss prepared further carefully worst the driven which the environment for of and the which are for best. is have reality

continued Mike steps have necessary as we we such you ensure these, times long and built before in thrive Dana success. to hear challenging will taking the As withstand are term and ProAssurance indeed said, from as Kevin is to and our and

details Dana Dana? like into to the take the of I'd that, ask to us With quarter.

Dana Hendricks

decline Ned approach per development current accident due to accident a income specialty Consolidated $XX.X P&C previously was for subsidiaries, reflect Thanks our relating decrease share, that in or amount million segment to primarily higher of to a a This approximately mentioned. and quarter-over-quarter. years. unconsolidated equity year The net and cautious of environment diluted continue ratio Ned. totaled of quarter lower net favorable the results earnings $X.XX our prior to the loss loss a

of diluted gains news quarter. after-tax refer which with the the and net realized release effect, the non-GAAP or reconciliation investment operating $X.XX net per share excludes our was Please income, in consistent income. for to approximately operating first of income Non-GAAP effect a the $X.X quarter to million

premiums written our the from segment, renewal and in segment gross compensation will written Consolidated completed the an the Lloyd insurance increase later the address workers' regular introduction, effect policies. and the by of disciplined unchanged transfer year were write at assumed ago XXXX Ned cycle excluding business decreases our portfolio relatively XX-month quarter, offset the declined are the quarter of reinsurance to premium in of loss Premiums Kevin maintaining in segregated effect of appropriate sale which to we risk. underwriting to portfolio the stated his as were the standards, in the in call. dedicated These necessary second

business walk are deem from to We away to we willing underpriced. be

one of operation. the SPC our loss were sales million portfolio $XX combined The a ratio and segregated within affected ratio loss in by

not this impact Importantly or participant sale no our this has ultimately we loss are and in an earnings. owner on

transfer, the and accident of ratio was expense the to loss loss our Excluding this year our from net XX.X% current effects XX.X% loss consolidated portfolio and ratio relatively increased unchanged.

the year combined This in favorable of consolidated our current to quarter, the brings the of was development of policy to and the compared effect environment. us ratio period, quarter. loss quarter a a slight loss year-ago million point to reserve E&O down quarter, compared a a further the $XX.X Net the of million the consideration $XX first for the prior in excluding effect improvement portfolio X.X XXX.X% increase and transfer,

well by of of year million, quarter. average fixed increase to to $XX.X securities. an within the primarily investment was from investments. as net due in certain attributable yield the as for to portfolios driven and This net This is in ago two primarily offset maturity earnings short-term investment million of quarter our approximately limited our in million decline in our asset an lower unconsolidated maturity $X.X subsidiaries, $X.X consolidated by $XX.X income, somewhat Our higher investment decline partnership increase was earnings from a in compared million reported classes result our fixed investment

opportunities is balance customers liability sheets, or coverage higher This pricing their for needs, acquisitions. market in through seek as growth strong for creates We the firming. and mergers quality organically either companies with professional healthcare companies believe

strength strategy take management towards both balance we potential capital ensuring geared opportunities to of sheet of is Our poised appear. advantage our the and as that they are

Mike? call our the turn from Mike comments I'll Casualty his on results Now over Property Boguski for to Specialty segment. & the

Mike Boguski

his you Kevin President the Thank Officer. of We Eastern. future. to Also I'd by promotion leadership and as on Ned to promotion on start Executive his congratulating to look forward his like Dana. vision into supporting to Shook congratulations Chief all

factors of a transfer from segment led result, the loss quarter The the recorded operating quarter $XX booked In million, to Specialty comparison. loss $X.X P&C quarter important it's of understand addressing that loss second second significant on in the an million. quarter-over-quarter first the the portfolio XXXX impact the to that improvement had that of

written loss The million ratio. also the portfolio transfer accounted booked which earned quarter and $XX.X at XXXX, fully of was premium for second a of in XX% loss

the loss will effect more Property For numbers comparisons transfer. of the portfolio meaningful & my Casualty and ratios of exclude the Specialty for discussion

of trends. across pleased the and the the Starting We premium achieving during XX-month approximately of to quarter-over-quarter timing due the were by P&C premiums retention flat Gross of the quarter, with rate top X%. written encouraged solid policy in line were exclusive Specialty increase $X.X effect premiums million renewal increases segment the of while the essentially cycle. renewal

the securing retention Highlighting segment, of for two quarter. achieving renewal while this of rate XX%, X%. continued on during increases Premium the business portfolios was average important in an XX% premium retention successfully business increase reflecting underwriting was facilities XX% this while rate physician of the quarter discipline in the book

for business podiatric quarter. with in This quality Also our underwriting premium underwriting ability discipline our specialization, to we profit. risk chiropractic strategy obtain achieve cornerstones selection right were of with XX% this the and exposure a the particularly pleased the deep to the are long-term and high retention our price combined

improving We focus operational will and into future. driving competitive the to position continue our also efficiency on

XX.X% loss of operating trends consistent quarter. in increased written $X.X year in ratio percentage was by the was quarter the lower XXXX. drove ratio and loss business in reserve the the year accident increased the This ratio XX.X% favorable New second X.X in development. The driven second The as loss compared quarter increase accident XXXX. to to million loss year calendar a with the point quarter of

development. necessary to the emerging The severity pick less the was steps loss our This strength requires the maintain and take year to sheet. view favorable continue cautious ratio flat expense of higher in accident balance trends We of a quarter-over-quarter. resulting

life Finally, strong attractive half the very first we performance operation profit has the sciences pleased were in of of an with produced XXXX. Ken? underwriting our which

Ken McEwen

Workers' through Segregated Kevin segments? please and will Reinsurance you us Thank Portfolio you, Mike. Compensation Cell Insurance take

Kevin Shook

compensation by Workers' highly million segment The the of Ken. written to marketplace insurance for Compensation be quarter-over-quarter continues premiums our the gross you, quarter X.X% will. I operating evidenced as income million. Thank to declined $XX.X workers' which produced $X.X Insurance competitive

written business decreased year effect workers' million of to $X.X quarter the of Great the million transaction due from decrease which This ago. renewal $X.X of $XX.X Falls the to New compensation added second XXXX. a million in for part is traditional new rights business

our to decreased XX% continued our due commitment large part in retention to to Premium underwriting.

severity. a resulting more discussed and in economy both results in workers workforce strong we've past, entering increases in in and unemployment the frequency As the inexperienced low claims

the in keeping decrease resulted our XX% us prior said, closed of in This and X% improving during made application loss the has successful and closed in economic with is risk to trends. in That insurance XXXX patterns price of resulted XXXX. careful strategy consistent committed individual business assessment XX% with cycles its just and premium a the quarter through Eastern renewing changing quarter of and account times. during underwriting on disciplined strong closing model of claims claim that

on in reinsurance loss accident previously that was impact the our accident loss XX.X% favorable the effective to decreases we aggregate our $X.X the claim quarter. Insurance treaty of deductible The an during annual current of XXXX. added result a Xst, million renewal ratio in reserve offset rate recognized segment The impact year primarily Compensation to XXXX reflected trends net favorable the Workers' May by was of ratio increase mentioned development the for XXXX. As year

get into loss Dana touch I mentioned the Before to base I Segregated Reinsurance the the Portfolio on of want segment Cell earlier. results

a captive cell the ProAssurance. of unaffiliated errors One assumed segregated insurer with policy an liability from at and programs Eastern omissions portfolio Re

a met million. claim During quarter, that of limit was the under this loss filed lifetime the maximum $XX policy

interest and decreased operating or correspondingly in impact losses We have no in no cell portfolio results. This to our this increased loss cell. and expense ownership particular loss dividend resulting expenses segregated adjustment net participation the

of ratio. not resulting in the in expense However, the combined expense ratio calculation the dividend is the included higher

segment the actually to increased X.X the to E&O XX.X% of loss reserve percentage the X.X ratio year the accident points the impact Excluding ratio for points and percentage decreased XX.X%. combined by

For the includes figures more XX-Q please for the effect refer our quarter E&O to second adjusted filed of for reserve. reported Form details comparison of which a the

the primarily Reinsurance Gross operating to retention in were in in down Cell attributable the of and Portfolio the quarter. income segment response competition Segregated The $XXX,XXX resulting the marketplace. again decreases in $XX.X XX.X% reported premiums million from renewal from million our $XX.X for quarter, to written XXXX, both intense pricing,

manage cell, compensation solutions to for expenses. allows leveraging lines coverage healthcare single ways a market liability high and in product Alternative both segregated that unique offer both are portfolio expertise types. workers' professional We demand a policyholders seek monoline as controllable in

in to this year-to-date. Even XX%, the the but quarter competitive flat remained at XX% solid rate Retention retention in at market. decreased is XX%

those to business business. our segment, Reinsurance Workers' on this segment of of line Cell X%, within in trends Workers' Following with similar Compensation is in trends Segregated Compensation down Portfolio segment our loss our pricing Insurance

the claim in million favorable quarter XXXX We accident compared development which of to quarter reflected trends recognized Ken? million in XXXX, XXXX the $X XXXX, net than years. expected primarily the in of reserve better same and $X.X

Ken McEwen

update you your an will Lloyd's on before please Thanks comments. closing Kevin. Ned, give us

Ned Rand

Ken. Sure

As several Syndicates we of now, we participation an Lloyd's stated the view in in as for London investment. quarters which two our participate we

the a than we partnership short-term long-term by investment fluctuations. created such more with the As consider value any

million. and in This Dale percentage and $XX.X loss thesis X.X ratio today. on We new driven to underwriting business. respectively was second the affiliating Dale net while expense our and increases In original by that points, net valid exposure quarter, by both growth both written with X.X premiums pricing Partners increase remains the believe and ratio renewal almost doubled Underwriting declined of Duncan the

to The We be in encouraging. business putting rate was discuss months well will at is the Syndicate New particularly better for we reduce strong syndicate. account to Ken? business proposed of ways complete. renewal look that XXXX a the to are exposure our once growth plans do the the position continue XX-year over as to next together be will several increases its and

Ken McEwen

us Thank taking you, before comments questions. we Any Ned. begin closing for

Ned Rand

the want I building stability of is of commitment our you. short-term Thank to at cost and there found any strength words, and keep direction, just that quarter to If evidence wholeheartedly Ken. our become statements Yeah they will we right while to which reiterate one a us competitors to in the are more results. these be philosophy, in the one, an lost. value it's advantage this like that than growth one pointed are and the long-term believe in

of business we expect Combined industry the consistent I many strategy be best our and the employees industry at large. across with with subsidiaries, believe exceptional business in tumultuous and the casualty this property innovative our for of to book specialize, ProAssurance of which we Ken? Because we competitors what the in across our lines is the products services. most during period to a positioned of have excel operating

Ken McEwen

Thank that remarks. you, concludes Ned. our prepared Nicole

We questions. are ready for

Operator

Thank you.

begin will Our Instructions] now question-and-answer Peters Greg James. session. We first the go comes ahead. [Operator Please of Raymond question from

Greg Peters

I talked Specialty not the doing what specifically but and about Casualty to from Property in questions. book. and the underwriting have in market about perspective own you to perspective a you're your an morning. I reserving Good severity circle increased back wanted couple results

severity cautious development. posture about the To increases development favorable diminish you're if concerned substantially. that reconcile continuing like you're reserve it reserve would seems to to substantial trying fact me, also I'm that with report that in

Ned Rand

its Ned. Greg Yeah,

they time for of accident still that not been the to quarter-over-quarter than has favorable we kind continue but that do prior will over have see basis development continue reserving a those trends the our look worse reserves see our to over you on at time, are that's embedded loss level while you view years. in of and if amount So, adequate reduced as

why up have we level end to that's of favorable So, continuing a development.

in view loss those years, We And reserving trends better -- take a pessimistic have establish what worse past, pretty slightly number a of as analysis. trends conservative loss of over last the continue pretty what's do. than that reserves talked we have and to we be while been when embedded of kind view they than the will in

Greg Peters

Can was severity just when ago you it--? me the to it started change your posture quarters remind or was you with six

Ned Rand

where And in is own to quarters one the changes back six marketplace but was about I the do not where we yeah, fact want increases. these seeing to business go ago probably that book our have have to look to Greg, losses. I'll seen within our other back comment we it paid you were within of about or severity severity so said began really we talk in

going business to just being have the are or our organization by We observed these early across into on to develop in established claims increases not. it's and reserves professionals losses the still too tell case given paid to this whether tail as

Greg Peters

that sense XXXX develops the assessment? several over going. be probably fair target get want to your pattern of going or the would is XXXX that business to to see next how be quarters that year ultimate Is a a we'd So, accident where track to

Ned Rand

is. I and before takes It those have data. of data think XX really better begin more emerging kind we or that to years paid out any accident of claims months

assumption Greg. So, a good I think that's

Greg Peters

an been of in because just property business but wrong hurricane or previous I'm a Okay, it's the have Lloyd's year investment Lloyd's just a if -- been I I you're curious, maybe action the that maybe And and XXXX thanks. volatility -- market to know more guess exposures. years, of I the it I on seems you type has sense like the of the a that's where lot movement you, for for around than business has most have different perspective? have catastrophe a the potential in exposure for rate

Ned Rand

property loss lines, same think and lines would Greg, I especially for hold The rate market the increases property the in affected those have you're true most are within the marketplace the overall been us. significant Lloyd's that for largest right.

that of by you from remain bought on catastrophe exposure do still Syndicate basis, the grown say We book factor has not is that that exposure. reinsurance prior our the when a exposed business, in periods. For I dramatically that would to net our

in talked honest what quarters call year enough scenarios I lessen the fair ways we exposure to we be XXXX found on acceptable couple found and at. not the looked I we we a terms were have As at ago, the we the guess that not of looked to have us, to of account just would just economics that

in year account. I looking And prepared of are XXXX in at our a so year be as account XXXX to we remarks And participant now. full mentioned continue the of the

Greg Peters

congratulations you as script as first conference Well read your ever well your you've done stand it. on so… without call Got everyone before prepared

Ned Rand

Greg. Thanks,

Operator

go comes Our Please KBW. of next Campbell from question Christopher ahead.

Christopher Campbell

morning. good Yes,

specialty were slower XXX First bps momentum rate reducing of P&C seeing bit question is segment, the anything in on rates that's physicians' the a little Medmarc? happening sequentially you're kind there about

Mike Boguski

the keep it's mind podiatric as Mike. physicians' it's rate, One included business Chris, thing to on Yeah, in our well.

rate So and little in I But we've X.X% the XXXX in of a quarter kind quarter, consistent there a was throughout and X% business which the X%. on the book. XXXX it rates physician bit the actually to roughly kind consistently towards brought is down over seen about increases slight the believe three podiatric range of decrease of end on -- five were of point that to what

Ned Rand

in having as states give the quarter And second that comparisons on renewal now business some heavier mentioned you just have let impact. podiatric if renewals heavy quarter, a me a Mike at quarter-over-quarter based all given

it's timing. more So

than think I trends indicating.

Christopher Campbell

think you seeing you're call early adequacy rates or with kind the just then to get of Okay, that get overall, in still that uncertainty loss needs is to I on market to the rate of terms cost side? too do great. to to where And guess

Ned Rand

Yeah, I little it call. a think probably Chris, to is early

now six about everybody to quarters. more think so I or awake is we've talking been what for

have a begun continue, abated, drive headline more the of reinsurers a think that marketplace. will continue, have not the to longer is but going this pricing. point tipping bit large and the pain stage industry, we stage, the consistently is today. a feel challenge always We toward not little we're underwriting kind where onto verdicts will at The we a backwards to But see the and those makers of overshoot that's that just why on have encouraged we more market, that of fact most the of of the effect in on because know in kind the to it's price trickle paid I down has in the cycles certainly and be and the undershoot That's disciplined large it because price really the and verdict. try kind before looking given losses lot

Mike Boguski

Mike. is This

a seen I competitors there but I'd and facilities on rate think region weren't we've varies seeing it for to that on year renewal the books a add we message out by achieve and general physician business that. just books ago of that their state, looking their both

just that's us. of kind think an I So encouraging trend for

Christopher Campbell

And Why rate? then in more that much why book? need physicians so healthcare does is worse so the much

Ned Rand

commercial that that reasons And commercial the you've rate be would think expertise don't that because can that's are space. They got marketplace there to in have point to under to, more the accounts capital that particular so focused, I one can on two capital. I big it typically driven bring on. dollars necessarily rate a plays more they They price attracts compete business. individual premium and what

and cases juries a space, the enterprise physician. bricks-and-mortar. against is from social verdicts see against against easier lot are impersonal as it commercial easier where I to building I think it's to brick jury a defined going is other jury We the awarding big a big but facilities lot a up find against for think physicians than certainly this that's come well, is award with not it's a on to an but exclusive perspective, thing the

Christopher Campbell

of guess comp Great. Comp the workers' And of workers' those down seeing both frequency segment segment. you what I in terms are were then just the and why severity the SPC in switching segments? to comp, Workers' in more rates than

Kevin Shook

frequency a it. with business more Yeah. the segregated has This economically The portfolio been in business. book very Kevin. is The is consistent little more severity growth cell has and been sensitive. of There overall

there. in So and up inexperienced driven more book workers of has probably that's the of flat frequency been The business. think a I severity kind that bit little

a individually I But the result We the quarter indicative of would at wouldn't our the six-month focus of second X%, underwrite very really It's focus certainly look results on the much itself. every rate but book so second our of to rate on single look decline the and good keep policy account profitable year-to-date. desire I I more would accounts. quarter at is in than business.

Christopher Campbell

still workers' And it. you core comp happening your in seeing Is book. the are is there? is you What's Okay, frequency workers' comp -- or are in down? that got what it flat

Kevin Shook

Yeah.

fairly So seeing in This severity XXXX what to actually and kind little Cell and I we're to of XXXX, up year about a Segregated trends it said point. a with maybe down it just segment. Portfolio Reinsurance the flat bit, consistent was flat

Christopher Campbell

increases book? And got Okay, then the guys Lloyd's what are getting in you it. rate

Ned Rand

Chris, low greater. to it's Hey, specifics. I in probably book, the In mid the in property teens exposure, it's the single-digits. The and Ned. the casualty have don't certainly it's

Christopher Campbell

the third quarter. for all best answers, thanks Well, for great. Okay, of the luck

Kevin Shook

lot. a Thanks

Ned Rand

Thank you.

Operator

of from next Mark go Instructions] [Operator Please Our question Hughes ahead. comes SunTrust.

Michael Ramirez

does Hey. for Good down pricing you higher Thanks drop ratio your year Michael example, to This morning, equity? for can more guys. how in for before need taking guess you average? to loss Ramirez physician questions morning. in our be much our Mark. first, with go line is So like, I long-term accident consider this

Ned Rand

that. call think early Yeah. too Michael, I it's to

severity tell. losses, we to the until manifest we that seen losses where of believe sense in trends get We it's But heading, need. it's know. we getting not paid to have are and paid actually yet rate hard days a the We really are early

Mike Boguski

Yeah.

Mike. think point one other I it's --

time to -- come just earn increases, that in book. and out started takes If and through XXXX as you to an mind in-force in is XXXX the renewal rates over there keep

into be are will the to that So, – where going. future. that But correlate obviously, we've -- helpful and the then, got loss trends

Michael Ramirez

Okay. Thanks that. for

your perception on as there's the are of Second, meaningful professional segment? usual? liability acting loss it just in Or your the they business is competitors' trends what pretty inflation is medical in view So much like system?

Ned Rand

ago, few beginning probably when to we are a point. ago, competitors said trends We six to we this think caught we see react we're at us marketplace would I that say up in and calling has and severity minutes were really pretty were the I the alone quarters and early that the industry to

Michael Ramirez

earlier. Yes. Okay. we apologize from I if that missed

Ned Rand

No.

Michael Ramirez

Maybe here. one on workers' comp

So two are in shift? particularly slowdown or like are led is just which kind this in of sort there one that any Or a a written of to basically market competitors it being broader space, premiums? aggressive

Kevin Shook

mean, are players. shift. workers' the from leveraging seeing comp comp market I monoline liability. competition broader we're umbrella seeing players from losses in We're that general a commercial to competition It's offset and package auto and

competition we've built adequate It's Eastern all from sustainable insurance kind result to rate our direct about times. and regions And we've cycles that premium, economic all account in speaking heavy. and every got results on the exposure. just, for and But through of underwriting underwriting of it's decrease policies individually a changing sides our the I of for make in sure focus written again, coming and mean, remains one profit

So --

Michael Ramirez

for unconsolidated and been already And of what or But helpful. reasonable this discussed maybe then, subsidiaries? outlook your earnings if is apologize one once asked. That’s equity I has housekeeping, again

Ned Rand

of question. good kind volatile of It's portfolio. a It's our part a investment

to kind of of economic performance lag, On hard predict be sometimes number and an back might is a of the there so at those over indication it's of headed. quarter-over-quarter. quarter the look we So where things get a prior reporting and timing a you kind lag think can investments,

the But the as, over we our I since is think, in as of began some term investments, long over term. long it focus, volatile we've always, and these said investing is

our now, We It to are itself guidance getting personally, and superior would where I any the have sorry, of are have being volatility manifests going getting I than then am you that add volatility little because these give a past, right good is operating but returns stressed, that. earnings and can't on really more been but in investments. it

Michael Ramirez

Understood.

guys. Great, the questions. for Thanks Okay. all

Operator

This Mr. over like concludes session. McEwen conference to any Ken would the I remarks. to turn closing question-and-answer our back for

Ken McEwen

talk That's have. we'll you again for joining November. Thank all to you in we us and

Operator

you Thank now today's The for conference attending has presentation. concluded.

You disconnect. may now

ProAssurance (PRA) 9 Aug 192019 Q2 Earnings call transcript