- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, good morning and thank you for attending today ProAssurance Third Quarter 2022 Earnings call. My name is Amber and I will be your operator for today's call. [Operator Instructions] It was now my pleasure to hand the conference over to our host, Jason Gingerich, with ProAssurance. Jason, please proceed.

Jason Gingerich

Thank you, Amber. everyone. morning, Good conference XXXX ProAssurance's discuss company's the Welcome call quarter results. third to to were news report These November in on reported results a XXXX. and which also the November XX-Q, X, X, release in company's Form quarterly on was filed XXXX, on issued documents statements expected affect could in other and significant alter and about ProAssurance's risks, and those Included that company's are control the uncertainties results. factors out were cautionary of the business review those statements. Please estimates US projections, expectations on within to this laws call identifies protections. Management as and and harbor expects to these with explicitly make statements the dealing meaning federal subject and forward-looking statements safe of applicable the securities of content November call on only X, The XXXX. is this accurate disclaims any to alter required part these disclosed or as of obligation as law information except statements. ProAssurance by expressly will forward-looking regulation, update And and or not undertake The items of non-GAAP expects during to today's management reference ProAssurance team also call. to non-GAAP counterparts. The reconciliation of company's these release a recent their GAAP provides numbers news is a to being prepared like I'd there conclusion for remarks. after time will of remind the and recorded questions this you call be Compensation Shook, Dana of today, and On CEO; President Casualty and Specialty Mike Chief and of Financial Ned Officer; Lines; Kevin Rand, call we Boguski, Workers' Property have our President our Insurance Hendricks, Operations. our President us Ned, off, please? will you start

Ned Rand

opportunity Thank we're an progress discuss to good ProAssurance challenges the hear the of you, at our leaders and morning. and to on provide Jason, from and is we're quarter's you pleased The here team to results business making with addressing. line

continue year. have in the been for results that ProAssurance place quarter's reflect to trends several This throughout

Loss and line P&C, in ratios results Specialty and core are of healthcare reaction compensation. trends re-underwriting business. the improvement are workers' to prop seeing is in we ongoing compensation First our in the businesses, workers' both improving the industry as and

in and have a business, for we operational insurers shortly. us and across of Specialty of increases reputation focus years detail retention appealing all We of the Board coupled marketplace. Mike components a the our changed which make couple in see reliability choice you It's our policyholder the excellence, been customer P&C an believe of for and long-standing that teams, ProAssurance pleased a will to competitive our are with also for for

income higher have progression these and to the our excuse the me, investment steady produces. and markets effects play higher continues high a a just our effects of large rates And investment the in of quarters couple and positive you role interest see impact interest rates in have rates - will portfolio results. on that Finally, of our the of these level of will rates on the the economy - of

the continue quarter As shares results. over Dana? and see more for reinvested, she we'll our through of grow line. those Dana major you of and portfolio numbers turns and as has income highlights the prepared to is impact take to our that the drivers bottom results our

Dana Hendricks

and everyone. Ned, morning, good Thanks,

declines increase which environment. a posted the essentially earnings third an Strong operating year equity this a LPs investment result of written and the and retention rate of equity the a the a from reflected For loss as per loss quarter. in premiums insurance and an the the fund compensation and competitive $X.XX to decline gains Lloyd's LLCs in income premium the reduction XXXX through market in helped unchanged quarter the of Gross or continued with in P&C in Operating in quarter loss segment. share. Specialty early $X million both began maintain third quarter, were in in to third offsetting workers' markets that from fixed reported broad quarter, we and premium,

physician effect driven related ratio, incorporates ratio investment results prior ratio the X our the further quarter improved X.X-point percentage and accounting profitability business. of costs, purchase XXXX standard of impact point operating third which consolidated our results. provided from improvement the of improvement in underwriting combined the in year Excluding income to a Investment a transaction consolidated in by addition

our discussion impacted are by XXXX ULAE of segment. prior as expense in for loss recall and net due process will compared our to that last ratios You our allocating Specialty offsetting from to in quarter's periods amounts change P&C

For our the of points increase consolidated in resulted consolidated change current loss quarter, expense offsetting decrease an that in ratio. ratio and to net with X our equal a about

year in the accident X.X Workers' in frequency quarter We Excluding the third as our change recognized from favorable in points NORCAL by to of lower improvement XXXX. quarter development consolidated each ULAE, came improved of core with operating our The $X the in of million compared net of ratio this segment. claims current favorably. loss the contributing Standard the acquired business, business the and segments Physician especially Compensation Insurance majority in

flow us XX% third to year million expenses. ratio, change temporary. reinvest our continued in be of opportunity than through Our approximately these X changes at maturing DPAC other holds target with value maturity, for decline quarter, the our unrealized of in over These additional accounting NORCAL's $XX We in higher Fed the quarter we vast sixth yields, the interest costs development Since investment investment led to the on by conjunction comprehensive related period, transaction portfolio's investment portfolio. bond Rising holding and much onetime than rates an million an losses reduction premiums quarter to Net of value. the rates departure about the consolidated a level $XX the to move to ULAE and These points the rates. and basis amortization expense majority book earned the in fixed directly prior income XXXX in equity, fair book in decade. points increases the this welcome higher funds increasing excluding the income to also consecutive and loss we higher yields losses driven their securities post-acquisition quarters. grew rates future income the the rate most in from hikes approach past in unrealized was of to XXX after-tax that consider as in certain low in net interest of buildup gave interest the artificially prior average experienced compared of

As losses the over moved are naturally maturity closer holdings quarter, existing passing unrealized reduced each to time. with

Additionally, future that over turn each the back investment that, - quarter increase I'll opportunity reinvestment at income. remain provides rates continuing and levels With Jason. it book to to yield current portfolio investment

Jason Gingerich

Dana. Thanks,

Mike Casualty Specialty to we're for going commentary Mike? pivot Now Property segments. to on Boguski the and

Michael Boguski

continued Specialty expenses, retention. adjustment and loss segment Thank results the improvements P&C pricing Jason. quarter in highlighted and loss premium by are you, for increases

from accounting related the contribute percentage X.X third growth gross of NORCAL point resulted as the impact in acquisition Excluding combined ratio to topline acquisition, to quarter points the The percentage continues purchase a increased NORCAL written X.X to during improved which premium the compared XXXX. quarter.

Gross value retention to XX% decreased NORCAL over Physician compared competitive the in as in are transaction points Net of growth percentage efforts deliver earned of a during quarter organization. with the by with the XX% business. the X% retention strategic by Premium and the underwriting XX% to XXXX. driven to We past pleased retention Specialty was premium Standard $XXX the X% million premium entire segment XX%. was marketplace, Healthcare that for improved continues in to written an has the X increased the a the quarter year-to-date result year.

the We strong in in Physician aggressive small retention units and book XX% Standard see account our to continue competition Overall, in by the medical large delivered premium business of quarter increases space. driven respectively. segments renewal the X% technology X%. We pricing XX% and at the were

strategies. however, as compared related in one-time NORCAL accident development development amortization navigate We point million market prior same of premium benefits We as one purchase $X approximately quarter items favorable improved and reserves. both items the quarter labor the third ratio retention, Favorable as points current New compared to to various change, results higher The to was accounting for X accounting, the the point. related in a the premium social by in with business to quarterly point levels accident subject of ratio expense in included driven was in after year the XXXX. for percentage company the recognized the NORCAL from to the and of period the million net quarter and commissions operational these reserve challenges was mostly improvement XXXX. integration percentage as Physician pricing, adjustments earned current exclusive the claims quarter was excellence ratio $XX in ratios, approximately relatively summary, frequency the excluding the lower of we accounting increased year of quarter the $X of $X and In yearly million NORCAL's The in purchase beneficial percentage are years the volume approximately are improved loss of percentage book. X.X tight of consistent The Standard change, one-time efforts a inflation. same economic included the the expense continued XXXX. prior book. purchase book competitive ratio million broker The a the well and increase in higher positioning This and premium. the ULAE of expense on approximately believe X quarter, and loss XX.X%, period well of highlighted by lower from net impact

- this through challenging in confident manage are environment. Thank We our ability Jason? challenging you. to these

Jason Gingerich

bring you date us and on Compensation the Cell the will up Insurance Reinsurance Mike. to Thanks, Segregated segments? Kevin, Workers' Portfolio

Kevin Shook

combined thank driven partially asset I adjustments. was was The increase a quarter, expense intangible audits price compared ratio, book rate traditional were loss segment's and in down to XXX.X% decreases and and and XXXX Compensation business in XXXX, premium corporate by related of about ratio, business The excluding XXX.X% by decreased in the quarter Renewal large you. of offset X% written ratio an offset Insurance decreases, premium for in fee partially business Gross a Workers' third the reflecting XXXX the to XXXX lower our account, in renewal combined new management loss will, XX.X%. new third higher $XXX,XXX. by Jason, decreased amortization the lower ratio. payroll

the retention for the a a quarter, driven XX% to of by was Our large account competitor. movement premium

While of soft decrease compensation resulted maintaining market a remains underwriting top to this priority. standards prolonged this quarter, workers' in during account in revenue loss our the premium a cycle the

new in rebound of premium the quality partners secure $XXX,XXX working but with our accounts. traditional quarter-over-quarter, business XXXX territories in of earned, our an included asset. after Our strategies unbilled audit Audit in profitable restrictions continue opportunities focus retain indicative Audit premium in increased quarter of to premium $X.X distribution business lifting pandemic book and increase to payroll of valued the underwriting our million to the XXXX. our on third

higher calendar the impact audit on monitor loss current an continue as The XXXX accident in processed year fatigue. the with year restrictions activity to to inflation and shortage, arrangement the a and loss ratio EBO quarters. reflects easing in and work We risks assets ratio. activity workers in will future the ratio accident The the return year improvement skilled claim of training, labor reduction in job loss in decrease resulting wage of elevated alternative reflected pandemic employee the employment

the closing XX percentages in During representing and the of months claims nine of the operation XXXX, one the XX% last XXXX prior claim claims of years. first closed best

underwriting $XXX,XXX loss included for were travel Cell Our Segregated captive the to by with quarter. more Jason? member and of segment investment all third due during the full year compensation business renewal quarter, finish this $XXX,XXX the events income We quarter, return general related the increase that activities team business expense normal Portfolio renewed and during Reinsurance segment. of with losses. available which This increased that programs ratio offset for an expenses higher was a the than to largely I'll in reported from the

Jason Gingerich

Thank you, Kevin.

of from turn Now it I a review Ned will the for Lloyd's. Ned? back to results

Ned Rand

impact Lloyd's Jason. have line reported the loss do our exposure investment segment bottom Ian. we over Lloyd's property the coverage Approximately Therefore, to of XX% or time Hurricane the catastrophe The reduced Thanks, of small resulting as reinsurance. coverage the Lloyd written in losses participation. $XXX,XXX will from the reflect some quarter. a to is

resulting ProAssurance and million million. $X the is that fall from between incurred are share indications likely to of initial Our the losses hurricane $X

the Before organization a heartfelt we I to to commitment. your get thank all to of dedication you questions, and our members across want for offer team

efforts You each rise all work continue best and the to your bring day. challenges to to

achieve progress results significant our improvement. taking our to shareholders. confident that and will to are right deliver strive that continue seen and the have to remain customers we our for I always steps and we We mission in

Jason Gingerich

you, Thank and that Amber, our for remarks Ned. ready we concludes questions. prepared are

Operator

Thank you.

line Paul from question We Paul, Instructions] the will is Piper session. now your begin Sandler. comes now open. [Operator Newsome Our Q&A with first

Paul Newsome

companies calendar and Should Good bit had type reserve get bit color Is consider morning, reserve on little look the a which very development high as wanted of - that thanks for the has to of more other part to ask little been favorable call. it's development, really historically we the number kind such norm? a process different than right other we I people, year a and - that the basically at? was changed? of the must we

Ned Rand

question. quarter calendar fourth current deeper Hi, Paul. of that and the a reserves It's dive second a on as approach, number We do development is what quarters, talked careful A That's the we've And cautious we're a good think Ned. taking of we're reserves quarter. any but as as couple the and over of the we year well and establishment in of last kind recognizing. points.

dive the less deeper of that process become COVID patterns. a into consistent feeds think that that closing the important more process become the to because had data on the claim little as has has impact I

back I comments into years see And huge of that you're are in social magnitude. in the and both kind saw we an The what of in do the levels leads past, that of on eye a that we going unlikely the appropriate that's the if to of XX conservative I occur inflation levels data, COVID. on. prepared mentioned in Mike But believe have that's his we so some that basis of to quarter. of given of and given development we favorable levels consistency the your we certainly and challenges reserves marketplace, establishing I think think do think think lack point But the something see that we the we do very that's

the The claims liability longer. other also COVID which of happened particular but conclusion back that's slowed, have means kind our that the of resolution closing reserves, healthcare is reached. again is that you patterns thing in turning analysis, That professional impacts the to final reserve taking with

we up to used clarity it it expanded. to current had year pretty So four be court was opened in, three timeframe that back felt And have we headed, systems it, has call while that good where a years, accident what know that? to moving through. you'd court they are at in and at a there's probably backlog that be anything there worked to Mike, operating pace I the to were significant a systems similar don't if remains pre-COVID, add has on

Michael Boguski

comments. further no have I

Paul Newsome

at interest That's in great. towards rates for to volatile. income, returns. I turn investment regular more was good recent investment Obviously, the your higher hoping but the are earnings the unconsolidated subsidiaries entrants

normalized kind others then you I you, some to expect the guess the - talk we or of I sort of are on have policies? when investments, of of could currently for that return So should two for this investments back what their of how businesses of filter some the is investments? with we be is insurance Because maybe really, kind kinds if and loss kind your pricing ask - into of relatedly, out ROE pricing fourth if of quarter alternative there And tax product sort out? what - of have wondering type question I about questions I'm we those

Ned Rand

to want you first take the I will and Dana? of the then that may second part part, be Do take

Dana Hendricks

great. be for morning, thanks the That'd question. Yes. and Good Paul,

and investments asking loss just LLCs the roughly We in - invested a little a those insight about. $X.X had million little LPs that more LPs on little and those background, assets in a LLCs. So you're on

equity fall the into and So credits earnings putting - also amortization I'm tax credit that line. tax aside the

those statements in a quarter is that one reminder, we saw the quarter reflection second in report therefore the lag market changes. financial a do third to a as our of quarter So, loss on us and

a in this the really which we're lesser the the earnings. estate quarter aware drivers While loss, quarter. markets sector, a second following our category the in were in fare did equity those the to Real to see software in translated hit negative which degree of Also majority second investments to to credit. marks quarter, quarter, pretty did I was tend they FinTech took third the in - generally are all a experiencing private the biggest big the that but well think and

that's So a a backdrop. bit of

Paul, that about the long that term, over say, thing investments particular have is really other is class I The this well. would served of they us

and back quarter second investments. the look the The over - and went we in XXXX. this class like might which particular second back because I last of last actually, Over you associated quarter knowing this last with only in I interested thought years I thing went five looked the of is a loss someone realized be is and

investment the or And well. look give do in XXX over question. And I years, I this last that's the see long term, first through be back your responsive yields hope X% us So average. we on say to certainly - basis served expect of helpful really it points. to and when the served classes five ballpark take I that

Ned Rand

second algorithms the for perspective that of they on look loss the us to policy. At built-in the kind that pricing ratio. the rate kind your is of translates that Paul, end on targeted of question, a from the way we risk-free the a based a of kind cash that under day expected flows have a And at work

kind that so Recognizing of so that's mechanism that pricing and And XX% periods ROE probably underperform market you long will achieve periods. you'll that works. target we that in a on conditions, And the that's depending over some that's the so - the to way historically that use. been and pricing in some within XX% term

as that certainly ROE As above for rates XX-year target XXX ROE is ProAssurance we an target at points up. up treasuries, move moving an interest your organization, basis

portfolio, points earnings think equity, comments about about a to one Dana after-tax our of made of means to that XXX every four the investments when investment an portfolio the forward. basis you rate points we of it's basis about move as driver on the that the gains ROE an approximately and XXX which basis importantly be you think leverage I think power leverage, for to of the some make that'll our important in we gain of you

Dana Hendricks

Yes, these then he over what we specifically sense quarter. insights as us, on Paul, expect And mid-November. you give reports to a about, thereafter, reporting next six this as of Paul receiving back in can have from course I'd circle will something asked investments that, the will moment. really begin obviously, able And in weeks I'd not but the be to into begin they we at it's of like

Paul Newsome

right. Thank the All Always help. appreciate you.

Ned Rand

Thanks, Paul.

Operator

Thank you. Instructions] additional There queue, in any conference questions back pass questions remarks. further There are or currently in so will are to [Operator no no Jason I closing further queue. for currently the over

Jason Gingerich

And you, that forward today. We to XXXX. you Amber. joined in to Thank thank everyone you with us again look speaking

Operator

you Thank today's concludes quarter This call. XXXX third your participation. for ProAssurance earnings

line. now may You disconnect your

ProAssurance (PRA) 12 Nov 222022 Q3 Earnings call transcript