Earnings call transcript Q4 2022

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Operator

Good morning, all. I would like to welcome you to ProAssurance Q4 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers remarks we will conduct the question and answer session. [Operator Instructions] Thank you.

the to turn Gingerich. host, now will conference your over Jason I

please ahead, Sir, Jason. go

Jason Gingerich

that These Good the Brica. call fourth XXXX XX, a the you, everyone. on issued cautionary uncertainties February alter also report to XXXX. those Included company's ProAssurance's reported factors were filed and February results. documents risks, on news year-end significant XX-K, on release and and affect XX, Thank quarter morning, out annual statements. company's discuss statements was expected conference the the in which those about Welcome XXXX, could were in company's review results of to control are ProAssurance's Form other in results. and Please and business

call except and the and XX, is harbor call and projections, applicable any this this of or Management federal will obligation forward-looking not as protections. dealing the with of statements. to explicitly regulation, to content alter these expressly within these statements expects laws and accurate by undertake disclaims part expectations to meaning update on forward-looking of securities February safe The law as U.S. estimates or disclosed ProAssurance information statements XXXX, subject identifies make and as only required on

team remind complete press XX-K filing review aspects you to of call. Form and This for recorded non-GAAP and the ProAssurance numbers investors like of and their remarks. call selected non-GAAP The we for The to provides on would reference full morning, management reconciliation the today's of remind these will of also after counterparts. questions is be company's results should during there release discuss release and items our to that expects they a time information. conclusion recent a will news accompanying that GAAP being I our prepared

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

Ned?

Ned Rand

us today, Jason. conference Thank you, optimistic Good fourth our to call. morning, and about year to the ProAssurance. welcome quarter and continue be I for joining Thanks future at everyone. full

the year see trends year, team the reflecting our reunderwriting our ratio, the efforts of of improvement and as operating business. in to in the health workers' line care compensation our prompt improving For ratio industry members accident results loss full Loss current saw reaction across of steady we ratios are to business. lines in the continue and we the

We care business. in severity monitoring our that the higher on the than in be prior social customer some below parts health development loss differentiate competitive, opportunities we trends the country and historical competition medical some trends. ourselves pursuit by loss others. to The jurisdictions be costs to liability pressured mission claim of as challenged by the impact in to core current anticipated and these markets are have us year offering continue frequency protect professional inflation and is professional to continues of from see do outstanding Our are liability carefully service environment in our trends

navigating fixed core an in prices declining fears markets created income Our holdings in resulted recession rates admirable volatility did investment well. the interest in last as team higher markets as for job and year challenging broader

rates position, We've adjust the now markets. cash in which quickly short-term and been income to to interest fixed adding available our higher

higher floating investment higher the income. rate benefit holdings at increase and our they also rates addition, our from reset payments In coupon net as

in too assets meaningfully benefit income mature, recent in returns, we net they fixed our from expect higher and higher be investment than income As core to XXXX years.

fourth to our quarter the consolidated company shares provide full over the metrics turn to high-level results going to the now year. for she things Dana as for into insight and I'm the

Dana?

Dana Hendricks

everyone. morning, good and Ned, Thanks,

per with we billion of the we quarter, and grew $XX.X a diluted gross during reported the year addition $X.X or of fourth operating income $XXX for share. to full quarter $X.XX full premiums written of million income the of Consolidated reported the NORCAL's the million year, $X.XX million And For share. or for per year. premiums operating grew $X.X

core contributed of the helped gains $XX $XX and Our operating the competitive environment. in in million new to million market P&C quarter a retention renewal levels year, respectively. pricing segment premium and and the maintain segments in business Strong Specialty

increased to expense costs, X our the reflected Excluding development and about ratio, X the quarter of the higher touch accident full higher prior purchase the XXXX. on a which year in periods in combined accounting impact compared in same ratio I'll in shortly. year ratio The points about consolidated transaction-related primarily and lower and combined point fourth the quarter favorable

Benefiting and from almost ratio operating X the full in our impact higher costs. purchase accounting transaction-related excluding investment improved also of point year, income, the by

periods ratio That year, points net As our mentioned the our P&C in of due to as process of an expense change ULAE our equal to with on change offsetting previous in by and to loss our loss in for points compared prior a the are XXXX Specialty full impacted X resulted our allocating calls, net ratios and amounts for quarter consolidated about consolidated segment. in ratio. offsetting for decrease expense increase and X.X

loss portfolio segments. to standard loss physician trends ratios sale by full compensation purchase business in loss and point in a driven effects, in Excluding favorable X year accident frequency our was our quarter well by as This the current year. to net both the due reinsurance almost improved and improvement workers' as and initial favorable our change trends reduction ratio accounting in consolidated ULAE the some insurance segregated

due the increase some in offset higher-than-anticipated jurisdictions emerged largely our by book initial primarily our was HCPL to in severity loss that improvement current ratios trends loss to quarter. This during

respective prior in the this our the loss book prior and than largely year million full quarter in development reserve million severity accident quarter. periods, favorable to was While to in trends year we level response net HCPL and the of year, development the recognized lower due favorable $XX fourth $X respectively, of our

quarter about earned onetime Our The the quarter in the in in expense X costs points an impacts, change in our X.X higher year. ratio increased ratio primarily acquisition consolidated expense policy in and costs purchase excluding increase P&C and lower full the point reflected accounting ULAE, about the expenses premium in transaction-related and segment. Specialty

result Our $XXX consolidated $XX million million net full and the and quarter investment was year, fourth respectively. for

XXX points portfolio's We yield, reinvesting are than yield the book maturing investment in that increasing future bonds income quarters. approximately basis currently average higher

losses Interest gains Our a for the significant These Bond quarter, for as XXXX in comprehensive for we recognized holdings and in of declared, unrealized to million. year. gains of substantially Along the fair this of holding our market reported loss through to $XX $XXX our movements dividends impact investments our declined full after-tax income million decline portfolio LLCs losses year fixed from all fourth other leading quarter the have and of rate year. unrealized year. directly the value these unrealized and items had Overall, LPs holding account rallied on during the fixed earnings flow valuations on value lower in in than with equity. book after-tax XXXX. fourth both the prices in income been

the these temporary. in maturity, holds approach we majority to be value changes securities fair vast believe investment our of Since these to

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

the book at levels, and income. investment that current reinvestment continuing portfolio, provides to rates quarter opportunity remain yield each future Additionally, increase

With the back that, call to I will hand Jason.

Jason Gingerich

Dana. you, Thank

of Next, ahead, from Boguski, we made Specialty highlights Mike. Mike P&C hear would Go in like to some the the progress segment.

Mike Boguski

in and the Specialty year Jason. retention as and quarter improvement segment full The you, ratios growth, for premium by highlighted loss P&C segment. results Thank as accident across premium current the year top line pricing increases well are

expenses X.X from combined a the related NORCAL ratio full year unfavorable relatively as to Excluding accounting adjustments XXXX. the acquisition, purchase to percentage point was flat onetime impact compared and XXXX

acquisition We that the continue talent, delivered the growth, pleased value synergies diversification operating including business. regional leverage, organization, NORCAL of asset expense with our premium strategic invested to has to be and the

was increased XX% year Premium for by same year, top The million to to in XX% in an acquisition. primarily retention business. the XX% in and for compared both the XXXX. for the growth $XXX the year, driven $XXX written and million retention segment premium of improvements NORCAL full in quarter the by this representing in physician line result year, quarter driven XX% standard for the was our the the period Gross

premium of and delivered retention our and XX% medical XX% strong addition, business respectively. we units, in small In technology

was Our XX% our the retention the specialty to health care disciplined space. continue specialty we strategy as underwriting execute for in year

year. for care. quarter specialty X% were the and with the increases pricing quarter XX% We in the increase of were health year in X% for full price the and Renewal pleased

throughout firming business. to specialty and addition, the structure business the continue market and conditions secure terms, quarter the we to In XXXX. conditions appear be product to The specialty fourth start improved in

competitive lower severity the compared segment accident standard and New was ULAE. and higher-than-anticipated relatively conditions. for year, This quarter book $XX by within reflection was a for full for accounting of business in million for physician trends the driven points of ratio year of the The couple the change recognition and in frequency flat year the improved territories market to was loss the XXXX, quarter this percentage X.X offset and claim exclusive segment purchase in million $XX by loss of our states. a certain

and the $XX in prior in million $XX recognized of for the period $X XXXX. favorable We million million net year compared in accident and development $XX as year the to quarter comparable million

severity As standard claims social lesser less experienced severity as comments, of higher-than-anticipated is business outlined his XXXX. in development operating are QX jurisdictions resulting by physician in specialty favorable in trends. and, to pressured business, in our currently compared environment a inflation to our Ned select a and that opening extent, we by We in

and the quarter. reunderwriting for percentage increase subject lower items by broker in XX% premiums efforts was ULAE points to due prior and for commissions. to earned and volume premium ratio year, quarter was The ratio the the onetime expense excluding the The the expense various XX.X% driven change, higher primarily after our accounting, quarter increased a of purchase the X.X

business costs as expense retention strong premium noted broker related as as accident increased primarily line X.X year and points, ratios. summary, For in to improved technology initiatives segment increased and of in growth the In percentage well ratio the travel. subject top reflecting to higher year, quarter delivered the the loss volume commissions

position XXXX favorably These in success ahead a economic continued continue of of We in marketplace. of year be the to integration. headwinds pressures the with spite and for inflation and us social NORCAL competitive the the achievements ongoing pleased

year, With XX amazing to years. journey, this the retire agency want It and tremendous my your all as grateful our express and over my as to over colleagues past for Ned of to and support all relationships, our and and ProAssurance decision valued Directors well my the sincere I'm lead to X opportunity like appreciation that accomplished partners leadership my experiences an ProAssurance to the for respect we years. tenure. for extremely strategic been take business this opportunities past to Board I thank has at I to team together. am I'd executive and confidence Rand, organization support your and during to thanks the for the serve grateful

out to our Senior shout and Shook, special Kevin you Members. Eastern and A Team thank Executives

compensation the together, XX sale had experience building workers' portfolio and segregated we business. For of entrepreneurial years a specialty

and over my was Let's journey only their thank together. I also recently of in It and together, its you all not families XXth special and truly to a to the business anniversary. support together, start a but build [indiscernible] celebrated bottom we heart. from want We XXXX raised communities

heartfelt a Francis, I'd commitment your Senior P&C you strong team Especially we on NORCAL. and like a Executives, built the members with for to transaction years. we work, for conclude ProAssurance, navigated all to in over X past dedication acquisition executed the hard to foundation thank future and Together, successfully with integration of the our Rob the the and history largest and excellence of challenges,

we have your extremely I and accomplished for grateful support that and am valued proud together of tremendous all friendships.

back Jason, you. to

Jason Gingerich

all reinsurance do the the the us Thank Mike. you We have what segregated in points best with you to cell compensation the segments? you share Kevin, and workers' very for key summary. wish insurance from retirement. portfolio your

Kevin Shook

Compensation for expense continuation segment combined year an partially the The XXXX, quarter. ended year Insurance The Thank in December underwriting year-over-year, for ratio ratio full XXX.X% reflecting XXXX The you, produced loss combined by fourth excluding improved Jason. higher XXXX, XX.X% was including offset ratio. compensation full combined ratio, the increase ratio XX, of higher the corporate Workers' The Gross lower written a and related in XX.X%. and fee amortization in gross year XXXX reflects and asset was premium increased workers' X.X%, the quarter intangible marketplace. year-over-year and competitive very payroll premium the partially by X.X% of a audits management adjustments premiums by fourth offset written respectively.

X% pandemic renewal loss net to renewal year-over-year after of alternative workers the job new restrictions to rate of XX% Audit in in was in year pressures. reflected XX% XXXX. XXXX higher a work loss compared improved premium risks arrangement XXXX higher shortage, pandemic business pricing increased claim for ratio return quarter loss compared reserve easing and $XX reduction elevated activity restrictions labor year lower loss accident and in rebound training, year current with decreases the resulting ratio competitive and fatigue. payroll retention as to favorable XX% in and the of development and XXXX. lifting reflects the reflected loss XXXX accident both year in year XXXX. skilled ratio accident ratio XXXX The full The and premium employment current the the in employee million of an of indicative and environment The decrease a calendar lower

Net XXXX. $X XXXX $X for was compared in development million favorable of all million to

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

ratio expenses team general an higher from events business expense increased return full travel to due increase and with the normal XXXX, and business-related compensation in activities year. to this Our largely in member

agency briefly members, Moving income ended the XXXX, for than everything I'll portfolio workers' was for our unrealized and segment XXXX. reinsurance. reported together wrap business by investment $XXX,XXX thanking a cell underwriting offset team compensation losses. we in loss partners segregated included year of which by that This accomplished million up $X.X more of to

unbending Our our commitment values enthusiastically an our team demonstrate continue execute to members and model. to core service

opportunities shortage in and challenges, marketplace inflation. the We focusing well to growth economic a are off solid labor XXXX, and of qualified profitable as start as including strategies price our continuation on medical decreases,

it turn back Jason. I'll that, you, With to

Jason Gingerich

with you discussion Ned, please remarks Thank the segment? you, Lloyd's close Kevin. of would a the out

Ned Rand

a combined Thanks, Lloyd's small In a underwriting the Jason. total, with the segment profit The segment produced for XX.X%. the a year of for loss full produced small ratio year.

discussed impact full included in the for You of last XXXX. that will we losses recall in the are that by the and Hurricane year likely produced results storm quarter,

the gives hurricane we produced The the was Our the organization. $X reasons investment scale of us be prospects net across continued of look estimated seeing optimistic losses to under to share by the for XXXX our just about We million. and driver the be of forward. the can a to hard will achieve work create results going key results in efficiencies company. improvement income forward that

him we us. passion in X well that years. that stay will you missed a he wish will Mike I ProAssurance the our miss take what thank ProAssurance certain every for has touch, for and to last you support retirement. challenges want we the his moment how I to and everyone be the marketplace. at thank done leadership am responded also by all in to Mike's and will by presented to of over for of friendship, I while grateful. certainly all I has customers I'm day do And his each want

participation Thank your your I now you team the in to will and be And call. for answer happy questions. today's

Operator

have We from the Instructions] first Raymond Peters [Operator from question James. Greg

line is Your open. now

Unidentified Analyst

This on for Sid is Greg.

or curious or you when good could if approach reserves you recognizing to your Just about case in go news reserves? talk how and bad to your

Ned Rand

what science. in come up will as their quite in on our determine are professional And liability down discovery and and that And particular, that. the be they monitor support. claims a can in, portfolios lengthy. adjustments manage that more to happy the they claim, the talk make of on or Yes, medical It's claims facts to on professionals each

the and the adjust initial that with then reserve limited as come have that information an we So we facts will in. establish

allows professionals quarter really think And is use for to a our of heightened claim in I reacting we do that's course was as the consistent consistent the future. consistent in saw that over our see fourth business claims that time. process what's a couple important that ordinary actuaries projections What that an and we're what in we us. to what data and of the that we environment. jurisdictions make in data into And

Unidentified Analyst

And migrated us change and the more then how could years? some perspective you over that's give maybe if claims last the on open several in

Ned Rand

the As number Sid? claims, of open as far

Unidentified Analyst

correct. Yes, Yes.

Ned Rand

Yes. have the information I changed think don't stated. don't I front today. that quantum us know open that in we claims has as we've of of dramatically

is have sorry. X years of but in details We in jurisdictions, that a front seen as inventory compared and means frequency I'm across don't the of number the me, decline have to a continued I claim down, ago, specific

Operator

Hughes [Operator Mark Instructions] of Securities. now from next the Truist question We have

open. is line Your

Mark Hughes

some if a but you lot missed XXXX, business what's of curious commonalities that is XXXX, think environment. then? you and time I when of inflation and you signs this and of I emerged just between et a How around? of in of your I'm cetera. then compare you on lines has claims COVID, got And maybe the you that to of of happening but what versus can could social you I areas, the compare heightened early lot wonder passed earlier, and saw sort now about this more And from now kind broadly some concerned? just kind if your lay time it finger comments contrast think does where were identifying

Ned Rand

Yes.

what that system. before that legal 'XX, that I I'd kind And in continuation than 'XX. there in saw, and the the trends numbers, 'XX happened we I'm those pause a is around the 'XX, to And systems at year saw we 'XX continuing, don't go and the as the 'XX, the through their of we we happened of identified verdicts. 'XX I what reopened of 'XX, that quantum cases a of as of very maybe talking back pause. up seeing I'm think say kind in was seeing, that backlog I were shutdown 'XX step court sorry, topped COVID the in what some system ahead. number of is have cases. and way but and have we we which and 'XX, as work think, time of we're that in as the to COVID more far trends -- -- is and 'XX Mark, it's confident that large Mark exact to through about time court not hit, is What trend this are prior those saw 'XX those

Mark Hughes

Well, you I hear loss and love that. I'll ask pricing least up give keep is or to going ability improved this some being ask but with dynamic to question, on may I would But be it therefore, your extend comments trends? recognizing our an that competitors translated into to was cost you may at competitive this,

Ned Rand

Yes. All right.

some Let big communities to of reacting me I back What's that. right It's my tell. tensions to add continue I'll There's that short in there underlying [indiscernible] responding. going push frustration than workers against common it kind idea but we certainly this? way and anger that -- out think very and heroes, and see and right driving think for We But don't the very And period contributor that's theme, come juries this just some of a perhaps just always did, back hostilities more of I answer to would care which the health are became our COVID, as we playing hard and to anything. now. that had into of we time out a that a it.

you they those ours. absolutely, I occurred you in would for it seeing that XXXX, tell at very As verdicts because large that competitors, weren't look if you're

reinsurers by are where in companies being out well And dynamic this They're pricing that the well, so will marketplace. capitalized. that We're extremely absolutely seen felt against they as and lot we the being the a play well. as of in are by interesting compete

can believe, be And certainly that respond. But the back control catch rate can't them environment. control push drive respond, with that that we and We to there how to forward are the eventually. factors higher marketplace should in in some we of will all capital them, are business how this they to willing up continue underpricing will I pricing throw which at

Mark Hughes

what inflationary then there? is transferred dynamic? that is And Any that Yes. your separate into was point pressure a comp? over Or workers'

Ned Rand

that, and a let will you'd But of from will increased tailwind then well. work the Kevin we if Kevin. I'll that we kind don't answer way claims eventually that inflation the -- cost get I there's get anything its translate that. wages in into to certainly, as to premium know add

Kevin Shook

No, that's right. exactly

audit and reserves. are increase which in ultimately, So obviously, claim of we're our the And we've portion indemnity endorsements. the portion, commensurate in increase 'XX, the in medical seeing expecting we case then a the put into base premium

Mark Hughes

view some a recognize book? view bit, you environment expansion. very environment? line circumstances to and on in you you And your you top in still top want had to be I growth? how up of a an don't Is Yes. think costs want your erosion what's Or kind line see may hold the the just you share dynamic the but do under posture this where

Ned Rand

I'm that Yes, Mike to one. going let take

Mike Boguski

in Mark, care specialty was all, via of And think contributed we're to growth high-quality general us first year. that's liability in obviously we'll on really I acquisition each on been underwriting NORCAL the our future. for of P&C side, seeing a the Science it business organization. health positions And expansion. re-underwritten is is businesses, it's growth of top X%. care and small XX% focused What approach book to growth our health and the line health of our professional well this with the the care disciplined line liability whether our versus bottom professional businesses, market Life business in X% the

quarter and opportunities. if pricing Now take market we the those areas to advantage did firming some start our of the in we'll and changes 'XX, fourth in see specialty

Mark Hughes

We'll the Best And call. congratulations, you miss Mike. luck. on of

Mike Boguski

I that. Mark. you, appreciate Thank

Operator

questions no have [Operator Instructions] in further queue. the We

hand to to Jason. it back like I'd So

Jason Gingerich

us and today. Brica, you, you look to you that again. Thank joined speaking forward everyone with thank We to

Operator

call. does That conclude today's joining. for Thanks

day. You may and now lovely a lines, disconnect have your

ProAssurance (PRA) 28 Feb 232022 Q4 Earnings call transcript