PRA - Earnings call 3 2023 | ProAssurance Corporation

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Frank O'Neil

Good morning, everyone. We reported on third quarter results in a news release issued November 8, 2023, and on our quarterly report on Form 10-Q, which was also filed on November 8, 2023. Included in those documents 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 carefully.

This morning, our management team will discuss selected aspects of their quarterly results on this call, and investors should review the filing on Form 10-Q and accompanying press release for full and complete information.

U.S. statements and call forward-looking explicitly the of make estimates with statements to meaning expectations, and identify the expect on dealing this projections, within We these as safe federal harbor securities subject laws to protections. and applicable

of The disclosed call of is law forward-looking except only obligation these accurate expressly or and update the as regulation, November alter XXXX, not required to this disclaims undertake X, and call on as this of -- part content by information ProAssurance or statements. will any

Our also today's to a non-GAAP call. numbers reference The these provides counterparts. to of management release expects team items their GAAP company's during recent reconciliation non-GAAP news

are call Dana team members, the President me with Ross be will Rob and Francis, the Kevin Hendricks, Ned and Financial CEO; Chief Shook, Karen Murphy. Rand, joining executive On our Taubman leadership today Also Officer.

call turn Ned. Now the going over I'm to to

Edward Rand

insights to out our for Thank briefly And while you, back. appreciate really to you Frank. good try Thanks a have that. And I morning nice retirement quarter, forward of our role. are to to third current I fill and vacancy coming it's for appropriately. the market both the into we IR in resolved note market. everybody. In Dana realities reporting conditions the providing results and to evolving we respond of look

our themselves. book disappointing, to as they want while trends is business of the practice Compensation are development address loss. of primary our Workers' And historical I the for negative our $X.XX Unfavorable operating consistent upfront. present in recognizing reason the with loss actions

that it I number, headline results trends development think positive ahead. that resulted better reserve While the masked loss in point to also

extremely and strength strong. appreciation business competitive retaining and up team us were the retention higher, quarter-over-quarter service we our quality insureds, these of of and only insureds business earn market new and testament for an provide who Gross members is to to a and not helping dedication partners while signals written in distribution new our was the This effectiveness significantly the but premiums conditions. X% remained are

I current question be suppose are why conditions. growing given the would legitimate we market

on business profitability strategy lines we retain and can will Our both underwriting meet we and strive disciplined business profitably and Thus, and remain believe only grow pricing to individual we believe write in as our of as pricing, book goals. our long underwriting. we we in relies

in lines to trends well. higher-than-anticipated Inflationary the see as will market we we in and pricing. trends be loss trends return affect conditions seem which which Those operate, we we a write, P&C continue the severity Specialty more insurers active believe to continue affecting rational to to hasten

Within talk because handling, But it's our effect work we recognized. are it, trends seeing claims a others. coming begun it's than to believe about these And of on proactive universally writers should pricing inflationary comp work market. have comp, comp while we profound and being not a in work the some earlier have in

further years. to made been participation. decision decreasing to at our over forward And several We any look as the have past have discontinue XXXX, Lloyd's the we participation

will beginning also the we is which agreement third operations upon an which interest ownership addition, reporting associated later. approvals. In contingent entity segment sell quarter, entered certain Syndicate this unrelated party, to discuss in reorganize underwriting into This remaining an our us XXXX to with decision to our Dana and led

important level, P&C. highlight each want in I Now X items to high at looking segment at Specialty

defense service pricing we coverage speaks and about competitive in ] in standards. environment, our First, our meets ability business new commitment. volumes This of based our underwriting million [ and and on to write believe even $XX wrote our this we business that quality

our standards. XX%, led strong to was sign the underwriting result return our with retention a profitability Standard being and amplifying given strict good of goals of Physician segment prices again, those meet in our retention X% face. conditions pricing renewal at Overall, in we support renewed positive believe the the we by premium business, competitive quarter, market of XX% gains overall further A in in increase the

legacy trends continue severity to in We a increased handful monitor of jurisdictions. our

As we'll impact as all the cases we claims. of medical in can see values and for on judgments key this increased are drivers I here, mentioned, and large wary both complex social the settlements of severity settlement have and inflation and downstream

an of quarter-over-quarter. ratio in driven Total incentive expense onetime under expenses performance-related underwriting offset was accrued quarter year XX%, down just the earned segment decrease last million, the quarter, expenses the prior ratio The down $X current X as year the for by of in were by decrease underwriting points well a resulting levels expense to as amounts lower in compensation plans premium. in of in impact partially compared

our was XXXX Moving quarter $XX.X third level Compensation now Insurance to Workers' at gross written segment, the premium with essentially million.

new During quarter, million, business was retention quarter, year's the $X To our upside, premium last $X than higher $X.X XX%. by and premium third renewal quarter-over-quarter. audit million was the third million decreased approximately

However, renewal state pressure the period, loss rates prescribed continued driven rate by cost over were down adjustments. same from X%

While third rate believe Workers' quarter some which improvement Compensation the decrease, quarter -- encouragement. second rates was continue offers an over we to be change quarter pressured, the

of impacts mentioned, are I book. As trends we Comp seeing in inflationary Workers' the our

X what observed medical the compared to higher-than-anticipated quarter, cost we During during the of in loss average we trends per claim year. our first quarters observed as the third

this With cost in claim and experience by in XXXX injured While an workers, inflation wage we per continue claims claim approximately medical is total to for our both years. to cost XX% accident care of we medical health driven and the our expenses care frequency, advancements. representing higher XXXX increased average medical reductions attribute trend costs,

year $X these loss net we in our increased to primarily to and accident unfavorable loss development, accident full In XXXX year trends, reserve of response the of recorded XXXX ratio year. XX%, million

to we've get reported to treatment upfront strategies quickly. treatment the in result real past medical short-tailed time, back injuries productivity professionals workers the discussed claim care health appropriate injured Our in assessing compensable with that and being

were lower and premiums ratio P&C, underwriting prior expense the quarter-over-quarter. a down the continuation XX% The of expenses just earned As with underwriting market higher net conditions. competitive slightly was result than quarter as Specialty of

a impact operating points of results do which Portfolio to Cell Reinsurance approximately of cancellation XX underwriting strong our increase XX where income not in in related by $X Segregated that results cells take no Portfolio therefore, driven we participate just economic the to interest. quarter. Segregated net under program for profit underwriting results, due results, those an the operating our combined in Cell increased in we investment on segment a and contributed segment XXX.X%, Finally, Reinsurance tail points of with ratio The million the to had coverage the to and Frank?

Frank O'Neil

Thanks, Ned.

Let's from go consolidated results next and and sheet returns. to Dana? provide Dana highlights balance investment who will review the

Dana Shannon Hendricks

want start, to X the attention call At Frank. items. to Thanks, I

First, bit a me segment let the reorganization on Ned expand mentioned.

participation in Given as years XXXX, year. open runoff so as year participation next after essentially of earn quarter reporting to our our scheduled. is results decision reflected prior underwriting be our X be Remember, will in participate quarter second this activity XXXX until to our the will Syndicate out there lag, no longer for in to continues not

these our segment changes, As reorganized beginning we quarter, reporting. a this result of

syndicate as found detail in on the segment. can XX-Q. the of are results in investment We as current be segment from assets P&C our U.K. underwriting these changes results well the More our our tax segment in allocated now reporting Form Specialty income and Corporate

We more recognized results. the quarter, to the Workers' a impact during reporting our unit, net goodwill review no which goodwill potential million arise at related Compensation Secondly, frequently annually had had impact and operating to our $XX impairment for that to noncash impairment circumstances may however, our we least exist. Insurance indicate impairment largest if results, our

As our unit we and on during impairment margin approximately that the Workers' previous second goodwill then a not XX-Q, interim quarter Insurance our impaired goodwill reporting reported Compensation of performed X%. analysis in indicated assessment by was an we quarter,

Workers' taken recorded in actions full in Insurance updated segment in as outlined we And quarter remarks, current which we the of charge the goodwill. assessment performed accordingly, our goodwill inflationary in impairment indicated the quarter. trends current an to in response a Ned's Given Compensation

operating results. to moving Now

quarter the in impairment. share, the being loss million loss was per $X.X operating $X.XX between difference or goodwill and the operating almost to Our due the net with diluted entirely

our development business, current accident higher almost the to primarily points In due unfavorable ratio X year quarter, lines with his from results, of loss covered the in consolidated increased our remarks. of loss which Workers' of terms both a combined coupled core ratio underwriting year Compensation the ago of Ned in in business Insurance our drivers

a in again quarter the by performance-related mostly for in driven plans. The incentive amounts ratio compensation accrued reduction consolidated decreased expense

results fixed yields to investment due Our highlight higher which income increased drove to income rising rates, book interest net to million our as on XX% continue portfolio. a average investment $XX be

the X.X% or were book yields Our higher the the in basis new quarter average yield than purchase in XXX points quarter.

of were balances in order end, through approximately repurchase and down as stock. to since the we Our shareholders needs our provide X.X% have the rate to year reinvestment investment operating more for capital average of cash return to reduced

reflected almost Equity of to subsidiaries quarter quarter. of LLCs about tax from LPs typically over did deductible unconsolidated and the a in improvement gain our to are and LLCs, reported operating $X $XXX,XXX In loss losses, in exceed LPs small generated the us loss investments not leading and XXXX. which earnings total, a partnership X-quarter the million third small a yet earnings our $XX,XXX significant from a from for in the on the lag, of quarter,

third million reserves cost segment. Since of of $X third gains a shares share income including P&C year, million Specialty lower resuming last cost at with repurchased million loss May, was $X.X $XX late total X exchange million due in foreign repurchases in million, the at the the to X of million currency down $X shares a our to from have in euro-denominated rate quarter quarter. Other million $XX related decrease during we quarter, the of

repurchased end not the of since We the share authorization any remaining repurchase have is around today, million. as shares And our quarter. $XX of

quarter book at on impairment value. share per $XX.XX, down end no value year-end, tangible book had driven Our from the effect goodwill X% which by was

from $XX.XX our comprehensive $X.XX losses of as value which September portfolio, on book per unrealized share, Adjusted XX. maturity excludes loss, is fixed accumulated holding of other primarily

maturity. to We these hold temporary unrealized losses as continue ability the we to be to consider both intent to and have

to Our year-to-date Frank? share $X.XX share. book value adjusted contributed have repurchases per

Frank O'Neil

and questions. Thank for and you, that Ned. ready concludes remarks, Dana prepared our we're Bailey,

Operator

from comes Newsome today first [Operator Sandler. line question Piper the Instructions] of from Our Jon

Jon Paul Newsome

I year-over-year want of the year more and at for you both businesses. Specialty an this bit the the improvement about to at look for you you detail deteriorated core about business from a And are outlook look little basis. view on accident development, ask your the reserve Specialty in -- a results

you that worse could is think the the environment Maybe that assuming market, of that, suggest actually results sort core would actually why that you that your of own is contrast are your the better. reflects actually worse? most when environment So and better book not

Edward Rand

Yes. matter start good claim Paul, level of all I at it's a exists a by question, variability of hasn't just think saying of kind in the I it's just would just changed partly the and that the what is marketplace kind results. uncertainty in relativity. and of

so given take establishing And a exists cautious in we that level marketplace. uncertainty think approach we the very continue in very, the of reserves to

new we're rate I as are call the What are I it. to and trying levels competitors for down that we price gains always exceptions business, compete we think to they are what new of renew as compete drive on that but as there improved encouraged get seeing just And clearly we're would business by is to we part the for on loss-leading we -- to behavior business. aren't able this,

So is piece where coming improvement those the are from.

and lot the environment challenging still think side, uncertainty very, it's a there. On of out a very I loss

Jon Paul Newsome

Great.

want are things But of is, change I just of are There of Comp, it. reducing understand in discounts that the do that statutorily there factors to pricing Workers' side, there's are Comp also And Workers' the at my many other companies terms them created. obviously pricing. better and of rates, On sort can understanding materially. lots

years, several Comp. the your about going has between the profitable your we and not you're peers you're that maybe a been that you most the more whether going see charge talking could of But this price, results means Workers' exclude reserve there's quarter, there less Comp prospectively than rate underwriting disconnect that if business, to suggest adjustments could I there a for even there's talk conclusion worse you're I or that we better about and whether in Because to well. not with rates there's performance lower what Workers' Given last think future? plus inflation some of see the or on as just mean, obviously, on making lot

Edward Rand

Yes.

So chime to then as try well. there's question, Paul, to a lot unpack in in can and and that I'll Kevin answer

rates and very, But as we pricing is on certainly the think, these those an do, good between the So opposed rates. job to do very in difference promulgated yes, to I pricing there of pricing. impact based And promulgated the have the on a marketplace. rate a exposure pricing

And we the you'll rate industry, if you that for to have declines broader same you then think, certainly look work the over at by pretty compare for we've I the the the actually through of that, I'll of for time rate justify which reduced book and reduced frequency, industry managed seen, period business, that our effectively. see comp

promulgated what and as as been declines nearly significant significant as not would compounded indicate. the decline those a of declines not Our rate rate certainly broader have the as rates market, in rate

and that, decreased we see do combat So do claim frequency. we

balance claim heavily. a those a a challenge And -- large, rates. that frequency with of by lot market on forward. because going the trying downward pressures overshoot very, And that, to is those And market and going side the inflationary of rely but it's very to competitors so promulgated on decreased these be and really going to it is tough is

influenced by they because market. them are influence the We

-- inflationary lot faster. recognize faster we're the we and that is other a But of claims because trends I seeing close trends guess, these I think we thing would we add, that the

rest that's couple what And the so for final think industry of the the lot of a industry. years. is the least And within is claim resolution or a cost we of of at know true don't the rest the and final I a of

industry. And hold know handling claims we're open that quickly they more there and going on speak just the make they're inflation we're I add that than to to to. anything the that how so today, into build how is claims ultimately have Kevin, payments the I that resolving future can't to you'd that? they that in

Kevin Shook

industry changer. different I that's the an from seeing note starts we're think to do structure I trends underwriting the medical we a with when tiered think No, LCMs. going market right. have X-company perspective is that that I inflation a to recognize earlier, would be that

are in same, those regions the same, business segments book is Our makeup largely and the write we to of to add the just our same which the are comments. market Ned's

Operator

Securities. the line today Maxwell of from question next from Fritscher Truist The comes

Maxwell Fritscher

last just in today. Mark morning. Good add-on question. I'm an for Hughes calling of Kind to the

was are You medical kind quarter being It inflation that quarter. of wage flipped inflation mentioned seeing opposed last Workers' more driven Comp had as in by What there? inflation. to you that's sounds like this

Edward Rand

Yes.

think the what I inflation hard. That of mean inflation hit moderating across reflected a was do bit, think certainly, gone I in think inflation really away. saw wage probably has the rates doesn't little this quarter payment wage but fully I is we don't that's the the states. all medical kind

more continue -- there really medical. pressure it. was was I in of remarkable to upward piece be what be wage But will quarter the the on think So some the

Maxwell Fritscher

in first there second impact, had large XQ? big from that the quarter the in any quarter. relatively muted claims, a in then mentioned Were it impact for And you'd the large claims

Edward Rand

I a mean -- Yes, claims. the it's to a good higher first would we frequency continues say, question. continue off, of see industry large I

in on If what's kind do job you does, recent $XXX in claims a of iteration in the that for in chart had to they're of tracking showing I as new they've most anybody the going and analysis good a TransRe million. as excess trend where add they follow now think their the space,

out industry. still that's there in So the

certainly in first first just the been did nothing we in the than where like years was saw of quarter, we to we at impact quarter. than had was resolution the accident you, IBNR. we reserves but higher -- we thought of that's they for established And should claims some had quarter, levels have and where older limited amount a the remind what that In those claims, larger resolved, higher there some an

Operator

[Operator Scott. Janney from from of Montgomery Instructions] the question comes Our Farnam line Bob next

Robert Farnam

A more workers' the for comp questions. One is sector. few broad

on about the to is So Ned, the going probably downside. industry you're the miss talking that fact

what higher get I'm to to figure catch loss years bureaus just trying just go there feel update for continue a for rating more of loss I'm trend. their lag time all So to going kind to costs the for to the kind rates is something to up? down Is trying having out, of you're before states are X right, the that face? incorporate to

Edward Rand

Yes, a good really Bob. question, it's

their Which million. a a put when kind it's and And for by decreases have say, head states 'XX. of know you on I and for data $XX over would that picks I by are, XX of have utilizing, think is, out large, time rate a think, So large, on months and bit to those again, loss lag heavily, scratcher again, leaning from in pretty decline inflation standpoint. I There's of push to frequency declines. what's XX the an going been they're the they those these

will 'XX challenge. be So a

We with account and I on we're something on. 'XX. expect get midstream, unless add we see the to underwriting the before to -- seeking taking price commensurate to to risk anything wouldn't if Kevin, individual you would anything will continue focus believe changes that? But

Kevin Shook

to. what's the going which models think medical on. think that's I quarter anyone Ned. frequency-based, don't are . certainly on results side, I No, more But and driving The is totally to our be spot agree, immune is

Robert Farnam

-- to talked different write And tiers Workers' about to you Okay. with Kevin, have business having LCMs. be able the you multiple Comp

getting to of movement curious performance tiers? there been seeing in terms generate try you to of seeing kind kind higher rates? have to stronger in you're and So of classes what shift a kind of Just

Kevin Shook

Yes.

have We higher. upper price company get that's the highest tier priced companies. tier the any the maximum bunch to shifts debit. cannot We and frankly, moving And we business in at are of seeing a things quite

costs, challenge. been Ned said, a amount have down been as but has fair since of lot helpful, business Loss the the of in a been company obviously. company, mid the And and preferred having XXXX. in less incredibly higher, the business X-tier So then in it's structure a business

Robert Farnam

few just while different it Okay. if everywhere? Just of kind is or rather issue the more right. on line, are And seeing business, on figure a trying more inflation. particular pockets All injuries? to classes geographies, in you if than medical particularly a the a in you're still Are this types of showing bit wholesale maybe -- a are out there this that color of

Kevin Shook

describe higher trends pervasive. being would I as medical the So

So book we we our and pervasive points segments at looked We right market market all and is pervasive in There's our really are way kind states, care, book that education, the a entire the through bit the its of lot at that we business. looked write But down segments, across health a performed impacted which, one. that at regions, more middle. business, at write others. book Hospitality. lot of of looked obviously We segments, we market regions, making it book. are being to than now looked some business all inflation a across in was medical of of and the little better. of again, Restaurants

Robert Farnam

Right.

Okay. And look can vantage we point, -- inflation CPI medical whatnot. via our the and from in terms at

medical you're terms of the primary inflation actually So you of the seeing are what -- drivers? higher if the seeing version kind inflation. so, of is And than kind of are CPI what in

Kevin Shook

Yes.

-- quarter this is where Go I Ned. sorry, a I'm we -- would are So ahead.

Edward Rand

ahead, Kevin. Go Yes.

Kevin Shook

is medical wage would say I is and outpacing quarter margin. inflation the wide CPI a This pretty by inflation where

with an which workers' you outpacing should a indemnity workers' in carrier. And medical a when unfavorable in increase has going in to piece, payroll. that, compensation your perfect commensurate theory, So think But starts is the got to you've a premium. when result indemnity, about that's it be comp claim, world if

Edward Rand

of as part been up. the within that to that I online those And has Bob, tend catching your inflation, -- expensive. been life-changing, come then, X by it's very, now very And question, a of are driven really it's I new are combination things. medical therapies by other And costs they driven the life-saving and labor just then think think, medicine

system price pressure and the just then So expensive more well. as care services being the within health

Robert Farnam

All right.

Okay. And more just Ned. question, one

medical are your here. hog because your medical -- there of the Sorry something that of XX% to medical related the cost a industry? Is Or losses for side. higher call or insurance -- trends of to you XX% you is that is claim? face But so typical have typical in the portion faces your business -- more

Edward Rand

because of we I think thing, so faster, book skews shorter that and on component much is do probably Bob, a have a The one is that wage business. comparison tail resolved lower of that? what duration may of a spent That's actual add on more being clients be percent overall. about the Kevin, you to as medicine. cost than total would the the dollars basis

Kevin Shook

I higher of less ago XX% line say in with that. XX it XX, when the is industry, No, agree with or indemnity. is inverse was it the which I what would medical was years more

the driver. is medical So

And For but Medical number the ProAssurance, point, suggest industry, for is in around maybe the the industry. I also for of it's points XX%. the couple specific a Ned's quote that would a lower. percentage can't and to driver certainly

Operator

The Instructions] [Operator question comes of Securities. Matt the from from Carletti line today next JMP

Matthew Carletti

bit? medical a update takes -- anything for while that regard? smaller larger competitive message. get to and competitors kind mutual I while, of Or it or Ned, of I Is a forth, changing the of the us hoping maybe profit that the if competitors about market could you update a to on right now. mean liability state just kind the even landscape so some don't ] back have obviously, the you to I [ of shift them us just initiatives the but been think how moving, a in pricing professional talked the for you've Can business. was on of of just bit side focus kind has

Edward Rand

continue a good they to pricing of as nothing Rob in. the amounts excess say is capital a write then and leverage a Matt, are that The that would and mutual really ratio to think do be -- broad accounts individual and going to again, generalizations. we do that? some -- of use What one as changing. certainly question, that behavior add who that see willingness I those let we Good is I chime business, new But have see of and I the pretty at Yes. to on always their and Rob, high doesn't for do think would are this combined out motivations, -- but result. compete companies to I'll anything type competitors some from make go of peers we what way. to there's I hate you

Robert Francis

Just companies. putting a the market are little color. on certainly, The reinsurance rates The -- up. reinsurance is going more pressure

For don't that and as do some are carriers smaller you if those contracts. what organizations plan business tightening capital, much on of the maybe under can can't those will, have the reinsurance reinsurers do allowances, their

ratio. So but world are against public The where mutual of certainly as a in several right aggressive are acting combined some still are you average a larger increase more quite They've carriers, the most responsible competition. Those a that as decided we've the continue now changing goals. carriers. mid-level capitalized, pullback said, overall, to growing not to are to and their responsibly smaller seeking, be as relevancy the of a on at have returns company seen little is appropriate multistate. those account those bit growth appropriate still higher accounts willing, size Ned write and And highly carriers, we returns. mentioned, some Maybe returns seeking

pursuing that business. they're so And

core approach potential where more in are is focusing opportunistic-only standard we states and taking business very of on we our business on more type a believe that return. So there

Operator

There at time. are questions additional no this waiting

to like management any the back to remarks. for team over the I'd So closing pass call

Frank O'Neil

call. We Thank you, conference on with again forward speaking Bailey. quarter's And I you and our remarks. think our to concludes that next look

Operator

for concludes This call. all your Thank participation. you today's conference

may disconnect lines. your You now

ProAssurance (PRA) 9 Nov 232023 Q3 Earnings call transcript