PRA - Earnings call transcript Q2 2024 | ProAssurance Corporation

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Operator

Good morning, everyone. Welcome to ProAssurance's conference call to discuss the company's second quarter 2024 results. [Operator Instructions] Now I will turn the call over to Heather Wietzel to begin. Heather, please go ahead.

Heather Wietzel

Good morning, everyone. release, quarter and results news XX-Q on its second and yesterday, issued investor report presentation Form ProAssurance August X. documents other out those risks, business and and in were results. about ProAssurance's statements Included expected the could uncertainties affect and the factors of are alter that company's control cautionary significant review Please those statements.

and team for the review XX-Q news release management will of our should select morning, effects results investors the and complete information. full This discuss on this call, and

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

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

We during today's also call. non-GAAP items expect to reference

a counterparts. numbers release non-GAAP reconciliation news these recent company's provides The of GAAP their to

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

will over I call to Ned. Now the turn

Edward Rand

I'd call. rate per in like continue interest take by Thank you. investment as a net operating income higher benefiting to the advantage the environment. our we XX% to start And from everyone We second welcoming share, quarter to of $X.XX earnings reported of increase in

face to conditions Liability long-term our the remain achieve in of of actions particularly results, segment, the beginning includes that profitability Medical underwriting P&C reflect in market sustained challenging. line Our which our business are Specialty Professional to

level accident the the X-point favorable The both prior reserve the net first Compared and also loss ratio. X.X a improved improved releases year Looking quarter by current net ratio with higher loss to with sequentially last points, in Specialty loss contributing ratio improvement of year-over-year. the P&C. for year, year at

medical have professional the recognized and liability loss responded time, challenging to environment. some we For

While driving flat, eroading inflation reforms social fairly remains and tort are frequency rising severity.

many in write XXXX, outpace severity health trends have to in MPL of within believe on there are lines renewal business business our business. Since increases We over are the of where segments by rate this levels in our pricing within profitably. care cumulatively, standard premiums specialty intently opportunities X% achieving ahead with business for renewal space we increased focused XX% we even remain as and quarter's MPL we and XX% XX% by averaging for our driven that

that believe We our also continue opportunities we to meet in current do the expectation business of not rate forgo new accuracy environment. renewal and loss

was below business last New million. $X year at

claims a conditions. of managing As existing Specialty for address with and a our focused premiums solid pricing on written are In disciplined retention although underwriting were P&C XX%. flat, parallel remains we insurers result, actions, market Net to

moving steadily our our improved We focusing of pricing forward also for enhance and are innovation business to on decisions and use workflows of doing tools with ease partners. selection, improve distribution insured risk while

where analytics, with extensive there us markets are is helping those our are We subsectors on to leveraging in profitably. market and predictive data business opportunities write this which

part us more pleased We're in consider factors, to retention venue midsize these a be our improved a example, this help of severity of underwriting small effort. when For specialty tools the establishing appetite. including as accounts to seeing and variety profitable

Turning to our Workers' Compensation segment.

medical began of we claim impact higher the cost to that to trends address to working aggressively rising see in mid-XXXX. per loss related are We

focus below XXXX the claims premiums the appetite impact. environment full last still year down year Further, For in ratio ratio, year X in year's segment's obtain can We the quarter. loss new $X we current reflected is a our remains on about accident having points intentionally current written caution necessary quarter, second business rate until above positive operational below at our last gross and discipline underwriting X% the million. cautious with although believe was the

average have slightly claim below reflecting elevated half trend cost improved historical continues levels, We to claim frequency the second although per XXXX. from seen claim seen of the Reported in levels the still initially of prior growing impact higher year the influence no is this systems. for the integrated reserves medical average second in medical cost vertically change and quarter. per the There in of accident segment

data by to comp will productivity efficiency. enhance profitability, preparing that with experience. challenging a provider AI leading conditions underwriting we introduce the industry AI and Clara tools agreement market along into entered using are recently, and workers' extensive help Analytics, Most service claims address us analytics with and an with We to

workers, enhance us administrative capabilities help professionals. and burdens To for estimation reserve claims improve medical our the injured case outcomes our for lighten

cycle. We will escalating best-performing costs address helps various identify tool claims leveraging platform direct document including the the life medical to aspects medical our be platform early claims to to providers severity in their help their intelligence that of and high care

billing are policy XXXX. that we in and risk segment of integrated claims, this beginning systems in the capabilities leveraging new at the management These place put

of We fourth expect in XXXX. processes contributing quarter our Clara to to the be

to our conditions, history keeping workers' in us cyclical lines from goals like. remain achieve headwind these taught medical but our As that confident current efforts. will we We underwriting us as our focused businesses respond achieving last profitability both our quarter, has I in market compensation in quickly both our despite long said ultimately to and as professional would ability liability

continue our to improve for while turn We balance that be key term. so but then book discipline some our results. we will expense shrink the long maintaining short-term can know long-term will to of delivering positive to we focus insurance conditions a to compromise markets We choose our our achieve to fix growth not and protecting in sheet wait we the that over our to at

signs you'll further looks see I the results. into think Dana? our Dana more as progress of

Dana Shannon Hendricks

to to going deeper P&C before a Segment I'm aspects results into the investments. Specialty Compensation and Ned. bit overall of Thanks, dive Workers' and turning

on seeing rates improve. our loss we're written Specialty by essentially net the with stable segment's net P&C, loss making for overall noted retention pleased as premiums current We're ratio points improvement flat. Ned accident driven was MPL in year even were the ratio business. The of X As we're progress the

prior addition, review. million than better reserve as ratio actual from year's a ratio is which favorable development in-depth an actuarial offset year expense. more higher reflected offset expense tail In from second better to of commission quarter higher from emergence ratio ceding large was expected loss policy, expense net loss accident The a $X income our by partially last benefited

was higher in gross and offset compensation, X%. over EBUB premium. estimate, workers' This a compensation-related The one the well due largely current reflecting just point higher year premiums accident renewal the loss audit to higher losses written ratio For to combined XXX.X%, in down decreases ratio as partially due change by costs. our ratio retention segment's increase expense were net as was rate a

are year all that reduced Across expenses as compensation-related Full anticipated. are we than nonrecurring past. This about ratios costs we've in overall including our by were last lower the on talked running of expense had year $X headcount. our and higher corporate benefits about year, expenses segments, XXXX slightly by million higher

higher million continue quarter. an to results. rose take of rate Turning the Net environment. $X by was income This XX% we or investment excellent as to advantage investment

quality than average basis New average points with purchase with years. yield fixed in duration quarter X or higher of of the an book bonds X% XXX yields XX% our in remains over just The maturity X.X%. were investment-grade high portfolio

as our of investments reported to and to partnerships million manage LLCs, yield. our to limited and liabilities continue earnings unconsolidated an gain $X We our our to largely We duration portfolio of in asset subsidiaries. equity match generate optimize recorded that from and

due are to of included a lag, of in typically These one our investments produce benefit allocable a continuing our operating earnings report credit they decrease estimate Equity tax our on a and related partnership returns. strong and losses. quarter to share partnership $XXX,XXX to also

partnership life investments Overall, amortization nominal the our also are out associated of operating point end a wanted XXXX and with NORCAL. forward. their benefits which be of tax income tax losses was expected to credit gains associated to and to $X of our related the nearing investment partnership cycle, I determination net acquisition going and of outstanding income net operating difference that the consideration contingent million, primary are included final between

As carrying investment required complete, was NORCAL resulting resolve $X.X quarter we have million steps in the to were in members. In due. no losses. additional June, liability you for fully final certain liability to owed the potentially contingency a former the net amounts The through been may reduced recognized gains recall, consideration and and

our very long-term bullish remain expansion into brings ProAssurance that the market. particular, in California the NORCAL We to value on

hold the we Finally, adjusted losses as unrealized fixed metric it securities maturity Management maturity. was primarily intent until value embedded have about share book just the looks $XX. per holding our at portfolio, over to of includes ability this and both $X to per attributable related share

accrete value Xx GAAP those Should will insurers our as that To as value. over long will there bond me at to accretive. to back our book our bond and remain be with we reiterate unrealized portfolio the continue close, sheet yields Further, or leverage we book decline current to matures, investment losses believe upside let our is term. to protecting balance yields committed equity

will that signs and meet seeing pricing Ned? management. delivering be we intentional are that actions objectives, continue We capital are our on levels our to

Edward Rand

operating progress but earnings Thanks, be by sustained much we we there we goal done want profitability, to everyone that is just achieve of $X.XX Dana. making encouraged our per with I more are to to the X-month remind know of share. are

forward We expect quarters. look and progress to sharing continued in coming results

Heather Wietzel

We're prepared that Thank concludes our Ned. questions. remarks. for you, ready Operator,

Operator

from Our Instructions] Carletti Matt [Operator first question of JMP. comes

Matthew Carletti

very just on there obviously, about at kind cautious version I'm intentional the wanted can conditions think it. maybe good are growing you point I at, your I look want on your stock business, capital viewing management hoping capital you're guys I moment. being to market -- of is the at how to to and just point trading, on book last given value expand remaining Dana, guys Dana, you you whatever the of follow last up about discounts management, mean, very on

kind update And and you versus of of capital so opportunities? of on you kind other capital holding could uses buybacks how or on you're the view just if for us what

Dana Shannon Hendricks

being need as statutory awful Matt. capital A.M. for management. position. thinking capital with needs. Best we're is while rating, our we well us, our when about to risk-based as see Sure, capital consider liquidity lot our all and an comfortable mindful very We're capital that very remaining sufficiency. And the to at as There requirements we're the about committed

as marketplace so Best what considering to However, thinking continue we're be just market may be A.M. us to regulators conditions, cautious. the volatility and the in lead remain we really navigate current does which

ratings that about thinking we're I it. said, Best affirmed wrong you with A.M. our the in that's late recently has All how But leave want impression. don't to June.

Operator

from Our Sandler. Paul question Piper next comes Newsome of

Jon Paul Newsome

away. remodeling probably credit One one, couple A questions. going of the simple tax impact

rate tax going or away, to those back effective this percent tax. XX-ish state up higher something that the it's with tax useful the charter would historically, put are it it guidance think rate? I as with does taxes be helpful that that credits is Or effective any for the

Dana Shannon Hendricks

wouldn't follow associated credits Paul, tax the to I you may with these over been particular up on expect diminishing need time. our mean this have question. with I investments

I But dramatic had to don't do think specifically, answer you our some rate. they've a tax effective on to So impact additional need follow-up. I'd

Jon Paul Newsome

parts you or could good the last given sense give year the a moving -- little Maybe so? for is of the us rate expense run Okay. of ratio this a all the

Dana Shannon Hendricks

be I Paul. expenses, Yes. there thought, question might around a certainly,

in quarter-over-quarter really is listeners change And change, make driven sure compensation-related consolidated so wanted level our understood to what of had expenses by largely year-over-year costs. that that was that we I the

And part, a that to the and, plans driving is is, me due higher lesser the our degree, improvement heard slightly amounts increase in say And down employee adjustments. quarter. in performance you related incentive annual performance-related accrued opening in that remarks for merit metrics in to count

necessity we been, efforts as those that's top positions aspect that filling very a especially the open important have come continue to of will our vacancies. line We And our scrutinize of determine management to expense really decreases.

expenses rate to So of be we are I expenses. good as would continuing mindful it's as for that any run say

Edward Rand

That Q. the your effective there is rate more arrive our at Back tax rate. a you on probably we reconciliation details give will about how first question, in

Operator

Our from comes of Peters next Raymond question Gregory James.

Charles Peters

come questions Two marketplace? the players? environment. from coming on broader the is you just quick entrants quarter, macro In the new existing competitive any have Or into seen pressures

Edward Rand

space, Medical talking Professional you're Greg? say I'd the Liability about

Charles Peters

Yes, yes.

that. about Sorry

Edward Rand

marketplace, changed No, not no and landscape someone The they're we'll substantially. an not entrants. impact it Yes. the really then about at into now Every new all. much of hear has typically, competitive entering but making

Charles Peters

business. seem piercing I the up Yes, of your I'm pick of And same to just some news. of whether any curious it's

basis the the that's of So question.

Edward Rand

back parts go that. entrants the we're make market. sorry. -- our seeing any No, on No, of not we're really To Yes. waves not new any really in

Charles Peters

Any severity, an businesses battle a any companies that tail know, increase another just business, state-by-state internal dealing book sort know involvement It's lines but change? rates, thing, many I topical of attorney Okay. of representation et across quite writing any question. of And of then in the you ongoing become, business. longer in in I with seeing your or it's business? you cetera. decrease know as macro for change it's are liability

Edward Rand

Not No. changes there. material seeing any

Charles Peters

with Okay. And are workers' reserve that, explain you favorable to peers. higher combined the just less And I your development. comp different ratios the mean, of seem maybe results your finally, can reporting from It's going most and business. be just you're to by

your workers' we're what in what you in a could help comp us other seeing lot with and Maybe just of seeing the peers company. we're gap between bridge

Edward Rand

good seeing. I they be what seeing talk speak our doing. may Greg. they It's be and a we certainly, we're for what Yes. about or And can't peers question, can may what

I parts X think to there's your question.

reserve workers' and than the of compensation a marketplace. you'll book we more have short-tailed relatively claims and lot recall close faster aggressively On a development, the that

we of a that, are book the workers' small. the absolute hold as reserves compensation for that And pretty consequence

favorable for opportunity less there's the So claims. closed because development we've

flip potential sideways also lot for closed. a there's claims that a because lot is Now the less things less go the or to side are long of

the see in that inflation of maybe our faster our I respond little to do in also close we some because quickly, claims on a and think top perhaps peers health trends and and care, of faster more stand doing. are than claims we

approach being responding And influenced we're to how we're clients negative we the approaching care And counter trend what we cost that also, trying in the and from responding rate that, both so and by. markets is and of area. inflation states kind elevated is as as the stemming to we're in mentioned medical individual to of market

Operator

from Mark Our next comes Truist. question Hughes of

Mark Hughes

give Ned, for comp number any workers' great did specific quarter? for you the

Edward Rand

you Rate going to for that. change I'm Kevin, number? numbers. Price refer go to

I down X%, to think confirm. want it was Kevin but I

Kevin Shook

Yes.

So prior was down the down quarter year It rate in was X%. this quarter. X%

Mark Hughes

social good. say, you've observe recent issues XXXX, or development can in years, set discussed Very anything the reserve in stands kind the frequency active XXXX severity Anything aside around from that of on Okay. that broader you around inflation. the

Edward Rand

to that would in I years. Nothing Yes. point those

Mark Hughes

down, impact some think investment the pricing. on if to you rates Do Yes. therefore, coming portfolios. Do we think interest think if flow you and that interest about some there's think set might rates some help have pricing start underwriting going do your might of on cash big neutral the you lower have

Edward Rand

Mark. income, XXX. to I'd that ratio would levels there companies of are think are lot write Certainly, to be Yes, them the investment from of case, like that allowing high above well benefiting a is combined

certainly should And so pricing if those pressure a a reaction from we standpoint. returns, had it on result some downward in

of to be overcapitalized. mutual companies challenge these other is companies the a very lot these think I though tend

interest And in their environment. think, downward mutes response, a rate so that even I

Mark Hughes

Yes.

the Okay. and to California acquisition, about there? any competitive broader pricing NORCAL picture? with pretty then And the is market Or the anything similar trends it distinct

Edward Rand

similar to picture. changes reform a couple Pretty some ago. years had broader in in They the the of California

that beginning perspective. from not of is to well But respond that little I it's a think huge. I think positioned bit to to impact, we're see the market a but pricing

the about pretty riders and good When in it's generally California good behaviors. California I think are kind scale have the market, of all

don't in market and And that the do large, compete some of as so we the markets pricing California say I as much irrational see would in. we other we by

Operator

Farnam comes of question Janney. from Bob next Our

Robert Farnam

how workers' going to question model another trying to on I'm just figure forward. comp. out And Just

made you've Clara investments, insurtech including analytics. these So

kind going just kind you're to kind spent much what is time. way feel, of any over and can you investments I'm these quantify how there of So of you've to see going on -- savings how

Edward Rand

Ken, I'll please? let answer, you

Kevin Shook

Yes.

it's been quantify kind So insurtech costs it. minimal. I has to the on Bob, benefits upfront would say a the lot of of of difficult the

it's medical doctor, Clara I going significant. to severity attorney gets be you on alerts involvement. scores to the predictions, providers, right think

we'll couple a better next quarters, I for feel it. get over So the of think

On say there the advantage $XX using for going underwriting a to of smaller investment has Guidewire million ratio for loss there double business, accounts And that it's digits. XX,XXX versus under grow low we're is to significant predominantly incrementally it the over accounts be is where loss book that small best goal the business ratio.

implemented hard Clara using Guidewire. be as is. to what book it for it's But expect things of But being without to say the these to favorable extremely and to business me grow expect small exactly

Robert Farnam

to there. I expect definites Okay. didn't any you have

declines with of the in may improve going loss still broadly you continuing more from because comp, pressure of that it thinking rate the actually guess, is those the your because rate Or ratios I environment? here to under So are be investments?

Kevin Shook

be I X We're down doing a from with management headwinds a care up. think network from we're -- it's side vertical a perspective. to look, the schedules under integration. going Fee lot X points going There's lot of months PPO are medical on ago.

So it's improve. expectation my continue a answer difficult to but is question we'll to

So directly answering I realize question your because to the not it's I'm future. hard predict

Robert Farnam

quarters over All eye No, things just we'll Yes. are to I an no. guess next evolving. on see right. it to the how few keep

of if a All impact. jump the start get you curious on right. can Just kind

Operator

questions you. At this via the Thank stage, telephone further have we no lines.

any I'll back hand over Heather remarks. final closing So or to Wietzel for

Heather Wietzel

have we in forward on if thank like to some any or and the interactions call joining out to there months. of we'll on Yes. again investor And talking free Thank follow-up us the everyone, you, you questions Feel today. quarter's look of address. to are other next you'd for you, to coming reach course,

you. thank So

Operator

call. joining. this you for gentlemen, and concludes today's Thank Ladies

disconnect may lines. You your

ProAssurance (PRA) 9 Aug 242024 Q2 Earnings call transcript