PTVCA - Earnings call transcript Q3 2018 | Protective Insurance Corp

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Operator

Greetings and welcome to the Protective Insurance Corporation’s Third Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Han Huie of MWW. Please proceed.

Han Huie

Thank you. joining quarter morning XXXX for Insurance the all third Corporation conference you us for this Protective Thank call.

company’s hosting company’s it If copy the would are you at today’s everyone at the in at XXXX. of call access is release, accessed Securities to as to remind inform www.protectiveinsurance.com. of well. that a statements for management maybe with which release, made are not and time, this the online call, website deemed Private available forward-looking the press and Litigation that investor did release, conference within like a you you accompany Reform which not At maybe presentation the webcast press call website, along receive to the Act I me historical the live which during like meaning an certain earnings statements may we would this of

Corporation the the its forward-looking Protective filings press expectations Although that to the risks with in obtained. assumptions, based will assurances are expectations on and that from any are included be statements from SEC. actual detailed Factors are believes can no differ results with cause reasonable release in and Insurance it give could time-to-time expectations materially the reflected company’s

over I like him. go to call Corporation Please Jay to turn Nichols, introduce and Interim Now, the would Insurance CEO of Protective ahead.

Jay Nichols

our results and conference Thank the reporting everyone quarter joining call you, Han of thanks for to third for XXXX.

want the of employees the people are I Protective. Of thank to most the course,

to personally begin shareholders. of a has of to helpful have and path and our embrace will been to our performance During we answer delighted then me providing the our be helpful financial over overview by willingness I questions. those This update will past to comments, been of completion presentation profitability. I openness XX people days, all William turn and already work together will on the for our the XXXX. have Upon during third of an by to we performed quarter an the of

ended were is industry costs. continues Relating further required settle to it, increased September time run, commercial trend. results this issue the cases, the Our of and XX, months this accelerating Trend in time the length to the been exacerbating to disappointing. X XXXX for and behind trend litigation increasing run resulting we’ve hot loss and in in automobile to

During has segmented each the our of the past certain require and product, by channel in need for by rated in line. rate We cases, these XX of team XX XX of rate XX into our business distribution book then that class. sub-segments days, sub-segments in XX%. subsection excess a

to across are committed pursuing rate the book. that where required We

by as We and are factors more applying score as well though, driving other by safety geography a are granular basis rate losses on such class, experience. that as

While and premium point not this result will the market are a in unit growth, of at in this a accelerating trend. alone we the our impact seeking rate as

where As see while a ourselves disadvantaged necessary. we not competitively pursuing increases rate do result,

renewal periods worked historically has rate in at be than two them approach three changed. rather blending over applying have gradually We not in cautious or all will more This once. increases, been and

Additionally, automobile limits. commercial our higher profile we our toward shift seen have business limit in

trend will accounts faculty of work our with the I underwriting exploring and judgments. holding, both these to appear on be this more While discriminating taking achieve larger are more layers profiles, pricing our lower volatility to the exposure of and by limit access actions limits. we to where we emerging needed with shift believe litigation large volatility, to reduce reinsurance to while to rate being targeting appropriate

midpoints. our the reserves that above net of are are digits confident things, quarter reserve produces we actuarial that mid-single side and action On gross our in the brighter

aggregate annual for Under reinsurance our re-insurers. are potential the our treaty. our gross to losses deductible mitigated by point the this development ceded above Additionally, future attachment XX% adverse of treaty, is

have through a of XXXX treaty XXXX, million $X.X years the the point. cumulative For that of total attachment we fall incurred below losses

we’re for very close those the the treaty years For years, X we’re X and point attachment other above to of attaching.

not to the partners if quarter detail significant results. there some will While of now expect the with William? treaty us. details slides we to on website, support you our to additional do a development, adverse provide William this. expose regarding our our is third in X additional there related reinsurance have way, are Page

William Vens

Thank you, Jay.

As per third $X.X quarter. third loss of compares quarter the net which $X.XX to or $XX.X share, discussed in net our for release, $X.XX share press million per income our was million year’s or prior

the X to to compares the $XXX.X or the to year the million the per million XX.X% compared our XXXX, $X.X which $XXX.X first $X.XX Gross program and per share distribution loss net of increase of net share, X.X% written both $XXX.X premiums months for first months The for by in driven the prior for during written period. premiums growth XXXX Gross $X.XX continued For increased written the totaled commercial, retail current workers’ auto XXXX. and of million $XXX.X period. compared in of X products or quarter million XXXX during channels. million written was company’s quarter to to third income $X.X increased million compensation

compares XX.X% for underwriting the combined ratio loss XXX.X%. quarter $XX.X third combined of a the Our XXXX. for of operations This resulting quarter of ratio an in to produced third million, of

the premium in to time increase reserved both litigation combined of a accident treaties. coverages; a X XXXX, an additional a was ceding claim $XX.X strengthening year premium in for adjustment this our XXXX of reflects: $XX.X severity XXX.X% XXX.X%, in the to to prior to million environment result ratio million in to the as which strengthening the commercial provisions combined loss automobile increased periods a related related second, development as Jay and the ratio period. months The increase and variable more compares reserve For unfavorable reinsurance well due of ratio discussed claims. settle all historical as First, of during first XXXX an challenging combined

the the of past measured maintaining is Over of years, to portfolio. investment improved our income, in has to investment designed character income. generation increase investment realignment, company conservative while few continuing This the continued the result portfolio

fixed Third of The investment compared increased income quarter leading higher higher an increase portfolio. net quarter average net XXXX. resulting income positive reinvestment duration, cash in as reflects investment as third well to our from invested yields the XX.X% short to interest rates, in funds income increase for flow

months continue more modest. future in to We investment to increases to compared increased the For months investment XXXX, income X be the first X XXXX. do expect income of net of XX.X% first net

due continue increases assets resulting However, from expect to flows. higher further cash invested future expected to positive we

Over of has income portfolio the at X.X duration, level effective past duration including year, cash, an years. approximately relatively our fixed remained

Our portfolio rating, average has income of a high-quality cash, AA minus. including fixed weighted

the During million actions income short with the third reallocated is duration, the investments in our This approximately securities. quarter of fixed XXXX. first equity of of into quarters $XX XXXX, we consistent two

X stocks still first securities, reallocated as conservative lower were of of fixed of further equity were reinvested year, new short the sales million the $XX a the tax into predominantly duration, equity we more from XX%. the opportunistic income approximately high-quality, posture. portfolio these from to income benefited fixed short-duration, low shifting basis into rate Proceeds investments our During investment months These sales tax corporate and securities. company

impacted shorter of the continuing income leverage the over reducing yield ratio Favorable growth expense also Premium time. have expense contingent these favorably has contracts, company’s given In loss the reinsurance improve fixed income workers’ in end to increase of prior to ratio, ceding our at commission accretive impact base due accident were the prior yields to the expenses. sales expense expense increased which development from a the stated ratio curve. on from to effect compensation consistent to products with addition, favorable year our our year the is strategy

XXXX, of decrease of September XXXX shareholders dividends positive the ended Moving $XX.XX, operating at of share during third XXXX. per Book flow in positive months XXXX, quarter, flow the per financial X cash cash months payment to the position XX, for XX, after $X.XX totaling per was once was, our cash value first the share million September again, during XX, on $XX.X a share. resulting X operating September $X.XX of to

financial website release, As third this This and a we’d be time, quarter our delighted protectiveinsurance.com. our press any commentary. reminder, reviewing a at our results presentation answer on to statements brief quarterly questions. we concludes At posted our formal

Operator

from first Reiss Instructions] [Operator of Our Please question comes question. the Janney Montgomery from with your proceed line Brett Scott.

Brett Reiss

Mr. is that tort two. Thanks the going settle cases opportunity is the longer future? the timeframe and to bar the to Nichols, or continue ask morning. into why Good to question for taking

Jay Nichols

to time that that settle, and these we damages, are that would and be higher helpful. these reconstruction. they on judgments. had are we they taking They cases spending lot longer a money a more ball, seeking limits I it’s are are accident seeing these higher more are are trend higher If crystal because observing spending a pursuing What

So the a in getting time they – are going outcomes. are think where I on some there structural achieving and industry is issue just spending more lawyers good

from to to is I they there an so after cash think not coming that. the secondarily, case so And the are – continue spend there And flow more influence they so cash finance is willing on next and also constrained. flow are case time litigation world in, the

and factors, abate sure sorts but we how to that’s that contributing are we what some the those all seeing am So, soon. are but of two I trend anytime elements, it are expect it’s don’t they and we are attributing of

Brett Reiss

mention to When been look strategic be the Mr. press about – there everything right. with on was was also all was table subcommittee a Has formed Right, board committee out came that initiatives. the the Birchfield of release to going Mr. formed? into Birchfield, leaving, that

Jay Nichols

of consists independent the members has been and Shapiro committee board formed two That family. of two and it myself members

Brett Reiss

outside can Is – Is to in there share made interest us the of offers have there color on committee? anything been any Okay. you – parties? from terms with there

Jay Nichols

nothing that area. to have share in I

we So committee. established have the

alternatives and evaluating apply we to are how going business. they to We are the evaluate

Brett Reiss

for you Great. Thank questions. my answering

Jay Nichols

you. Thank

Operator

back the I the for the closing question-and-answer session. gentlemen, we like and remarks. have Jay end Nichols Ladies of would turn to And reached call to

Jay Nichols

Okay.

and rate, that and a to our look repeat Protective, much note, personal thank and forward here thanks our to we achieve are at you folks and support executing customers results on your ongoing my our to with the create want and stakeholders other your very for to expectations heartfelt received I volatility our managed consistent time. Just plan we producers, from the

Protective Insurance (PTVCA) 13 Nov 182018 Q3 Earnings call transcript