Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ProAssurance Corp (PRA, Financial) reported operating earnings of $0.23 per share, benefiting from a 16% increase in net investment income.
- The net loss ratio for the Specialty P&C segment improved both sequentially and year-over-year.
- Renewal premiums within the Medical Professional Liability (MPL) lines of business increased by over 65% cumulatively since 2018.
- ProAssurance Corp (PRA) is leveraging predictive analytics and innovation tools to improve risk selection and enhance pricing decisions.
- The company reported an $8 million gain from investments in limited partnerships and LLCs, contributing to strong returns.
Negative Points
- Net written premiums for the Specialty P&C segment were flat, with new business below last year at $5 million.
- The Workers' Compensation segment's combined ratio was 113.2%, reflecting higher current accident year net loss ratio and increased expense ratio.
- Gross written premiums for Workers' Compensation were down just over 3%, with new business below last year at $5 million.
- Expenses and expense ratios are higher than last year, driven by compensation-related costs and lower overall headcount.
- The company continues to face challenges in achieving underwriting profitability in both Medical Professional Liability and Workers' Compensation segments due to current market conditions.
Q & A Highlights
Q: Dana, can you expand on how you're viewing capital management at the moment, especially given the cautious approach to growing the business and the stock trading at a discount to book value?
A: Sure, Matt. We remain committed to capital sufficiency while being mindful of our AM Best rating and risk-based capital requirements. We're comfortable with our capital position but remain cautious due to market volatility. AM Best recently affirmed our ratings in late June, which supports our cautious approach.
Q: With the tax credits going away, does that put the effective tax rate back up to the statutory rate?
A: The tax credits associated with these investments have been diminishing over time, so they haven't had a dramatic impact on our effective tax rate. However, I will need to follow up with more specific details.
Q: Have you seen any new entrants in the Medical Professional Liability market, or is the competition from existing players?
A: No new entrants have made a significant impact. The competitive landscape has not changed substantially, and we are not seeing any new entrants making waves in our parts of the market.
Q: Are you seeing any changes in attorney representation rates in your book of business?
A: No, we are not seeing any material changes in attorney involvement.
Q: Can you explain why your Workers' Compensation results differ from your peers, particularly regarding the combined ratio and reserve development?
A: We close claims faster and more aggressively, resulting in smaller absolute reserves and less opportunity for favorable development. We also respond to trends in inflation and healthcare costs more quickly, which impacts our results.
Q: Did you give a specific rate number for Workers' Compensation for the quarter?
A: Yes, the rate was down 3% this quarter, compared to a 7% decline in the prior year quarter.
Q: Do you think lower interest rates might impact pricing, especially considering some mutuals have large investment portfolios?
A: Yes, lower interest rates could lead to a reaction in pricing. However, many mutual companies are overcapitalized, which may mute their response even in a downward interest rate environment.
Q: Any distinct pricing or competitive trends in the California market with the NORCAL acquisition?
A: The California market is similar to the broader picture. Changes to tort reform in California have had some impact, but it's not significant. The market is well-positioned to respond from a pricing perspective.
Q: Can you quantify the investments in insure tech, including CLARA Analytics, and the expected savings?
A: The upfront costs for insure tech investments have been minimal. While it's difficult to quantify the benefits, we expect significant improvements in medical provider scoring, severity predictions, and attorney involvement alerts. The goal is to grow the small book of business with the best loss ratio.
Q: With continuing rate declines in Workers' Compensation, do you expect accident year loss ratios to improve due to these investments?
A: It's challenging to predict, but we expect continued improvement. We are addressing medical care management and other headwinds, and our expectation is for ongoing progress.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
