ProAssurance(US:PRA)2022-08-13 19:25Financial Data and Key Metrics Changes - For Q2 2022, the company reported a net loss of $1.7 million or $0.03 per share, while operating income was $16.3 million or $0.30 per share, with an operating ROE of 5.3%, up about 3 points from Q1 [11][12] - Gross premiums written increased almost 13%, driven by an additional month of NORCAL premium and continued renewal pricing gains [13] - The consolidated combined ratio, excluding transaction-related costs, improved by 2.5 points from Q1 2022 but increased by 3 points compared to Q2 2021 [14] Business Line Data and Key Metrics Changes - The Specialty Property and Casualty segment saw gross written premium increase by 18% to $168 million, primarily due to the NORCAL acquisition and solid renewal price increases [26] - The Workers' Compensation Insurance segment reported a combined ratio of 99.8%, reflecting a decrease in the net loss ratio offset by an increase in the expense ratio [33] - The Lloyd's segment reported a profit in Q2 2022, with participation in Syndicate 1729 continuing at 5% [39] Market Data and Key Metrics Changes - The company noted that the current accident year net loss ratio for the Workers' Compensation segment decreased to 67% in 2022, reflecting a lower current accident year loss ratio [37] - The company recognized $19 million of favorable development in the quarter, primarily from the Specialty P&C segment [17] Company Strategy and Development Direction - The company is focused on integrating the NORCAL acquisition, with significant progress in underwriting and claims areas leading to improved results [7][8] - Management emphasized the importance of continued re-underwriting and prudent expense management across the Specialty P&C segment [25] - The company aims to drive down the expense ratio while improving loss ratios, particularly in the Specialty P&C business [56][58] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding inflation's impact on the business, noting that jury behavior and social inflation have a more significant influence on claim costs than general inflation [9][10] - The company remains optimistic about future earnings due to rising interest rates positively affecting net investment income [22][23] Other Important Information - The company recognized net investment losses of $24 million due to changes in the fair value of convertible securities and bond funds [20] - The company retains the first $2 million of exposure for health care professional liability business and reinsures above that [86] Q&A Session Summary Question: Can you elaborate on the impact of inflation and jury behavior on your business? - Management noted a disconnect between CPI and medical inflation, with jury behavior and social inflation having a more significant impact on claim costs [45][48] Question: What is the expected run rate for the expense ratio in the Specialty P&C segment? - Management indicated that the expense ratio is expected to normalize following the NORCAL acquisition, with minor fluctuations anticipated [50] Question: How do you see the long-term journey towards underwriting profit in the specialty commercial business? - Management acknowledged ongoing integration work and emphasized the need to drive down loss ratios through re-underwriting efforts [56][58] Question: What is the current status of the Segregated Portfolio Cell Reinsurance segment? - This segment reported a loss of $352,000 for the quarter, with underwriting income of $580,000 offset by unrealized investment losses [39] Question: Are there pressures to offer higher than $1 million limits for policies? - Management acknowledged that while there is some pressure for higher limits, it is not yet widespread, but it is expected to increase over time [84]