ProAssurance(PRA) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net loss of $18.1 million or a loss of $0.34 per share for Q2 2020, with an operating loss of $32.4 million or $0.60 per share [19] - The consolidated current accident year net loss ratio was 110%, up 21.8 percentage points quarter-over-quarter, primarily due to unusual items [24] - Consolidated net realized investment gains were $20 million in Q2, driven by a recovery in fair value of approximately 40% since Q1 [22] Business Line Data and Key Metrics Changes - The Specialty Property & Casualty segment recorded a loss of $56.6 million, primarily due to a tail policy for a large national healthcare account, resulting in a $45.7 million net underwriting loss [29] - Gross premiums written in the Specialty Property & Casualty segment decreased by 16.3% quarter-over-quarter to $107.1 million [30] - The Workers' Compensation Insurance segment produced operating income of $1 million with a combined ratio of 98.7% for Q2 2020 [50] Market Data and Key Metrics Changes - The company processed approximately $3.7 million of premium reductions and $5.3 million of premium deferrals during the quarter due to the pandemic [45] - The Workers' Compensation segment experienced a 39% decrease in reported claim frequency during the pandemic [53] - The Lloyd's Syndicates reported approximately $1.5 million related to the virus in Q2, with an estimated additional $1.4 million expected in Q3 [70] Company Strategy and Development Direction - The company is focused on strengthening rate levels in its Standard Physician business and executing state strategy initiatives [30] - A comprehensive reunderwriting of the Specialty healthcare book of business is underway, with completion expected by the end of Q3 2020 [32] - The NORCAL transaction is progressing through regulatory approvals, with expectations to close by year-end 2020 [44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of investments and noted that the pandemic has reinforced their mission to protect customers [5][21] - The company is being patient in evaluating investment opportunities amid economic uncertainty due to COVID-19 [24] - Management acknowledged the challenges posed by the pandemic but emphasized ongoing improvements in operational efficiency and underwriting discipline [27][74] Other Important Information - The company allowed cash to build to support business operations and customers during the pandemic [24] - The human resource team successfully implemented remote work plans, allowing 95% of employees to work from home [13] - The company has recognized net favorable prior accident year development of $17.1 million across all segments except the Lloyd's segment [25] Q&A Session Summary Question: Can you discuss the favorable development in the quarter, especially in Specialty P&C? - Management indicated that the favorable development was due to trends emerging better than estimates, with no changes in the reserving process [77][78] Question: What is the magnitude of exposure in the Senior Care business? - Management noted a significant reduction in exposure and premium levels, with only three claims reported related to COVID-19 incidents [82][84] Question: How is competition in the healthcare liability business? - Management described the market as highly competitive, with some states experiencing more aggressive competitors, but noted rate increases achieved in the quarter [89] Question: What is the company's approach to reserving and accident year picks moving forward? - Management emphasized a cautious approach to reserving due to uncertainty, with no changes in their reserve philosophy [92][94] Question: Can you elaborate on changes in terms and conditions for policies? - Management confirmed that changes primarily involve deductibles and other structural adjustments to improve underlying profitability [107][108] Question: Is there any additional exposure expected from the large national healthcare account? - Management confirmed that the reserves were strengthened at year-end, and they do not anticipate additional exposure from this account [112]