ProAssurance(US:PRA)2019-08-10 00:25Financial Data and Key Metrics Changes - Consolidated net income for Q2 2019 was approximately $11.5 million or $0.21 per diluted share, a decline quarter-over-quarter primarily due to a decrease in equity and earnings of unconsolidated subsidiaries and a higher current accident year net loss ratio [13][14] - Non-GAAP operating income was approximately $4.1 million or $0.08 per diluted share, consistent with the first quarter [14] - Consolidated gross premiums written were relatively unchanged from the year-ago quarter, with declines in workers' compensation insurance and segregated portfolio sale reinsurance segment offset by an increase in the Lloyd segment [15][16] - The consolidated combined ratio for the quarter was 105.8%, a 6.4 point increase compared to the year-ago quarter [17] Business Line Data and Key Metrics Changes - The Specialty Property & Casualty segment recorded a second quarter operating loss of $8.4 million, an improvement from the first quarter loss of $12 million [21] - Gross premiums written in the Specialty P&C segment were essentially flat quarter-over-quarter, with premium retention for physicians at 88% and facilities at 80% [23][24] - The Workers' Compensation Insurance segment produced operating income of $2.3 million, with gross premiums written declining 9.4% quarter-over-quarter to $64.2 million [28] - The Segregated Portfolio Cell Reinsurance segment reported operating income of $848,000, with gross premiums written down 11.5% from $19.1 million in 2018 [36] Market Data and Key Metrics Changes - Pricing in the healthcare professional liability market is firming, creating growth opportunities for companies with strong balance sheets [19] - The Lloyd's segment saw net premiums written almost double to $18.8 million, driven by increases in renewal pricing and exposure growth on new business [42] Company Strategy and Development Direction - The company emphasizes disciplined underwriting and maintaining strong balance sheets to withstand challenging market conditions [10][12] - The management is focused on operational efficiency and improving competitive positioning while ensuring long-term success [25] - The company is exploring mergers and acquisitions as part of its growth strategy [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the increasing severity trends in the healthcare professional liability market and is taking necessary steps to ensure the integrity of the balance sheet [11][12] - The company remains committed to building long-term value rather than focusing solely on short-term results [44] Other Important Information - The company experienced a decline in net investment results for the quarter, primarily due to lower reported earnings from limited partnership investments [18] - Management noted that the loss from a segregated portfolio cell program had no impact on operating results but affected the combined ratio [34][35] Q&A Session Summary Question: Concerns about increased severity in the market and reserve development - Management acknowledged that while favorable reserve development has reduced over time, reserves are still viewed as adequate despite increasing severity trends [49][50] Question: Rate adequacy in the market - Management indicated it is too early to determine the necessary rate increases for adequacy, but noted that competitors are beginning to react to severity trends [62][64] Question: Competitors' actions regarding loss trends - Management observed that competitors are starting to react to severity trends, indicating a shift in the market [77] Question: Workers' compensation market competition - Management stated that competition is broad and coming from various players, emphasizing the importance of maintaining underwriting profit [80]