Q3 2019 Earnings Call
She needs third quarter earnings release presentation in financial supplement were released this morning in our available via its website www dot CNH dot com.
Speaking today will be Dino Robusto, CNH, Chairman and Chief Executive Officer, and James Anderson, She needs Chief Financial Officer. Following their prepared remarks, well open the lines for questions. Today's call May include forward looking statements in references to non-GAAP financial measures.
Any forward looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made during the call.
Information concerning those risks is contained in its earnings release and its <unk>. Most recent 10-K on file with the FCC.
In addition, the forward looking statements speak only as of today Monday October 28 2018.
She need expressively expressly disclaims any obligation to update or revise any forward looking statements made during this call.
Regarding non-GAAP measures reconciliations to the most comparable GAAP measures and other information provided in the financial supplement.
This call is being recorded webcast.
During the <unk> during the next week the called May be accessed on Sundays website.
With that I'll turn the call or what you see knees chairman and CEO Robusto. Please go ahead Sir.
Thank you Cody good morning, everyone.
I'm pleased to share our third quarter results with you today.
Which reflect continued good underwriting performance accelerate at price increases <unk>.
And strong growth across our U.S. operation.
Or income for the third quarter was 102 million.
Or 37 cents per share inclusive of 170 million dollar or 60, Threepar 63 cents per share after tax charge related to the unlocking of our long term care active life reserves driven by our decision to reset our assumptions on the discount rate.
James will provide further detail on the unlocking as well as on the favorable 44 million aftertax outcome of our annual long term care claims reserve review the fourth year in a row of a favorable claim outcomes.
For the quarter, the PNC underlying combined ratio was 94.6%.
Right improvement to last year's third quarter results.
Strong underlying performance in commercial and specialty.
Set an almost three point deterioration in international.
In international we remain confident in our belief that we are doing all the right thing and I've already seen some improvement in our results, including a strong underlying loss ratio of 61.4% through the first three quarters of this year just.
He was in line with our overall company result to 61.1% through three quarters.
In addition, our re underwriting efforts have significantly reduces our international catastrophe exposure.
Each allowed us to avoid catastrophe losses in Asia due to recent events there.
The higher underlying loss ratio. This quarter is driven by lines of business. We began non renewing late last year validating our previous re underwriting decisions.
Obviously during this process the improvement won't be a quarter over quarter straight line.
The PNC all in combined ratio of 97.6% included 1.8 points of catastrophes, and 1.2 0.7 favorable prior period development.
Principally related to a block of commercial legacy MAA toward account.
We no longer right.
As usual James will provide more detail on our prior period development.
Our expense ratio in the third quarter was 32.5% nearly a full point lower than the second quarter.
We are pleased with our net written premium growth of 8%, which was fueled by robust growth in the U.S. segments.
Gross written premium excluding third party captives was up 11% in the U.S. segments.
Net written premium was up 9%.
International.
Gross written premium was down 2% increases in Canada continued to be offset by re underwriting actions in our Lloyd's syndicate.
We continue to effectively manage the rate retention dynamic achieving a higher rate increases in each business unit and doing so with steady retentions except.
Specific areas such as aging services in large property, which had lower retention.
We are satisfied with the tradeoff those areas have the highest rate needs and we continue to walk away when we can secure adequate terms and condition.
In the third quarter rate for PNC overall was plus 6%.
Up two points from the second quarter.
Commercial rate was plus 4% up one point from the second quarter.
Specialty was plus 6% up two points from last quarter.
International rate was plus 10%.
Three point.
Let me drill down on these rate increases to provide more insight into our execution in the marketplace.
And our specialty business unit.
Rate was actually up 13% outside of our professional you know program business.
Which really we refer to as affinity as.
As we have highlighted before our affinity business, mainly represents longstanding multiyear programs and therefore are less affected by recent price movements.
And our health care business, which has experienced higher loss cost trends for more than two years.
We have referenced on several prior calls rate increased further to 18 points compared with 14 point in the second quarter.
In public company do you know rate was up 42 point in the quarter.
Oh levels significantly higher than the 15 points, we achieved in the second quarter.
Well the magnitude of this rate increase was influenced by several large accounts.
We had brought increases across the book.
As reflected by the median of their rate achievement distribution for the third quarter.
It was double the median.
Second quarter.
In commercial excluding workers compensation.
<unk> was 6% a point higher than the second quarter, ending and included umbrella, 10% property up 8% in auto up 7%.
International rate was 10% compared with 7% into second quarter.
With broadly consistent rate movement in Canada, Europe and in our Lloyd's Syndicate.
Before moving onto our new business results.
But to make a few additional comments on rate and lost cost trends.
And resulting margin impact given the understandably high level of interest in this interdependent dynamic.
This is twice a written rate in the third quarter.
We have achieved slightly more than three points of earned rate against our long run lost cost trends, which are just above 2.5%.
This is a good start, but obviously needs to be sustained before we recognize any meaningful margin expansion.
Particularly when you consider.
We experienced almost four years of rate changes being lower than long run lost cost trends are starting to early 2015.
All else equal we would have to sustain the current rate levels through may 2021 to make up if you will lost ground in pricing.
Oh in terms of the in fact, the March into correlation is over simplify.
As it would have to assume a long run lost cost trends are the same as actual loss cost trends during that period and that our book of business didn't change in reality.
Losses have deviated from the long term average quarter to quarter and Moreover, we have elevated our underwriting focus in the last few years pulling levers beyond pricing.
Positively impact the loss profile of the book.
Just do dynamics, along with the fact that some part of exposure increases during that period also acted like rate increases explain to a large extent why the lost ground in pricing during those years didnt quite to a dollar for dollar compression in margin.
Similarly going forward then even if we sustain the current rate movement earnings through mid 2021, gaining back the lost ground in pricing.
I don't necessarily equate to a dollar for dollar expansion in margin.
Rather.
We need to incorporate all the vectors of influence on our accident year loss ratio picks.
It's actual claim frequency and severity trends.
As we previously highlighted a couple of lines of experience all your loss trends and based on the consistency of the pattern of deviation led the actuaries to raise their respective long run lost cost trends.
We must also accounted for portfolio changes.
Terms and conditions change is beyond price.
Changes in reinsurance coverage.
Well as legal judicial and regulatory dynamics, all of which we do in a disciplined fashion.
During the quarterly reserve reviews.
Well, let me show that detail on actions, we took on certain long run loss cost trends accident year picks and reserve increases based on the overall puts and takes from the influencing factor.
As we have disclosed over the past several years in discussed on prior calls.
One area, we have consistently seen a more aggressive plaintiff bar.
In within our health care portfolio, especially aging services.
Where are they have been targeting medical malpractice claims.
We began seeing this in 2016.
Claims from older accident years accelerated.
In both number and costs.
We raised our accident year loss ratio in 2016 and began seeking underwriting action at this time.
To mitigate the higher accident year loss ratio.
Importantly.
We also raised our long run loss cost trend in 2017, because we saw the elevated frequency and severity due to the deteriorating legal climate persist.
As evidenced by further adverse prior period development, we talk and previously disclosed.
We continue to review the results in subsequent quarters into Germany, even more aggressive underwriting action was needed.
Last year.
We began to substantially increase rate, while continuing to re underwrite the portfolio.
Although we have seen some improvement in the frequency trends raising services this year.
Our view of long run lost cost trends is 11%.
So we will continue to push on pricing and other terms and conditions.
As a market leader in the healthcare space, we do have the ability to execute effectively up on.
We also seem to a lesser extent the impact of a more aggressive cleanest bar in our umbrella.
Typically the auto exposure in our umbrella book, which we have also commented on during past calls.
Beginning in the second quarter of 2018, we began to see consistently higher severity on our auto claims in the excess layers.
Accident years 2014 through 2016, as you know umbrella claims take time to develop.
And recognized adverse prior period development for those accident years.
We also increased to 2018 accident year loss ratio by eight points in the fourth quarter.
And that essentially remains our current accident year loss pick.
In addition.
We quickly began to take a number of underwriting actions.
It is raising our attachment points on more auto exposed accounts and reducing the number of umbrella accounts with larger underlying auto exposure is.
Even with these actions the actuaries felt it was appropriate.
Raised a long run lost cost trends for umbrella by 100 basis points.
In this years third quarter to reflect that higher severity trends.
The good news is we now have higher rate achievement in umbrella.
And it is continuing to accelerate.
So here we are today.
And based on the momentum currently exists in the overall to enter the market.
And I believe it is more likely that rate increases running above our loss cost trends will persist throughout 2020.
It is quite rational in light of the lost ground.
And the pressure on loss cost trends I just highlighted.
The sustainability of price increases it's further validated when you place it against the backdrop of an exceedingly protracted low interest rate environment.
Getting back into our production results.
Another important element of price increases we are experiencing.
Is that they extend to new business pricing and that has helped fuel our new business growth.
It was up 10%, but with the same period last year.
Its traditional market.
This is a heightened level of business to be marketed as agents and brokers grapple with significant changes in terms and conditions that they fear may impact even their best performing accounts.
Our focus on Reenergizing relationships with our distribution partners.
The last 24 month long, what our talent investments that I discussed on past calls.
Has allowed us to capitalize on this this dynamic.
Which has contributed to our new business growth and so with that I'll turn it over to June .
Thank you know and good morning, everyone.
Our property and casualty operations produced core income of $241 million in the third quarter.
Pre tax underwriting profit was 42 million an underlying underwriting profit was 95 million.
Moving to each of our PNC business units specialties third quarter underlying combined ratio was 92.1%.
Underlying loss ratio was 60.1% in the quarter consistent with both the third quarter of 2018 as well as the first half of this year.
Specialties overall combined ratio was 89.8% included 2.8 points of favorable prior period development.
This favorable development was primarily an accident years 2017, prior driven by surety and management liability and partially offset by health care being adverse.
With a significant rate, we're now achieving in health care, along with considerable underwriting efforts.
We are confident that we're getting this book back under control Nonetheless, as Deno, just highlighted we will be cautious regarding the recognition of margin improvement until we see the benefits of rate manifest themselves in our actuarial analysis.
Specialties gross written premium X third party captives grew a healthy 9% in the quarter.
Our commercial segments underlying combined ratio was 93.8% in the quarter and its underlying loss ratio was 61.5%, which is a point higher than the third quarter of last year, but a slight improvement compared with the first half of this year.
The third quarter overall combined ratio was commercial in commercial was 101.6%, including three points of catastrophe losses, and 4.8 points of adverse prior period development.
As Deno mentioned the majority of the prior period reserve charge in commercial in fact 35 over the $40 million came from a block of legacy accounts from accident years 2009 in prior and are unrelated to the New York revive or statute legislation.
This adverse change was primarily driven by a reevaluation of expected reinsurance recoveries on those reserves. In addition to an increase case reserves on a handful of accounts.
I highlight the revolver statute, because there's been a lot of discussion about it.
However is early in the process for us because we are primarily in excess position position in the areas, where we may have potential exposure.
We will continue to evaluate this as we get more information.
Aside from the legacy development commercial had 5 million of adverse prior period development driven by umbrella.
Commercials gross written premium X third party captives grew 13% in the quarter.
The underlying combined ratio for international segment was 105.3% in the third quarter, but as you know pointed out the first three quarters of 2019 shown improving picture with an underlying combined ratio of 98.9%.
In the third quarter, the underlying loss ratio was 67.3% appoint higher than the third quarter last year and several points higher than the first half of 2019, driven by large property losses in our Lloyd's syndicate in in Europe .
As we've noted in previous calls.
Improvement in international will not manifests itself in the results overnight.
The expense ratio deteriorated 1.7 points year over year due to the reduction of earned premium from our re underwriting efforts.
Do you all in combined ratio was 107.4%, including 1.7 points of catastrophe losses and minimal prior period development.
Our PNC expense ratio of 32.5% was slightly below our current run rate as the quarters results included some favorable items in acquisition expense.
Our life and group segment produced a core loss of 122 million in the quarter.
This result includes an after tax charge of 170 million related to the unlocking of our long term care active life reserves, partially offset by a 44 million after tax gain resulting from our annual long term care claim reserve review.
The claim reserve review, which is the review of our current clean population was favorable driven by lower than expected claim severity.
As Deno mentioned this is the fourth year in a row. The result of the claim review was favorable.
On slide 13 of our earnings presentation, you can see the results of our gross premium valuation analysis.
The most significant change in the analysis with the discount rates.
Given current investment yields we reduced our near term expectation for new money yields. In addition to lowering your expectation of normalized new money yields for 2025 and beyond.
Last year's analysis assumed the 10 year treasury yield would get to a normalized level of 4.25%.
This year, we reduce that expectation to 3.75%.
This 50 basis point drop in new money yield expectation reduced the all in discount rate to 5.5% on a nominal basis and 5.76% on a tax equivalent basis.
This was the driver of the 280 million dollar reduction in GAAP margin due to discount rate.
Consistent with the results of the clean Reserve review morbidity provided a 32 million dollar favorable change to get margin.
Moving to persistency there are two dynamics to note first margin improvement was reduced by 166 million over the course of the year driven by policyholder response to reduction which has resulted in our earning a portion of last year's margin in other words benefit reductions and lapses.
Over the past year at a current earnings contribution and reduce future expected earnings which is what margin is.
Of course, a reduction of active policies also reduces the risk over the long term.
In addition to this dynamic mortality rates for policyholders not on claims have been slightly lower than expected, which we reacted to in this analysis.
Lowering the expected mortality going forward was the primary driver in the remaining $68 million reduction to get margin from persistency.
Finally regarding future premium rate increases as we previously discussed we only include rate increases that had been filed and not yet approved for that we plan to file as part of a current rate increase program.
Over the past year, we've outperformed our previous rate increase assumption.
And are continuing to file for additional rate increases.
Which combined to add 58 million to our GAAP margin.
Our best estimate assumptions currently reflect 230 million a future an approved rate increases.
And while we limit the amount of unimproved rate increases anticipated in our reserves. We will continue to seek rate increases over time, if and when they are justified.
So summary, summarizing our annual premium our gross premium valuation analysis.
Every year there is movement in each of these variables driving the margin in this year's analysis, a low interest rate environment drove the get margin below zero, causing an unlocking of the active life reserves on a charge to earnings.
Before moving on I'd like to give you a few important statistics that I think lend credibility to our assumption setting process.
It's been nearly four years since our assumptions were last unlocked.
Over the course of that time, our active policy count is 5% lower now than we expected it would be.
Our open claim count is slightly lower than expected and the total dollar amount of paid claims is 2% lower than expected.
So three broad an important metrics how many policies remain the number of open claims and the total amount paid over the last four years, we're all better than the assumption set in 2015.
On slide 15 of our earnings presentation, we've updated the data that we first provided during last year's third quarter earnings call.
The active lives in both the individual and group blocks continued to decline down, 21% and 33% respectively. Since 2015.
On the bottom left of slide 15, you'll note open claim counts.
In our individual block has been fairly steady in recent years.
We believe open claims on the individual block of essentially plateaued.
Another indication of the maturity of this block.
To conclude on long term care slide 16 shows the key characteristics of our long term care blocks.
You'll note that the average age of our individual block is 79 years old and the average age of a new claim. It is 84 again, indicating that this block which accounts for 85% of our reserves is very mature.
Well the group block is less mature, but the average attained age of 65.
It has a lower level of benefits. For example, there are very few lifetime benefit policies and only 15% have inflation protection.
Overall, our block is mature well managed and we continue to have confidence in our long term care reserves.
Our corporate segment produced a core loss of $17 million in the third quarter.
Pre tax net investment income was 487 million the same amount as the prior year quarter.
Our limited partnership in common equity portfolios produced pretax income was 18 million a 0.9% return and the result is roughly half of our quarterly average.
Pre tax income from our fixed income portfolio was 460 to 62 million slightly higher than the.
Prior year quarter.
The pre tax effective yield on the fixed income portfolio was 4.8% inline with prior periods.
Fixed income assets that support our PNC liabilities at an effective duration of 4.1 years at quarter end inline with portfolio targets.
The effective duration of the fixed income assets that support our life and group liabilities was nine years a quarter.
Our balance sheet continues to be extremely strong at quarter end shareholders' equity was 12.1 billion EUR $44.66 per share and our unrealized gain position increased to 4.2 billion due to the decline in interest rates.
Shareholders' equity excluding accumulated other comprehensive income was 12.0 billion EUR $44 in 14 cents per share an increase of 6% from year end 2018, when it when adjusted for the $3.05 of dividends per share paid during the first three quarters of this year.
In the third quarter operating cash flow was 466 million.
We continue to mean of maintain a very conservative capital structure and all of our capital adequacy met metrics as well as credit metrics are well above their internal targets and current rating.
Finally, we're pleased to announce our quarterly dividend of 35 cents per share with that I'll turn it back to Dino. Thanks Gents.
Before we move onto the question and Thats a portion of the call. Let me leave you with them over arching thoughts on the quarter.
Our actions on long term care reflect our continued prudent management of this portfolio.
Underlying PNC loss ratio was 61.7% for the quarter at 61.1% year to date, while the expense ratio improved to 32.5%.
Net written premium grew 9%.
We achieved six points of rate into quarter, two points higher than the second quarter.
And based on the current momentum we believe rate increases will persist above our long run lost cost trends throughout 2020, and what that we'd be glad to take your questions.
Thank you because I could ask your question. Please take a pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned out to your signal to reach I quit.
Once again that is star wanting to ask a question.
Plus for just a moment.
Well take our first question from Jay Cohen with Bank of America.
Yes. Thank you a couple of questions I guess first on the international side.
When would you expect the earned premium to kind of fully reflect the actions you took to get out of certain lines of business when will that be kind of off your books.
Well, so we started the non renewals Jade Dino.
[noise] sorta late.
2018, and so you not renew them as their renewal dates come out that plays out of course of the year, but as we indicated some of the prepared remarks.
It's a dynamic process and theres some additional a business that were non renewing and which is normal for the process. When we see something we don't think we're going to get.
The right terms and conditions were going to non renewals. So we think the non renewal of accounts is going to take through sort of the ended the second quarter of next year and that obviously, that's their earn itself out.
Which is probably some time through 2021.
And then just keep in mind, we mentioned it before there are certain lines, we exited alike.
Political risk.
And a large project construction engineering risks that have a multiyear tail. So some of those Jay you know a effectively.
See on the portfolio so.
I think you're looking at a 2021.
Yeah, no that makes sense, okay, and the second question I'm thinking of the answer this but just to double check and that the accident year loss ratio was there any material current year catch up did you reassess the first half results in any segment that might have influenced the current costs.
Under reported accident year loss ratio.
No no Jay you know when you look at.
Accident year commercial.
Underlying loss ratio when you're comparing it to three to Q3 keep in mind that in Q4 of last year, we increased.
The international we increased the umbrella and we also increased.
The property and that's obviously played itself out because it was into Q4, so you're seeing it elevated against Q3, which was a quarter before we made those changes.
We made us that make sense fee.
In specialty Jay just around aging services as you know reflecting earlier.
Got Ascot and now that makes sense, that's great. Thanks for pointing that out.
Thank you will not take our next question from Josh Shanker with Deutsche Bank.
Good morning, everybody.
Good morning.
I wanted to go back some of.
Those prepared remarks.
First of all on the 2.5%.
Loss costs long term lost cost for an estimation if I look over the past decade, obviously, you've been a decade of lower than long term loss cost trend or how does that 2.5% stack up against history I guess.
Pretty consistently.
Keep in mind and I think we went through it or Jane did on the last call keeping in mind because overall.
See below our two and a half, but we have a large portfolio.
Of.
Professional.
Any portfolio that has.
Probably over the full decade.
A long run loss cost trend that was slightly under 1%.
It might be a little slightly higher.
Then history cut though of of work comp, which has been particularly lower in the in the recent years, but you you put those two things together and you got some pretty consistent long run lost cost trends.
The last decade, a good decade to use as the basis of assumption.
Oh, I guess, Josh I would say the last decade as the best decade that we have to use for our assumptions going back further than that the market was quite a bit different than it is today. So it was our book yeah. So more of the part of the issue. So so I think we're going to consistently look at this every quarter to see if there is.
Anything that's changing and as deno reflected in his in his remarks, we're going to tweak specific line items and specific lines of business as we see them change, but certainly the trend has been holding for quite some time.
And that was the other part my question. So you talk about the fact that the negative pricing.
Over the past few years had not results in deterioration versus a combination of.
The exposure asking like rate and I guess, the re man of curing or I don't know your hobby do changing of the mixing your portfolio and he said going forward those things will still be an issue. So you won't have a dollar for dollar impact are you, saying that you expect the gap between.
Right and loss cost trend will be.
Reflected by even higher loss ratio, even lower loss ratios. Because then you'll lay on top of that business mix and exposure <unk> I was just trying to understand the dollar for dollar you're going to get you're gonna get more than your brain for the box.
These rate increases.
So the comment on the go forward was up.
Comment on imagery is that.
You know it hasnt necessarily been and loss cost trends are going to be what they're going to be actual and so you might not end up with exactly the dollar for dollar that the point being that often on these calls there's a lot of conversation of the what I consider.
To be the oversimplified correlation of rate than long run loss cost trends and I was just simply suggesting that there's so many factors that influence it including judicial regulatory and you know you play all of that out and so we're going to be cautious and how we move the margin it isn't that scene.
That I was referring to it.
Walter.
The portfolio, how you're always hopefully getting exposure increases that acts like rate over the long walks you always expect to have better margin than the rate over loss cost trend would indicate.
I'm not sure.
If I'm following that I don't Josh I don't I don't think that we would expect that per se I think and just going back to the first part of the question I think part of what we were trying to get across and that messaging and on the dollar for dollar margin is that with all but with all the moving pieces, we're actually going to be cautious just as deno said.
And so we're not going to take margin improvement as soon as we see.
You know sustained.
Rate above our earned rate above our loss cost trends. So it's actually likely to play out slower in terms of margin improvement rather than faster.
Okay. Okay. The that that answers my question. Thank you very much.
Sure.
Thank you all know here now from Gary Ransom with Dowling and partners.
Yes, good morning, I wanted to.
Do you get on some of the loss cost trends also.
You mentioned in health care, the number is something like a 11% and I and you know we've heard a lot of anecdotes about how aggressive the play as far as Dan I Wonder if you have any thoughts specifically about how some of the external effects like litigation funding.
And medical medical financing companies.
They have been they at least a partial driver of those trends and that's all.
Part of a question of you think it's 11 today, but maybe it's 15 and that's that's sort of what I'm kind of driving at what what gives if we see all these things, but what gives us comfort that we're kind of in the right place on these loss trends.
Gary and then I'll start and James May want to May want to jump in also so.
No we're not really seeing in the portfolio the effects of of of legal funding.
But let let you know you do see its impact from a few different areas first of all.
The plane as far as really targeted this industry you can see it into sort of AD campaigns in the marketing so inviting if you will.
More claimants to come forward and Oh that is happening keep in mind, Gary Weve been needed for over two decades. So we can see.
The difference also.
There have been some larger.
Jury awards and although a lot of these cases never make it of course, what it does is embolden the plaintiff bar based on what they see that somebody's jury awards and not to settle up front for what was potentially a lower amount for a similar type case.
In the past and intriguingly you'd also affects the adjusters.
And the defense attorneys, who are also going to incorporate if you will the higher verdicts.
Into their settlement calculus and so.
As I indicated we're seeing a little bit of less frequency.
But we're going away some of what.
As a function of obviously all the re underwriting that we have done and then.
So we'll watch to see how long run loss cost trend and whether that sustains itself. The slight improvement, we're seeing on frequency, but keep in mind.
Got some very significant rate increases, which eventually will be also sort of factored in.
And so we feel good about the actions we are taking how we're leading the market.
Combination of underwriting actions deductibles wording changes tightening wording and then also getting a lot of rate and then.
You play this forward and quarter for quarter, we take a look at this thing and as I tried to suggest we backed it consistently.
And we will act up and down as as as this moves forward I'm not really sure what else I could sort of add.
To give you even more clarity.
Well, that's that's helpful I realize it's mostly anecdotal.
Another question on the legacy reserve charge I'm not sure I understood James what you were saying about the it was a reinsurance recoverable.
That you you had somehow taken down is that did I hear that right now.
That's right Gary So as part of the Reserve review not only where are we looking it at our open claim inventory. We're also looking at.
The ceded recoverables that we had on on older claims and it turned out we had just overestimated.
Those either recoverables on some of the old older claims.
What came through.
Was there anything about these.
Was there anything consistent about these claims where they from some class of business that was similar or where they just scattered.
Random know they they were up I mean, they these were all the results were the review was really old product liability cases, with multi claimants involved things like public nuisance and food additives.
Which which is really what's in that bucket of claims the reserve review.
Focused around.
That both the claim reserves as well as the Recoverables.
Okay.
And what is there any Ah I can't remember if you'd do in a and e. charge as well at this point that might affect the accounting with no that should we will do our annual asbestos and environmental review next quarter.
Next quarter, Okay. Thank you order from the first quarter.
Alright, Thank you very much.
Thanks.
Thank you and once again as a reminder that to start one if you'd like to ask a question here now from their shields with KBW.
Great. Thank you very much good morning, and thank you for all the detail you provided some Austin that's very helpful.
Can you walk us through what you're seeing now in terms of rates and loss trends for workers compensation.
So I would say, it's been pretty steady the their rate in workers' comp continues to be kind of mid single digits negative.
Slightly better in the third quarter, but not materially when we look at trends severity trends continue to be benign stable as we mentioned last quarter and frequency.
Has flattened compare to what it was doing the last several years, which again is the same as it was last quarter, so no real change quarter over quarter.
Okay, perfect and I was hoping you could.
Sort of outline the exposure that the affinity book has to these listening trends it sounds like you're not seeing anything deteriorate, but their exposure if if the trial bar settles on sort of this you know pocket.
Our affinity book really is not a I mean, the kinds of risks that are inside there are much smaller a those are they tend to be pretty homogeneous accounts, but many many small accounts.
And don't fall into the types of coverages, where we've seen the plaintiffs bar attack.
And also our risk pool I mean, it's five six decades as we've indicated before and all of that makes a difference also it doesn't have because of the professionally and all the medical cost exposures that you would see on on comp some of the auto.
Related umbrella so that makes a difference given the medical on their tones in some of the others Meyer.
Okay perfect. Thank you so much.
Thank you and that does conclude today's question answer session I'd like to turn the conference back over to Mr. group, who still for any closing remarks.
Great. Thank you very much for attending and thanks for your questions.
[noise]. Thank you that does conclude today's conference. Thank you for your participation you may now disconnect.