Q4 2019 Earnings Call
Things like provocative dangerous 30, aliyah crime and so psychology professor at Stanford University, They found adjectives like reduce sodium.
Ladies and gentlemen, this is the operator.
Today's conference and webcast are scheduled to begin and approximately one minute until again until then you will again be placed helpful. Thank you for your patience.
And low fat were big turnoff make it sound tasty, 25% more people selected those vegetables compared to basic description. The emphasis here is there was no deception the researchers call it in Belgium labeling I met Donahue.
Burger King's New advertising campaign features a whopper sandwich covered in mold that print and TV ads, which are running in Europe in the U.S. are meant to send the message the company's removing artificial preservatives front signature Berger Burger King says is removed artificial preservatives from the whopper in several European countries.
Including France, Sweden in Spain, and around 400 of at U.S. restaurants, It plans to remove preservatives from whoppers served in all of its restaurants. This year and by years end Burger King's has all of its food items will be free from artificial colors artificial flavors and artificial preservatives in the U.S. and select European countries.
The study and pregnancy after breast cancer is out and as a b correspondent Jackie Quinn reports. It offers reassuring news to survivor, a study conducted in Europe found that breast cancer survivor.
Yes.
Welcome and thank you for standing by.
At this time all parties are in listen only mode.
After the speaker's remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star and the number one on your telephone keypad.
If you would like to withdraw your question. Please press the pound Keith.
Today's call is being recorded.
If you have any objections. Please disconnect at this time.
I would now like to turn the call over to state Auto financial Corporation's director of Investor Relations not Leaseco craft.
Thank you Carol good morning, everyone welcome to our fourth quarter 2019, earning conference call today I'm joined by our Chairman President and CEO, Mike Rocco Senior Vice President and CFO, Steve English.
Senior Vice President of personal and commercial lines in managing director of say that allowed Kim Garland.
Senior Vice President of data and analytics, Jason Bercy, Chief Actuarial officer at Mt, Roebuck and Chief Investment Officer, Joan after our prepared remarks, well open the lines for us.
Our comments today may include forward looking statement, which by their nature involve a number of risk factors and uncertainties as may affect future financial partner.
Such risks factors may cause actual results to differ materially from those contained in our projections or forward looking statements.
These types of factors are discussed at the end of our press release evolve and our annual and quarterly filings with the Securities and Exchange Commission.
Financial schedules containing a completion of certain non-GAAP measures on with other supplemental financial information are included as part of our press release and available on our website.
Under the Investor section now I'll turn the call over to Us disease, Chairman, President and CEO Mike.
Thanks, net and good morning, everyone first I'd like to walk mayor congratulating him on getting the opportunity to file the most innovative and exciting company into PNC space Balkan there.
Next let me update you on some internal changes we made at the beginning of the year I ask Jason Bercy to lead our data and analytics area as our Chief data officer reporting to me, we believe that a combination of technology data analytics and innovative culture will be a key factor who wins going forward.
Therefore, we felt it was critical to creating this focused and centralized group.
With this change I consolidated our business lines, both personal and commercial under Tim Garlands leadership.
Tim previously about personal lines before moving to commercial lines. So is institutional knowledge will ensure a seamless transition.
Now for the results 29 team was a year that had many twists and turns ups and downs, but ultimately wasn't successful year.
We started this journey to modernize state or just a few years ago and last year, we took another significant step forward.
We ended last year, I said that turnaround to state auto was complete I was mostly correct. Unfortunately, there were two areas that we uncovered early in 2019 that needed additional attention.
There were some flaws in our personal auto product and our personal auto platform.
Well I'm disappointed that these challenges put us behind our schedule.
Pleased though we have put fixes in place and entered 2020 prepared to compete across all our lines of business, Tim will address the product challenges in auto and what we fixed in 2019 and the changes that are coming early this year.
The auto platform needed some additional work to improve both speed and stability as walls enhancements to improve our processing of auto endorsements.
Vast majority that work was completed by the fourth quarter of last year with just a handful of updates I will be resolved in the first quarter again, while these fixes were not anticipated as we entered the year I'm pleased that we're able to make the needed adjustments. This is a benefit of heavier having a modern digital platform.
Unfortunately, the result of our Mrs was year, where we did not grow across auto and sales and make an underwriting profit both unacceptable results.
As a veteran of this industry and specifically auto.
Confident we can and will bounce back from this poor year.
We understand the business and now have a stable and innovative digital platform upon which we will place an appropriately competitive product.
There's room for state auto to write a significant amount of auto insurers are digital approach and emerging product will allow our ages two when their fair share of this competitive lie.
While we hit bumps across auto and failed to meet our expectations. The news was mixed but much better in homeowners. We continued to achieve a significant growth a clear indicator of power again of our digital platform and well design product.
As our auto product comes back and becomes more competitive whole will benefit as we anticipate an increase in multi policy sales.
Of course growth without profit is unacceptable as well so we consider the overall home results a disappointment.
We look carefully at the results and know that we had a significant level of both cat and non cat weather. In addition, we had a handful of fire losses, particularly in the fourth quarter.
The combination resulted in a combined ratio well above our expectations.
No, we do not use whether cast or otherwise or flyers as an excuse we own the results and we expect to return to profitability. This year.
Now commercialize had an outstanding year, we have consistently expressed a belief that sees lines presented a unique opportunity for state auto once we exited large commercial unevenness volumes are both unprofitable and the distraction we knew our focus on small and middle market commercial would lead to realize.
Focusing the potential in commercial lines 2019 was our first major step in that direction.
Our digital platform for commercial auto in small commercial has been embraced by our agent partners as well as newly designed products that provide better segmentation and matching of rate to risk.
Our middle market success has come without the benefit of our new platform instead, our culture, which is a foundation to the new state auto properly and powered our team resolving gains in both efficiency and effectiveness.
Second quarter. This year, we will it we anticipate the start of the rollout of our middle market digital platform. This will allow us to be even more efficient, helping all three components of the combined ratio gross loss control and expenses.
Especially pleased that we grew across all commercialized products other than workers comp.
We believe we can grow workers comp, but we refuse to file the market trends where rates continued to be set it up profitable levels. Our focus remains on underwriting claims handling and getting the appropriate rate.
That discipline will offer some growth in 2020, even with the undisciplined pricing in the market.
Workers comp will be the final line on our new platform once complete our agents will be able to write the complete package for both small and mid sized commercial on the same digital platform.
We just launched our farm and ranch product on connect our get our digital platform. This is so significant visa product has a level of innovation and sophistication that is unique in the industry.
Our rapid growth in this line will also be boosted as we had eight new states. Since we are currently in with the rest of our commercial lines business as I noted in the second quarter, we will start to roll out of middle market commercial, leaving only workers comp, which should be into market by the end of the year.
As happy as I am about our commercial growth I'm ecstatic about the profitability.
So why is that need attention, but the underlying loss ratios are generally performing to our expectation we borrowed leave our products have been well design in or build for ongoing profitable growth. The key as always for consistent profitability across commercial will be our expense ratio.
In an industry not node for innovation words can capture the prior to having our teams technology achievement. We set out just a few years ago Modernizes 99 year old company. Indeed, we were at the time, a 95 year old startup.
As we enter your fiber. This journey, we have brought state ordered in the front of the industry with our digital technology and new products. The cost was not insignificant, but with the largest part of the investment now behind US. We can continue to build the scale that will lead to efficient growth.
Shaving scale on our platform is key to getting a competitive expense ratio. We will continue to be disciplined about our expenses as we have been for the last few years, even with the large investment in technology, we've been able to get some expense ratio improvement. While we are now at the point in our journey, what we must prove the value of our investment.
Profitable growth.
2019 was an incredibly challenging year in our results did not meet our expectation we take full responsibility for those results. However numbers do not tell the full story, we now have or digital platform in place for the majority of our products products that have been rebuilt the sophisticated modeling in pricing.
Stabilized and improve that platform across our largest line.
This year, we'll complete the repo liberata product that began last year, allowing us to continue our journey to profitable growth in this key product.
Finally, our unique culture continues to be that driving factor in our success. We are building a little league team of professionals, who are innovative in power and passionate about winning.
We entered 2020 as an organization that is ready to compete and win across personal and commercial lines of insurance and with that I'll turn the call over to Steve.
Thanks, Mike and good morning, everyone. As you can see from this mornings release STFC reported net income for the 2019 fourth quarter and full year that was significantly greater than the same corresponding periods in 2018.
A swing and net investment gains or losses. The primary reason as it reflects the change in unrealized gains and losses on equity securities and other invested assets in accordance with a new rules that went into effect last year.
This new guidance has created the volatility it was predicted to create.
On an operating basis, which excludes the impact of net investment gain or loss STFC reported 29 cents per diluted share for the fourth quarter 2019, compared to 67 cents in the fourth quarter of 2018.
On a year to date basis, STFC reported 63 cents per diluted share.
In 2018 compared to $1.20 for all of 18.
Included in these results are the ongoing personal and commercial insurance operations as well as the impact of the specialty runoff business. The lower level of operating earnings is primarily driven by underwriting results with higher combined ratios.
Looking at combined ratios on a GAAP basis.
Comparing fourth quarter 2019 to 2018, the GAAP combined ratio of 100.4 is 5.8 points higher in the fourth quarter a year ago.
Quarterly results can fluctuate, but our fourth quarter cat loss and Eylea ratio of 7.7 is 5.1 points higher than the cat ratio of 2.6 reported in the fourth quarter of 2018.
Two items.
Two significant items drove the higher level of cats first we recorded additional specialty Irma and Harvey losses in response to claim development. We are seeing beyond what was expected.
Loss development seems to be impacted by efforts by insurance and public adjusters, representing insurers seeking damages by late reporting of claims indoor seeking additional damages beyond what we believe we owe on claims already reported.
We added to these reserves and the second quarter 2018 as well.
Some of these claims are or will possibly end up being litigated. This drove the 6.6 million of cat loss for the quarter in specialty run off.
Especially adverse development added two points to the quarter in nine tenths of a point year to date.
For the quarter end year. These cat losses are the most significant story within specialty.
Second we recorded an estimate of $16.5 million for storms in late October of 2019 impacting the Dallas Fort worth area. Collectively this is 23.1 million of the 24.8 million for the quarter.
Comparing fourth quarters, the non cat loss and LAE ratio for the fourth quarter of 2019 Rose 2.3 points compared in the fourth quarter of 18, and the GAAP expense ratio declined 1.6 points when comparing the same two periods.
On a year to date basis, the GAAP combined ratio of one or 2.7 for 2018 compares to 100.6 for 18, an increase of 2.1 points. The cat loss and LAE ratio was up 2.2 points, the non cat loss and LAE ratio was.
Zero by nine points, while the GAAP expense ratio declined to point.
Each successive quarter the impact of the specialty runoff has become less and less impactful in the focus continues to be on the adequacy of our reserve estimates.
I will turn the attention into our personal and commercial segments.
As can be seen from our press release disclosures on a statutory basis.
Personal and commercial segments combined ratios were 97.1 and one on 1.2 for the 2019 fourth quarter and year to date, respectively.
Appeared to 92.8 and 98.6 for the same periods of 18.
Our personal segment drove the overall higher combined ratios in 2019 with quarterly and year to date combined ratios above 100, while our commercial segment reported improved results in combined ratios below 100 for the same periods of time.
2019 personal lines underwriting results in the quarter and for the year when compared to the same periods in 2018 were impacted by higher cat losses, nearly ratios and higher non cat loss and LAE ratio is these were somewhat offset by slightly improving expense ratios. The personal lines book grew 9.1% for the year in 2019.
So when compared to 80.
2019 commercial line underwriting results were much improved with combined ratios of 86.5 97.0 for the fourth quarter 19, and full year 19, respectively compared to 90.4 and one on 1.2.
From the same periods a year ago for the year commercial lines loss and LAE results improved 1.8 points for compared 2018, and the expense ratio declined 2.4 points on the same basis.
Personalized grew over 12% when compared to 2018 for both the quarter end the year.
Environment will provide greater product details in his prepared remarks to wrap up my comments on underwriting results, let's spend a few moments on prior loss development and expenses for the year personal lines reported 1.7 points of net favorable development of prior year non cat loss in Eylea reserves compared to 4.9 points a year ago 2018 device.
Element included 2.9 points, a favorable development for homeowners compared to.
A 10th of a point of adverse development for 19 homeowners is not a line of business, where we expect significant amounts of development as it is short tail property.
For the year commercial lines reported 12 points of net favorable development of prior year non cat loss daily reserves compared to 10.1 points a year ago, we continue to see favorable experience emerge on workers compensation.
The absolute dollar amount of development was greater in 2019 than in 2018, but keep in mind. The book has been shrinking superior earned premium is less contributing to the higher ratio impact in 2019, as well small and middle market commercial reflected higher amounts of favorable development, while commercial auto was roughly half of what it was in 2008.
Jamie.
On a statutory basis the pro the total personal and commercial lines expense ratio for the year ended December 31, 2018 at 34.4 compared to 35.6, a year ago, a reduction of 1.2 points with overall growth of 10.2% and net written premium expense ratio did benefit.
But from scale base commissions, though as a percentage of net written premiums is trending down as more of our book is comprised of business written on our digital connect platform.
With lower overall underwriting profitability associated variable compensation was less than 19 as compared to 18 and offsetting these items as the normal pressure from increased fixed costs, such as wage and salary adjustments for associates. There was no material dollar change in our project related costs. Although this cost focused more on middle market farm and ranch.
And workers compensation lines of business as compared to commercial auto in small commercial end 2018.
With continued rollouts of our connect system in growth, we would expect to see the overall expense ratio continue to improve as we move forward.
Moving onto investments net investment income was up sequentially from the third quarter of 2019, but lower than last year's fourth quarter year to date net investment income was 80.4 million compared to $84.9 million for 2018 3 million of the 4.5 million decrease was in fixed maturities split evenly between.
Traditional fixed income securities and chips.
The overall fixed maturity portfolio at amortized cost declined during 2019, a contributing factor is the settlement, especially claims and run off.
Overall specialty reserves are down 85.2 million from December 31, 2018, and stand at 233.7 million as of December 31, 2019, and with that I'll turn the call over to Kevin.
Thanks, Steve and good morning, everyone I'll be covering both personal and commercial lines. This morning.
Both the fourth quarter and the entire year 2019 is the tale of two different stores.
I'll start with commercial lines 2019 was a historically Goodyear for state auto which produced a for Q 19 combined ratio of 86.5 versus 90.4 in Fourq, you 18, and a four Q 19, written premium increase of 12.6% versus Fourq you 80.
And for the entire year of 2019, our commercial lines produced a combined ratio of 97, and a written premium increase of 12% versus 20 Eightys.
The highlights of the quarter end the year for commercial lives. The commercial lines expense ratio dropped 2.4 points in 2019 from 42 to 39.6.
Growth continues to strengthen with all of the commercial product lines, except workers compensation growing in 2019 commercial new business premiums increased 76% in 2019.
Our products currently on commercial connect.
Commercial auto and commercial umbrella gained traction in 2019 and a continued in January 2020, as we wrote 9 million of new business written premium and these products on the connect platform.
This is almost the amount of new business that we wrote for all of commercial lines at an average month in 2018.
The challenges of the quarter every year for commercial lines, where the following the commercial auto combined ratio still above 100 102.5 for Fourq you 19 at 104.94 to all of 2019.
We need to both get more rate in commercial auto and continuing to approve the expense ratio.
And while we maintain pricing discipline and workers compensation, we are still shrinking in this product line, we still need to solve how to both maintain pricing discipline and grow.
There are many opportunities in front of us, including farm and ranch connect which losses first lives states earlier this month with far our farm and ranch connect rollout in 2020, we will be entering eight new states.
CPP or middle market connect is scheduled to launch is first state, Indiana in the next couple of months.
And while we have started to get traction with the products currently on commercial connect BOP commercial auto and commercial umbrella, there's still a tremendous amount of untapped upside potential for these product lines on commercial connect.
Also we have only scratched the surface of the expense ratio benefit for commercialize from connect for all commercialize the percentage of premium on connect is the following in 2018. It was 1.8% as of one to 19. It was 5.2% as a two to 19 it was 6% as a three to 19 so.
<unk>, 0.4% and as a four to 19 with the 7.5%.
While our commercialize business still has much work ahead of US 2019 was a year, where the business significantly advanced I could not be prouder of our commercial lines associates and we all believe that we're just getting started.
For personal lines 2019 was a year challenges for state auto our personal lines business produced for Q 19, combined ratio on 3.9 versus 94.7 in Fourq, you 18, and a four Q 19, written premium increase of 6.8% versus Fourq you 80.
And for the entire year 2019, or personalized business produced a combined ratio of 103.9, and a written premium increase of 9.1% versus 2018.
Personal auto is the product line, where state auto was challenged most in 2019 our results reflect those challenges.
For 2019, our personal auto results, our combined ratio of 103 written premium growth rate of minus 0.1%.
Policies in force growth rate of minus 7.2%, which is a minus 5.1% policies in force decline if you exclude Georgia legacy.
New business count growth rate of minus 13.2% and retention level of 67.9.
For Fourq to 19 alone our personal auto results. Our combined ratio of 114.1 written premium growth rate of minus 5.9, a policies in force growth rate of minus 7.2, again minus 5.1, when you exclude Georgia legacy business and a new business count growth rate of minus.
20.8% and retention level of 67.9.
These are unacceptable results questions or why did these results occur and what are we planning to do about though walking through some history will help explain these results.
First our objective back in 2015 in 2016 for personal auto was to become a predominantly preferred auto ensure that also wrote the entire spectrum of personal auto risks. This was different than state autos historical personal auto strategy of focusing on writing quote unquote prime of life personal auto risks.
When we talk about the higher risk and other personal auto risk spectrum, we are not talking about no. Prior insurance risks, but we mean risks with activity lower credit score risks and minimum limits risks the industry might describe these risks as standard risks and the better end of non standard risks.
From day, one we understood that to successfully managed this entire spectrum of risks we had to effectively manage both the preferred book of business and a standard better nonstandard book of business and that successfully managing these two books of business required doing things differently for these two VIX books of business different approaches to pricing.
Different operational requirements.
Our struggles and personal auto predominantly come from not effectively managing our standard better end of non standard personal auto business.
Over the last couple of years, we've been evolving our pricing raising rates on the standard better nonstandard risks and evolving our operations for example, significantly reducing the number of risks, where we accepted one month down payment.
Our for 2019 highlighted that our mistake was not making changes urges leave enough or aggressively enough in the area rates generally our rates for standard better non center business, we're still lower than we needed to be and our operations our operational approach and execution still resulted in underwriting and premium leak is that was higher for standard better.
Her nonstandard book of business than it was for our preferred business. These mistakes and standard better nonstandard rates and operations resulted in us attracting a higher percentage of these risks that we expected at rates that were not adequate.
To address these issues will be taking the following actions.
One we will be implementing an updated personal auto pricing model that lowers raise for ultra preferred and preferred risks and increases the rates for risks at the higher end of the respectful.
And two we will be making operational changes and underwriting and sales that reflect the reality that managing a standard better nonstandard personal auto book of business is different than manager you prefer personal auto book of business.
We know what we need to do improve the results of our personal auto business and the team is ready and able to execute these changes.
Homeowners also struggled and 29 team, but our homeowners story is much different than our personal auto story.
For 2019, our homeowners results are combined ratio was 6.8 written premium growth rate of plus 19.4% policies in force growth rate of plus 12.5%, a new business count growth rate of plus 20% and a retention level of 75.
For Fourq to 19, our homeowners results are combined ratio of 94.4% written premium growth rate of plus 20.7% policies in force growth rate of 12.5%, a new business count growth rate of 13.1% and retention level of 75%.
In 2019, Texas represented 27% Est autos total homeowners business and 2019 was a bad weather year in Texas. There are two issues here to consider one are the catastrophe and weather loads in our Texas homeowners rates adequate.
Generally we believe the catastrophe and weather loads in our Texas homeowners rates are appropriate.
Two with Texas, representing 27% of our toe homeowners book of business. Our homeowners results are very dependent on the weather in Texas in any given year, we need to increase the growth of our homeowners business in other states. So that Texas makes up a smaller percentage of our homeowners business. This will be a focus in 2020.
Again, our results and personal lines are unacceptable that being said I'm thrilled to get the opportunity to work again with our personal lines business and associates. During my six weeks back in this role for one thing that has been crystal clear is that the personalize associates are eager and ready for the work ahead of them to improve our personal lines business.
When I look across our seven major product lines personal auto homeowners commercial auto small commercial middle market commercial workers' compensation and farm and ranch six of them are in good condition and well positioned for immediate.
And one personal auto has a meaningful amount of work required to get it to our desired state.
And with that we will open the line for questions.
And as a reminder, if you'd like to ask your question. Please press star followed by the number one on your telephone keypad.
Our first question today comes from Paul Newsome from Piper Sandler. Please go ahead.
Couple of related question.
First I was hoping you could kind of give us some more detail on the auto retention situation and how you think there hope that will change.
In the future and.
And then I was hoping as well.
Related lead if you could talk about the auto insurance just market environment.
Lots of concerns that it has become a very very competitive market and.
How does that make it.
With.
Is it.
The challenge of trying to improve profitability the.
The book.
More difficulty.
Hi, Thanks, Paul I'll, let all that came way on both I've got a quite a view on the market environment that I'll certainly want to share as well by the end Kim could talk about retention and some thoughts on market.
So I think.
Attention is.
Going to be a combination of a couple things so.
I think on the.
First side of retention it's.
Sort of things that we do ourselves so.
I mentioned I think.
When we look at rates at both ends of the Spectrums I think we are probably price a little bit high on the preferred end of the spectrum and a little bit inadequate on the sort of higher risk and the spectrum and so.
As rates are stable or or down in preferred besch out preferred auto versus the.
Retention also Mike mentioned that we abroad greater stability to the platform and I think greater stability is going to help our agents.
Sort of.
There were renewals be less.
Have less systems related issues and so that should help our retention also I think a third aspect of it is.
Last year, we mentioned, we have stopped writing a bunch of one months down payment and that business had very low retentions and so the fact that we are writing that business anymore is going to help the retention of a book as a whole and so there are a lot of.
Of things, if we think about each of these markets I'll call preferred standard non standard individually those things should help retention levels in those markets individually.
But one of the things I mentioned was.
Because of some operational issues and.
Yes sort of prices being lower than they viewed to be at the higher end risk to the spectrum, we probably attracted a bit more of that business than we were expecting and that type of business just has general.
Lower retention levels, and so I think what you will see over the coming year is us shift more and writing more preferred business with just brings a higher retention level and so as that mix changes that will be as important driver as the individual sort of things that we are worth.
Moving on.
When I think about sort of the state of the markets.
Again, it's.
Yes.
We look at.
I think when we set rates.
We look at both what our actuarial indications are and both the ppas competitive position in the market.
And I think while we have seen the market getting more competitive.
When we go market by market I think.
You know, we believe that we can put rates in the market, especially in the preferred ultra preferred and that are both adequate and competitive and so we think.
Even though personal auto is always competitive and it continues to get more competitive that we will be in good position there.
I think.
You know what what we will see is at the higher end of the spectrum, we will take the rate that we need to take in so we may not be competitive on some of the standard or better nonstandard risks in that part is fine with us.
Yeah, and pause as some commentary I mean, it's very clear that.
Companies that are Scott spending between one and $2 billion advertising and there's a handful of them, they're going to they're going to win their fair share of the marketplace and those advertising dollars, obviously are driving customers to their site variable that closed those opportunities so be foolish now.
To suggest that there's going to continue to be some level of consolidation towards the top of the market.
Particularly with a handful and I truly mean, just a handful of of companies that are pushing into that space. The thing that's interesting about the auto market is that it's extraordinarily inefficient and while I mean by that is that if you go out and I'm sure you've done this and get 567 quotes the range of rates that will come back to you.
I would be surprising and they're not always the companies that are spending those one and $2 billion to drive those opportunities. So there is opportunity for more than just a handful of companies to consolidate now.
Do I believe the old line Mutuals and the old line Regionals are dead men walking and are not going to be able to compete successfully 100% because you have to have some core things you've got to have a very efficient system to make the process seamless if you're selling through an independent agent and you've got to have enough.
Efficiency in there that you can have at least a competitive rate because your expense ratio reflects that.
The other thing that's a misunderstanding about the market is that independent agents are either walking away from awed by the way a lot of those regionals and small mutuals are trying to switch to become commercial underwriters because are literally not seen a future in auto which creates more opportunity for those tweener companies like state auto.
But the other misconception about it is that agents are just kind a accepting this change and not adjusting themselves. We have a significant number of our agents who are what we would call digital agents or at least a portion of their business is that they go a set up online.
Search engines and they they are driving customers. So they are website. They get the advantage of kind of having that local presence and they are doing quite well in that space and what they're really looking for partners like state auto that have a also a digital presence and so.
The combination of the inefficiency of the market the.
The the bottoms, while others, who will start.
Exiting creates opportunities in that space for companies that have a level of innovation around their platform and their products, especially with things like telematics and some of the other changes that our team has been launching will continue to launch into 2020. So we're actually all in.
The auto I know some of you who look at the market from the outside.
Don't agree with that but we have a very strong feeling that we can win more than our fair share that business and.
We'll continue to pursue it.
Great. Thanks to the answer is we call.
Thanks, Paul.
Once more in order to ask the question is star 100 telephone keypad.
Our next question comes from Meyer Shields from KBW. Please go ahead.
Great. Thanks, and Mike. Thank you so much for the warm welcome.
So, let's stick with auto for a second.
When you talk about managing the books differently because that encompass handling the claims differently and can you talk about your capabilities on either ended the second.
Yes.
The core the core answer your question is no in other words, we have is very clear view and are in our claims organization that we wanted we fast we want to be fair, we want to be friendly and make process. Good now is there a change there possibly could be so for example.
You may see folks as there isn't as Kim call. It the better nonstandard standard there maybe a different time of day when when things happen then you've got to be thinking more differently about spreading year availability of your claims adjusters on a more 24 by seven basis and by the way we're not there yet.
After the understanding of that change you have to be more responsive to those types of issues. So I think our care organization is built to handle a handle the claims related issues. The bigger issue is that when you're thinking about the business.
You have to be.
Better at handling billing you have to be better at handles service you might have a different number of endorsements that are happening you may have a different type of payment related issues that could be happening, but most importantly, you've got to be very thoughtful about your pricing because on the.
On the business that's in that space.
Retention is never going to be as high as in the preferred space I think Paul asked about that book and gave us.
An appropriate to answer so you can't.
On the preferred business you may be willing to understand there could be some type of new business penalty for year, one and because you're anticipating the business to be with you for a long period of time, when you get into that middle space and ER and the non standard space you need to price that business for profitability from day one.
And so getting those rates right and getting that process in place is really where more of the issue that kims relating to in terms of steps that we've taken and so.
You know if you don't mind I'll just add one more thing there I may be going too far and answering your question I apologize, but this is this auto products like the other once we have this was a startup product in 2016, when we launched our vision I say that is people know that our auto performance prior 15 had not.
Had a really good history, and we have shrunk a lot of that business. So we build a new product and the evolution of that product. We just took another step Florida across 18, and 19 and it's unfortunate that we have these.
Quite frankly these bumps in terms of performance, but this is an evolutionary process and this company is has is adjusting to that so I really like your question because it really goes to the harder than matter, whether it's on the claim side, whether it's on building or whether it's on issuance or whether it's on rate setting we've.
Gadaffi sure we understand how to approach that business effectively and I think we've put in place the steps to do that so sorry that was all long answer for you.
No there was a phenomenal answer so thank you.
The second question.
Given looked at the fourth quarters above expectations catastrophe non cat weather losses, how are you thinking about reinsurance purchases for 2020.
Yes.
That's tivo weigh in on this we.
I think the biggest issues kind of private Texas homeowners fair, Steve, Yes, that's fair Mike here.
You know presently on the we have a property cat treaty as our retention on a group basis. So he has yet to be airclic clarify.
Is 75 million.
We're just now entering our marketing efforts and is already has the initial discussions with our broker as to what's going on at that marketplace and in some potential changes.
We're not quite through all that analysis, yet but I.
I think the real question is.
You know when we look at Dallas Fort worth is it going to have an impact you know on unlike what I'll call tail risks. So it might cause us to take a look at baby and had been on top.
As a real question is run out we properly priced and put in a cat load into that into that business. So that.
Over the long haul, we're going to make money when you're going to have years, where.
The up and down results, because when others that unpredictable. So I don't foresee massive changes in our reinsurance buying are structured but but it is is likely will probably at.
And.
I guess thats.
Great.
Okay excellent. Thank you so much.
Thank you Sir welcome.
Okay.
Okay.
We have no one else in queue at this time I'll turn the call back to not only schoolcraft for closing remarks.
Thanks, everyone for your question participating in our conference call and for your continued interest and support State Auto Financial Corporation is far to speaking with you again on our first quarter earnings call is currently scheduled for Wednesday may affect 2020, Thank you and have a wonderful that.
Everyone else has left the call.
Whitney Houston will appear on stage once again eight years after her dad hologram tour of the lead singer which starts in England on February 20 Festival project Houston onto a stage with real dancers and alive backing that and pet Houston the singer sister in law former managed.
Sure and the executor of her a state is producing the show in collaboration with base hologram concerts that includes most of Houston's biggest hits, including how will I know in saving all my love for you along with some rarities like a cover if Steve Woodward's higher love that Houston first recorded three decades ago base hologram CEO.
As they created the hologram the same way they did carry Fisher and the Star Wars movie Rogue One European tour runs through early April and U.S. States are expected.
Spacex seems to launch for tourists into Super high orbit, possibly by the end of next year, but don't expect any Supersaver affairs, it's working with another private company space Adventures incorporated for the flight, it's already help put tourist into orbit with trips to the international space station working with the Russians based program for this trip paying customers will skip the space station and instead.
Orbit two to three.
We.