Q4 2019 Earnings Call
[music] Good day, everyone welcome to selective insurance fourth quarter 2018 earnings calls at that time, all participants will be on live.
And only melt until the company portion of the call at that time. Kathy question, you may probably far long on your phone unequal good name and problem.
Time for opening remarks, and introduction I would like to turn Nicole over to senior Vice President Investor Relations at Treasurer Ryland Pie.
Good morning, everyone and welcome.
Bulk often called on our website.
I'll call the replay will be available last second 2020.
Ultimately, but the package.
GAAP reconciliations of any non-GAAP financial measures.
It always available on the investment based upon what I.
David will discuss other adult and business operations using.
Yep.
That ultimately filing <unk> quarterly.
For filed with the U.S. Securities and exchange submission.
Non-GAAP operating income, which we used patent life friends in operation leak makes it easier.
Obviously the insurance business.
Non-GAAP operating income.
Excluding the opposite that impact net realized gains or losses on investments.
Realized gains or losses of equity security and debt retirement costs related to early redemption that securities in the first quarter.
And statements and projections about future for fall. These forward looking statements under the private Securities Litigation Reform Act at 99, five are not guarantees of future performance.
Subject to risk and uncertainties.
For a detailed discussion on these uncertainties, Lisa Perclot annual and quarterly report filed the U.S.
Securities and Exchange Commission, you should be aware that selective also takes no obligation to update or revise any forward looking statements.
On today's call. The following members of collectors executive management team.
Like most be Chief Executive Officer, John Marchioni, President and Chief operating Officer, and must look our Chief Financial Officer, and now I'll turn the call over to Greg.
Thank you Ron and good morning.
I'll make some introductory remarks and focus on some high level themes and initiatives that enhance our strategy positioning us well continue to generate superior performance Mark will then discuss our financial results and John will review, our insurance operations in more detail, providing additional color on key underwriter.
And strategic initiatives.
Extremely proud of our stand out 2019 fourth quarter and full year results, reflecting continued strong execution across our underwriting and investment functions for the quarter generated record non-GAAP fully diluted operating earnings per share of $1.30 said.
Which translated to an annualized operating or are we have 15.2.
Our combined ratio was an exceptional 91.8.
And after tax net investment income was up 6% 47 million.
The fourth quarter capped off but overall stellar year for the company in which we generated strong premium growth of 7% and a solid combined ratio of 93.7 with underwriting operations contributing six and a half points are a week.
Our investment results were excellent with after tax net investment income, increasing 13% and contributing 9.1 points of our already.
For 2019, our overall non-GAAP operating our OE was 13.3, which exceeded our 12% financial targets.
Addition.
The change in unrealized after tax gains are available for sale securities of 169 million or $2 at 83 cents per share reduced our operating our OE by 60 basis points for 2020.
These unrealized gains will reduce operating our OE by about 100 basis points and that will reverse as these securities age.
2019 was a standout year for us in many respects with solid the operational highlights, including net premium written growth of 7% versus 6% expected for the industry average delivering our sixth consecutive year of double digit our lease which places us among an elite group appears.
That are generated similar results.
Issuing $300 million of 30 years senior notes in our first ever institutional debt offering which significantly increases our flexibility and provides access to attractive long term capital markets.
Being recognized for our superior operating and financial performance by rating Agency Am best who put our a financial strength ratings on positive outlook in October continuing to make progress on strategic initiatives, such as Gio expansion and delivering a superior omni channel.
Brings.
Making our community safer through the dissemination of recall notification and alerts coupled with our efforts to reduce distracted driving with our selected drive products offered free of charge to our commercial lines customers.
Receiving recognition as one of America's best midsize employers by Forbes and building a solar energy farm at our corporate office, which will annually generate approximately 4 million kilowatts of energy.
Highlighting our commitment to our communities and society as a whole.
Starting off 2020, there are a few specific topics I'd like to comment on.
First we're pleased with the direction of industry wide standard commercial lines pricing, which continues its upward trajectory and should only increased further in 2020 for selective fourth quarter overall renewal pure pricing reached 3.8%, which we expect will clearly established the pro.
Racing floor for 2020.
Our sophisticated modeling in underwriting tools allow us to administer price increases had an extremely granular level, while balancing retention and growth rates, we've been steadfast in our commitment to maintaining underwriting discipline, having consistently implemented commercial lines renewal pure price increase.
He says that have matched or exceeded loss trends.
Renewal pure price versus expected loss trends is the primary indicator of future underwriting performance.
For the past five year period, our compound new commercial lines renewal pure price was about 16.5%.
More than twice the towers Watson clip pricing of 8%.
As we look forward to the coming year, we are well positioned with expected renewal pure price in line with loss trend.
And excellent book of business.
And the sophisticated tools technology and best in class people to execute on our strategic plans second theres been a considerable industry focus on the potential for rising loss trends. We are certainly are keeping a close on overall loss trends, especially with respect to litigation.
Great and settlements estimated pure premium or loss costs are broken down into two principal measurements, one estimated ultimate claim counts and to expected average severity over the past two years, our expectation for overall loss trend, which is embedded in our loss picks that inc.
Increased from approximately 3% to 4%.
In addition, we maintain a very disciplined reserve methodology and position with a process that includes quarterly detailed ground up internal actuarial reviews as well as of semi annual reviews conducted by an independent big for accounting firm.
We are less susceptible to headline tight injury awards as our book of business is focused on smaller account business and lower hazard classes.
Our average commercial lines account size is 12000, an 87% of our casualty policies, excluding workers compensation have limits of a million dollars or less.
We also purchased reinsurance protection that limits per event exposure on casualty policies to $2 million that reduces our exposure to long term medical inflation.
Inflation, even social inflation is not a new concept the best way to protect your books performance, despite achieving consistent renewal pure price over time selective has consistently done this over many years.
Third while catastrophe losses were relatively moderate for the fourth quarter year, the risk of large unexpected losses remains per ounce climate related risks are leading to generally unpredictable unpredictability of catastrophe events, such as hurricanes convective storms loads.
In wildfires.
For the year, our total catastrophe loss ratio was 3.1 points, which was below our expectation of three and a half points.
In an effort to limit our exposure our catastrophe reinsurance program protect us on a 0.04% event probability to only a 5% impact on stockholders' equity.
Non catastrophe property losses.
We have also been consistently elevated for the past few years as an industry, we need to do more to managed property risks.
Corporately, including through mitigation initiatives risk sharing more diligent underwriting and consistent risk based pricing.
Finally, the prolonged low interest rate environment will continue to put downward pressure on industrywide investment portfolio returns.
Consequently, our lease in the coming year. This should result in a greater impetus for the industry you improved underwriting results in order to generate adequate returns with our pricing sophistication and agile execution capabilities, we are well positioned to benefit from commercial lines pricing tailwinds in the field.
Very confident and our ability to maintain attracted more leads.
Turning to 2020 expectations our guidance for the year is based on our current view of the marketplace incorporates the following one a GAAP combined ratio excluding catastrophe losses of 30 of 91.5. This assumes no prior year development to catastrophe losses.
3.5 points three after tax investment income of 185 million, which includes $14 million of after tax investment income from our alternative investments.
Or an overall effective tax rate of approximately 19 ahead, which includes an effective tax rate of 18.5% for investment income, reflecting the tax rate of 5.25 on tax advantage municipal products.
And a tax rate of 21% for all other items.
Weighted average shares of 60.5 million on a diluted basis now I'll turn the call to Mark to review the results for the quarter.
Thank you Greg good morning.
For the quarter, we reported $1.36 it fully diluted earnings per share at $1.37 of non-GAAP operating earnings per share both of which set company records. We generated a very strong annualized ROE you a 15.1% at a non-GAAP operating our we have 15.2% for 2019, our annualized non-GAAP.
Operating Ari of 13.3% was above our focus on Togut. The full year operating ROE was reduced by about 60 basis points due to the significant after tax net unrealized gains on fixed income portfolio that increased GAAP equity by $169 billion or $2.83 per share. These.
Turning to reflect the low interest rate environment.
Each year, we establish an operating ROE target those based on at least the 300 basis points spread over our weighted average cost of capital our outlook for interest rates and overall PNC insurance mode conditions for 2020, we've established a non-GAAP operating ROE target of 11%. The lowest August is principally a function of our.
Lower estimated weighted average cost of capital and the lower interest rate environment, which has put pressure on investment yields and as those are increase GAAP equity.
Consolidated net premiums written increased 8% in the quarter was excellent at 11% growth in upstate in commercial line segment, driven by strong new business growth and retention and accelerating renewal pure price increases. This was partially offset by premium declines in personalized DNS underwriting profitability remains.
Strong with a fourth quarter combined ratio of 91.8% driven by low level of catastrophe losses in our footprint as favorable casualty reserve development.
On an underlying basis or excluding catastrophe losses in prior year Casualty reserve development of combined ratio increased to 93.8% driven by the elevated fourth quarter expense ratio and some modest increases the 2019 accident year loss picks, which I'll touch on more in just a minute.
2019, consolidated net premiums written increased 7% with strong contributions from upstate in commercial loan Funniness segments. Our reported combined ratio was highly profitable at 93.7% and underlying combined ratio was an excellent 92.9%, which reflects 20 basis points of underlying margin improvement in two.
Thousand a 19.
This both despite delivered a very profitable combined ratio in 2019 of 93.7, which was almost two full points ahead about 85.5% combined ratio coal costs come into the year.
Underlying combined ratio ended the year 90 basis points above expectations. This was in part driven by the excellent calendar year loss ratio that drove the expense ratio up by 30 basis points above expectations due to profit based compensation with the remained largely driven by some modest fourth quarter adjustments throughout 2000.
19 casualty loss ratio pace.
For the year the impact of these additions to our 2019 loss ratio pace was 14.5 billion was 60 basis points and for the quarter. The impact was 11.9 billion a 1.8%.
Catastrophe losses, which as a reminder, relate only to claim specifically related to catastrophes designated by Pts were modest in the fourth quarter and impacted the combined ratio by one point, which is better than expected while non cat property losses resulted in a 15.1 point impact our role so slightly lower than expected.
For the year catastrophe losses accounted for 3.1 points on the combined ratio, which was better than our annual expectations of 3.5 points or non cat property losses of 15.8 points came in about 10 basis points higher than expected full year, our expectations that catastrophe losses were remain unchanged for 2020.
At 3.5 points.
In the fourth quarter, we experienced $20 million of net favorable prior year Casualty reserve development, driven by 35 billion of favorable development in workers' compensation line, and partially offset by 5 billion of development and general liability mobility, and commercial order overland and post all that liability and 2 billion in units segment.
The impact of net favorable prior year Casualty reserve development was three points on the combined ratio for the quarter and 2.3 points for the yen.
Moving to expenses our expense ratio came in at 34.1% for the quarter and 33.8% for the year.
The increase of 60 basis points for the year was principally driven by higher profit based compensation for our distribution partners and employees driven by our excellent underwriting results, we expect to pay out a record level of agency supplemental commissions for the 2018 year.
We expect some modest expense ratio improvement in 2020, which is reflected in our underlying 91.5 procyte combined ratio holdcos.
Over the next few years, we believe we can continue to improve operational efficiency drive down our expense ratio. Both also still making significant investments in developing our people improving our underwriting capabilities enhancing the customer experience continued product development and geographic expansion and other investments we feel important.
Manage the company for the long term.
Corporate expenses, which are principally comprised of holding company costs alone from stock compensation totaled 2.6 billion in the quarter compared with three portfolio into the comparative quarter with the decrease principally driven by a decline in and of salt products.
For the year corporate expenses totaled 31 billion compared with 25 million in 2008 days and included $3 million at one time items principally related to severance.
Turn investments for the quarter protect that investment income of 47 billion was up 6% from the comparative quarter.
For the year after tax investment income was up over 181 million was up 13%.
Improvements in both periods were driven by active portfolio management and excellent cash flows, which when combined with the net proceeds from a senior that operate in March of Drybar invested asset base five.
This was all partially offset by the lower interest rate environment, and a contraction of credit spreads that put pressure on new money approaches deals.
Overall, our after tax yield on the fixed income portfolio, including high yield bonds averaged 2.9% for the year.
The average new money yields of the fixed income portfolio drove year was 2.7 put some of the tax although we have now seeing five sequential quarterly declines with the full with the fourth quarter coming into 2.4% of pretax.
In addition, we've been managing down on floating rate securities, which now represent approximately 12% of our fixed income portfolio, which is down from a peak allocation of 18%.
Despite this decline at LIBOR over the last year, we still find the whole that yield of these occurring very attractive on a comparative basis, the similar fixed rate securities.
All in all the pretax book yield on our core fixed income portfolio decreased five basis points in the quarter and was down 14 basis points for the year.
On a go forward basis, we expect continued pressure on on book yield given the low interest rate environment. However, given our strong expected cash flow of 2020 of the fact that investment income guidance of 185 billion reflect some modest growth from 2019, although below our re contribution given the growth.
Stockholders' equity.
Our average fixed income credit rating remained strong at double a minus the effective duration of our fixed income the choice of investment portfolio as of the low end of the range at 3.6 years overall, we continue to have the portfolio conservatively physician.
Gross assets, which principally include high yield fixed income securities and alternative investment portfolio accounted for 8% total invested assets as of the ended the year and remains under way of longer term Togut alternative investments portfolio, which includes limited partnerships in private equity private credit and realize that investments that are.
Also the one quarter lag generated pre tax gain of $18 million for the gap, which was in line with 2018.
Turning to capital our balance sheet remains very strong with 2.2 billion of GAAP equity at increase of 22% for the year, our debt to capital ratio was 20.1% at year end, which is well below our target and provides us with financial flexibility.
We continue to operate at the low end of our premiums to surplus target range of 1.4 to 1.6 continents. This flexibility to the operating level when combined with a 278 million of holding company liquidity provides us with meaningful capacity the growth above market opportunities present themselves.
At 1.4 times operating leverage each few page combined ratio Qualys equates to just under one point of already in addition, our 3.05, probably this investment leveraged means that each point of pretax book yield on our investment portfolio resulted approximately 2.5 points of are we.
With regard to our reinsurance program, we enjoyed a successful renewal of our catastrophe program with January coast, we maintained our existing structure that keeps a one and 100 or 1% net probable maximum loss of PML from a major catastrophe risk us card game at a very manageable 2% of Capex.
And I wanted to 50 net PML point focus on profitability at 5% of GAAP equity.
We also renewed on non footprint catastrophe program across our retention from 40 billion to 5 billion for a five new expansion states as well as on United States outside of our original 22 state footprint, which includes states, such as Florida, Texas and California.
Pricing on the Cat program reflected the most free status of our account and our continued efforts to generate strong renewal pricing in our property portfolio and continued efforts to diversify our exposure.
As a reminder, our reinsurance program also includes our excess of loss agreements, which limits the impact to us of individual most losses to 2 billion for both property and casualty losses individual occurrences above $2 billion ceded under these excess of loss agreements with that I'll turn the call over to John to discuss our insurance operations.
Thanks, Mark and good morning, let me begin to a discussion of full year results of our operations by segment and then provide you with an overview of some of our strategic initiatives.
Our standard commercial lines segment, which represents approximately 80% of premiums generated 8% net premiums written growth for the year continually consistent track record of strong and profitable growth.
The segment generated new business growth of 8%.
They were retention of 83% renewal pure price increases of 3.4% and an excellent combined ratio of 92.9 for 93.7 on an underlying basis.
Commercial lines renewal pure price increases increased three 3.8% in the fourth quarter up sequentially from 3.5% in the third quarter.
We are happy with the overall direction of market pricing, although it is worth noting that the increases so far has been greater for larger accounts and specialty risks that for the small and mid market standard lines accounts that make up the majority of our book.
We pride ourselves on managing our renewal pricing strategy in a highly granular fashion closely monitoring re and retention by cohort of expected profitability.
Our analysis uses a point of renewal retention measure that removes policies that cancel prior to expiration as we think thats the best indicator of the effectiveness of our pricing strategy.
On our highest quality standard commercial lines accounts, which represented 49% of our commercial launch premiums, we achieved renewal pure rate of 2.1% and point of renewal retention of 91.
On the lower quality accounts, which represented 11% of premium we've achieved renewal pure rate of 7.8%, while retaining 80% at point of renewal our ability to analyze the risk and return characteristics of each renewal policy at an extremely granular level allows us to achieve additional loss ratio improvement.
Through mix of business changes, while maximizing overall retention.
Drilling down to the results for the year by commercial line of business. Our largest line general liability achieved an 89.6 combined ratio, which included favorable prior year reserve development totaling $5 million 4.7 points.
We will continue to closely monitor this morning for frequency and severity trends, including litigation rates, which have been relatively stable in recent quarters.
For the year, we achieved renewal pure price increases of 2.2% for this line, excluding umbrella and expect a firming pricing environment heading into 2020.
Our workers comp line generated a 74.1 combined ratio aided by favorable reserve development totaling $68 million, which accounted for 21.8 points in the combined ratio.
This favorable development related primarily to lower than expected severities for accident years 2017 in prior.
Renewal pure pricing was down 2.8% and we continue to take a cautious approach to underwriting this line as market pricing remains aggressive.
Commercial auto continues to produce disappointing results for us and the overall industry as elevated loss trend consumes earned rate increases.
Our combined ratio for this line was 107.9.
Well, we added $4 billion of reserves in both the current and prior accident years loss trends kind of remain generally in line with expectations.
Price increases averaged 7.5% in 2019 on top of similar price increases in each of the prior two years.
We've been actively managing noon renewable portfolios and target business segments, and improving rating and classification in an individual account level.
Our commercial property book generated a 93.9 combined ratio were 7.1 point improvement from 28.
Lower levels of low catastrophe and non catastrophe losses drove the improvement.
While market pricing has improved loss trends remain elevated indicate the need for additional rate level.
Our renewal pure price increases averaged 4% excluding in inland marine and we're taking steps to address the drivers of the higher loss experience through business mix shifts.
And safety management efforts.
Our personal line segment, which represented 11% of 29 key premiums reported a 2% decline in net premiums written mostly reflecting the more competitive market conditions or personal auto.
Renewal pure price increases averaged 5% and retention remained solid at 83% New business, However was down 21% for the year.
Market competition in personal lines, particularly for personal auto has become far more pronounced this year.
The segment produced a combined ratio of 97.3 were 88.6 on an underlying basis.
While maintaining adequate profitability remains a core focus will be doing more in the areas of product customization modeling enhancements and distribution to ensure we are optimizing our position in this segment.
In personal auto net premiums written declined 1% for the year in the combined ratio was 106.4.
Results included $6 million of strengthening for prior accident year casualty reserves, which added 3.5 points of the combined ratio.
Renewal pure price increases averaged 8.9% for personal auto liability and 3.8% for physical damage.
Benefit to improve profitability. These price increases are clearly putting pressure on new business.
With market price being under pressure in the favorable impact of loss trends diminishing we would expect deteriorating results for the industry in this line in less pricing picks up again.
The homeowners line reported a 2% premium decline relative to a year ago and a combined ratio of 96.5 that included 15.5 points of catastrophe losses.
As the majority of our premium is written on an account basis, our competitive positioning in the oil line has hurt our homeowners growth.
Renewal pure price increases averaged 3% for the year.
Rtms segment, which represented 9% of total premiums generated 4% net premiums written growth in 2019.
The premium decline in the fourth quarter related primarily to our decision to exit the snow removal business, which we discussed on last quarter's call.
The segment generated a 95.9 combined ratio for the year compared to 100.3 in 2018.
Overall renewal pure price increases averaged 4%.
Over the past few years targeted price increases business mix changes in exiting specific underperforming classes of business kind of contributed to the improved combined ratio performance in this segment.
Rtms book consists primarily of small account business with a similar risk profile to our standard lines.
While market pricing is increasing it is more muted for the lower hazard business. We right. Then go riskier classes that we don't such as large account casualties were coastal property.
Let me now switch to some of our strategic initiatives, which continue to drive our strong operating and financial performance. We're very proud of our accomplishments in 2019 and focused on the following core objectives as we move through 2020.
One using our sophisticated pricing tools to achieve standard commercial lines renewal pure price increases that are in line with expected loss trend.
To expanding share of wallet with our existing distribution partners and strategically appointing new partners.
Capitalizing on the investments, we've been making to delivery superior omnichannel customer experience and for identifying and addressing opportunities to enhance operational efficiencies and reduce our expense ratio over time.
Process redesign and technology enhancements.
We remain confident in the overall price adequacy and embedded profitability. Our book of business. We continue to achieve price increases were appropriate targeting accounts on a granular basis that are not meeting our profitability expectations.
The level of commercial lines renewal pure price increases we have seen increased during the course of 2019 in a 3.8% achieved in the fourth quarter are tracking in line with our expectation for loss trend.
If industry pricing continues to move higher as we expect we are well positioned to further improve underwriting margins.
Second our superior distribution relationships and sophisticated underwriting tools are clear competitive advantages, we will seek to capitalize on the on them as we execute on our strategy to generate profitable growth in the coming years.
Our stated long term objective is to obtain a 3% commercial lines market share.
Objective is built around a point the partner relationships that control approximately 25% of their markets.
And achieving average share of wallet of 12% across those relationships.
We have an additional commercial lines premium opportunity over time in excess of $2.7 billion. If we hit our long term plans and can do so without having to stretch our underwriting appetite or shift our risk profile.
During 2019, we appointed 98, new distribution partners, bringing the total to approximately 1300 54 2300 store fronts.
Third we have made major strides in recent years to enhance the customer experience.
During 2019, we made a number of enhancements to our self service in digital offerings, including a streamline activation process and live chat options.
We now have a 360 degree view of our customers that allows us to continue enhance our proactive communication program as we seek to create more customer value.
In 2019, we rolled out our new marketing tablets tagline be uniquely insured, which speaks to our differentiated value proposition for distribution partners and customers.
Investing and building out technologies that improve our customers experience remains a core focus for us.
Finally, while we recognize it is essential to continue investing in the initiatives related to our technology platforms sophisticated underwriting tools and customer experience. We're also committed to balancing these goals with an efficient operating structure.
We will look at a number of areas to improve efficiencies, including work flow and process improvements by lift better leveraging automation and robotics. We expect our 2020 expense ratio would be slightly lower than 2019, as we balance and our investment and expense management initiatives. We are targeting an expense ratio closer to 32% by the.
End of next year, and we'll seek further improvements in subsequent years.
Looking to 2020 and beyond we are an extremely strong financial and strategic position and are well positioned to continue generating superior results like we have in recent years, we haven't attractive book of Inforce business and have created a differentiated franchise with our distribution partners and customers.
I'd like to close by sincerely banking, Greg for it is 40 years of service at 20 years of outstanding stewardship as CEO of selective.
We transformed the company into a truly unique franchise in the industry.
Greg and I have worked and close partnership for much of the past decade.
We put in place a strategy that we believe keep selective on a path to be consistent industry leader and generate sustained outperformance.
Greg's new role as executive Chairman I will continue to benefit from his guidance and with them as they transition into my new responsibilities now I'll turn the call back over to Greg.
Thanks, Sean wrapped up another excellent year by delivering our sixth consecutive year of double digit ARR weeds, which places us among a very elite group peers that have generated similar results.
We had the best teams of employees and distribution partners in the industry.
At selective we're very proud.
About what we do as a company by one helping our customers put their lives back together by responding properly and with empathy after experiencing a loss to making our community safer by providing tools and technologies to our ensures such as weather preparation.
Yes, as well as vehicle food and product recall notifications, we are seeking to mitigate the risk of distracted reckless driving through the offering of selective drive free of charge to our commercial launch customers and three providing financial stability to our customers.
We are the best position in this market place with an excellent book of business and the tools technology and best in class people in the industry to execute our plans.
I could not be happier to pass on the reins of the company to John who will assume the role of Chief Executive Officer effective Tomorrow.
Paul and complete confidence that he will continue to transform selected into a truly unique company in the marketplace and an industry leader.
As we mentioned on our last conference call I will say in the role of executive Chairman for one year period.
With that operator, we'll open up to questions. Thank you operator.
Thank you Kim will now begin the question and answer session. If you would like to ask a question over the counter please press star followed by the number one on your Kelly.
Turning to record your name and company name one from your name and company name will be required to introduce your question Patrick hands on your path of Star followed by Q.
The first question is coming from Mike Zaremski from Credit Suisse. Your line is now open.
Hey, good morning.
[music].
First question.
Maybe just clarification on the combined ratio guidance that in a couple of questions. So the.
91 five.
Excluding.
Any reserve changes and caster fees and if thats correct that compares to.
That does a 19 number being 92, nine which would it imply.
Good deal if improvement or or am I incorrect and there is you are baking in some potential for reserve releases and 20 semi but let me start with that so so now there is no reserve releases there that number has the 2021. The 91 spot five is that as a number would know.
No no development no development in it and one of the things you have to remember there's a certain amount of expense ratio improvement and 20 over over over 19 to favorable development in 19 generated a lot of profit based compensation to employees to Asia. So you got a little bit of a mismatch.
You see some of the favorable developments rolling through in a line item that you exclude put the incremental expenses incurred 19.
We're as the in the underwriting expense ratio. So I just want to make sure you've got that point and that's about 40 basis points approximately.
Between employee and agents overall and so you have some of that element then when you look at the improvement Rolling the 20, the rest of a common strong resonate as I mentioned and John mentioned the renewals in the real price inline.
With trend and then there's underwriting and claim improvements outside of that I'd also add to some of the improvement.
And Mike. This is John we just add one additional points to the final point that Greg may relative to that underwriting mix improvement in particular, we site routinely every quarter that these difference in by cohort between our best.
Business based on future profitability, and we believed to be the 10 or 11% of our portfolio that we think has a higher expected combined ratio going forward by having a lower retention on that business at a higher retention on that business, we expect to produce higher combined with our lower combined ratios excuse me that is where regenerate.
Mix improvements that will give you loss ratio benefit in addition to the difference between rate and trends just whether to tie that together with the point Greg was making.
Okay.
That's helpful.
And.
The next.
Now I'll, let you might have said this in the prepared remarks, mark, but the general liability reserve deficiency sounded kind of minimal.
Do you have the kind of the the full year 2019, GL and reserve development kind of versus 18, and if you don't have it I can I can take it offline and and also you remind me Mark was there a.
It was TL part of the true up in the current accident year as swell in terms of the basis points you you mentioned.
Yes, Mike Let me walk you through that.
Yes, we did make some modest adjustments that a fourth quarter related to general liability on the prior accident year. It was the increase in the prior year with those of 5 billion.
But we had reflected some favorable development earlier in the years. So for the full year 2019 is actually 5 billion of favorable reserve development on the TL liability line at 2009 days.
That compares to just under 10 million $9.5 billion for the full year 2018, so relatively consistent when you're thinking about trends over prior years those in the current accident year.
Specifically related to the to 2019, we did increase the loss pick out the general liability by 2.9 points in the quarter, which was a 5 billion dollar impact we had a very modest benefit earlier in the yet so that when you put it all together for 2019.
There was it was a 3 million dollar increase relatively stable lawsuit was flat.
Just consider that a little bit of fine tuning go into into new accident.
Okay. That's that's perfect 10 and lastly.
John in your prepared remarks, I believe you you said litigation rates relatively stable past few quarters.
Is that are you referring to the what some other.
Firms have called out in the attorney Repped, revpas representation rates and and along those lines.
Well, we think about increasing loss cost that for the industry. It.
Guys think about it.
Especially in the GL our commercial auto line is is the attorney Repped freight is that one of the kind of biggest nodes or risk factors or is it predominantly the severity of the of the lawsuits or both.
So Mike this is John I'll, I'll start and I'll hit trying to hit both parts of that question. So there is a difference between litigation rates and a train rep rates and what we referred to in our prepared comments was the relative stability over the last several quarters in our litigation rates and Thats for all of our liability line. So.
Litigated file is one that is as the name indicates in litigation those are easy to track and measure and see a change over time, our tardy rack rates are going to also include files that are not yet in litigation.
They are the adjuster believes that there's a an attorney representing a client those I will tell you are not as easy for us or anybody else to measure because it's a little bit more of knowledge on the part of the claims adjuster to understand whether or not there is any been any attorney communication.
Those numbers will bounce around a little bit more they're going to be higher than litigation rates, obviously, because many of those will not ultimately result in litigation and I think that leads to an important point that we have stress on this topic in the past.
I would say really two fronts on this number one we do some modeling work and provide our adjusters very early in the claim lifecycle on files that have attributes that are more likely to result in litigation down the road what that does is make sure that we have the right adjuster on that file but make sure that their early.
Communication with that claimants.
It's going to put them more ideas about how that claim is ultimately going to be resolved and that will in many cases help us avoid litigated file now I turn it ties into your second point, which is litigated files generally speaking at a part of its going to be because of the severity of the injuries claimed by the claim it but litigated.
Houser generally going to carry a higher severity than and litigating files. Some of that is because of the costs have been ternium involvement, including your own and turning involvement as as the as the company.
But part of it is also going to be because you're generally going to have higher damage levels on both the property side and the bodily injury side Wenders lawyers and body.
Yes. So microsemi is that just Greg saw obviously too when you think about loss cost. It's frequency time severity, we closely monitor frequency activity and generally find that that is the leading indicator. The terms of the composite of your our breakdown your per pure premium how.
Claims are coming in so we closely monitor that and added.
Between that and it's very that John one over is really what drives the overall.
The loss ratio in the amount of lost solid.
Okay, and just lastly, the become clear that probably your colors always extremely helpful.
Are you seeing a little bit clearly given the right. There I guess the piccs were changed a little bit are you seeing a little bit of uplift and and loss trend.
For.
Mike This is John as Greg commented during his prepared comments, we have adjusted our view over the last couple of years of future trend expectations, which had been running around 3% are now pushing up closer to 4% just under 4% so that as reflective of what we've seen in our own.
Experience and again I think this is probably an important point that just stress. What we think is also a critical consideration way to think about changing loss trends in the industry, which is you really want to start by understanding how you feel about the initial loss picks.
That companies establish for their casualty lines and we've been very transparent about this and very consistent about this in all of our prior accident years in recent memory.
You will note that we talk about having an embedded assumption for future claims trends.
And that has always been embedded in our loss pick. We've also stressed the importance of achieving cure rate increases are pure price increases that meet or exceed that expected loss trend, which is a great way to think about the strength of the loss picks that sit on every one of those older accident years and I just.
I think thats, an important consideration way to think about that changing environment to the extent that does happen in it happens industrywide. It will hit the current and off and also hit the prior accident years, but we have had that embedded assumption for claims inflation in our loss picks very consistently.
Okay understood and Greg all the best in your new role as executive Chairman of the board. Thank you hi. Thanks.
Operator next question. Thank you for the next question is coming from Paul Newsome from Piper Sandler. Your line is open hi, good morning, and again congratulations to John Greg.
[music].
So little bit of a follow up the could we talk about rate versus the claims inflation.
I think if I read it right.
True rate increased levels are a little bit below 4%.
And does that mean that you'll be essentially pushing for more read.
All things being equal.
Next year to keep us up to the next in next year, you're you're you're at Recompletions.
So Paul this is Greg So that's why one we said that the three April established a floor.
The fourth quarter, we got three spotty in rate and we view that as the floor going into into 2020. So yes.
Okay and then.
I love to hear your thoughts generally speaking on the commercial business, which obviously has struggled for you and everybody else pretty much.
It doesn't seem like re underwriting.
Lease pre rate Purina is helping that much.
What are we missing there that that you think could be the reason why we the industry keeps falling behind.
Yeah, I think Thats, a great question and I'll tell you what what I think on also in the industry up principally was led by the way higher frequency counts over expected Thats what started and then I take it also so I think with that got Miss starting in 16 and roll through various AG.
Many years was just under estimation and I think that in part, reflecting some of the societal issues with regard to distracted driving.
Regarding core driving habits regarding a lot of issues with a lot of congestion on the roads.
Unemployment dropping people higher driving less experienced people on the road all of that add it and just the general road deterioration and then I'm avoiding potholes, although the place now it seems like but it's just a general deterioration of the infrastructure I think thats added to that.
And then I will tell you that one of the products that we off this like to drive product specifically earmarked at that were offerings that car into our customers free of charge. It allows them to manage their fleet that their maintenance records, but not only that its most important that it gives the driver score at the end of the weakest terms of how well they are driving which includes when they're on.
The phone.
What heartbreaking hard turning anything so that's a big when you look at the horse on effect, that's a big.
Additive factor that we can offer to our commercial fleets and then I would say the other part then is this whole issue around severity that worked its way in and so it where it was two areas that probably took a line that normally ran at about maybe three and a half the four in that neck.
The was destroyed trend standpoint, and pushed it to like seven.
And then so everybody was getting rate in in the six seven rate ill and Thats, where everybody is getting more of their commercialized, but that only started recently so all of this build up kind of caught everybody by I think a little that fall behind the April but I would tell you that there is a big improvement combined ratios occur.
Commercial auto drop from like 115 in the 115 area. We're looking at a one I want all six pretty much on an accident year bases that occurred year basis. So we actually feel pretty good about our improvement and when you look at where we're getting rate. That's obviously our lead line from a rate and it's just under 8%.
In terms of renewal and that's pure rate. So we feel that we can get ahead of it and we also feel maybe that the the frequency counts relative to vehicles as kind of apacs right now.
Yes, preaches acquire and Rose 11, Illinois.
Thanks for the glad to answer is in good luck in the next year. Thank you.
Thank you and the next question is coming from Amit Kumar from Buckingham Research.
Line is open.
Thanks, and good morning.
I had a few follow ups on a same discussion as well.
Just going back I guess Paul's question on pricing versus last call at the margin.
I think I'm oversimplifying, this a bit but I would have Todd.
Now with the tie to correct.
Pricing.
And maybe you can you just help me understand the did that a bit better is it a function off the loss trend to near full launch an entre counts.
But I would have thought that maybe the trajectory of pricing over 2020 local aligned with it being.
Had different.
Yes. So I meant this is this is John I'll start so I guess first for US based on the fact that we are achieving our target margins and I'll focus on commercial lines here for us. The conversation is more about price adequacy than it is about price maximization. We that's what we believe in and that price adequacy is in terms the.
Overall portfolio and it's also on an account by account basis, you have seen with that in mind, though some sequential improvement and it might appear slight but when you look at where our margins are that slight sequential improvement as a positive indication. We don't include in our numbers any exposure any exposure change and I think when you look.
What's happening in the industry you are seeing a lot more exposure included in the pricing numbers that are being put out there and while there might be some portion of that price number or exposure change that does acts like rate much of it does not so we give you what is probably the most conservative view and insight into.
Pricing, let's also remember we don't exclude workers comp from our number and you know and arguably would exclude workers comp, we probably should excluded from our combined ratios as well to make the analysis clip complete. So that's that's it's still a bit of a drag now that said, we do think that and we've reacted to it by raising.
Our last star future loss trend expectation up closer to four and that has caused us to view the rate need in our portfolio as a little bit higher and therefore, we expect a push that as the year goes on not art, we're going to still do it on a on a very targeted basis, though the business in our portfolio that doesn't justify.
By a meaningful rate increase won't get one because our view is we're going to do what we can to protect that portfolio. The flip side for that is going to 10% to 15% in the portfolio that we view as having worse than desired combined ratio future combined ratios is going to be the focus of our effort and we're going to achieve.
Higher rate levels. There. So I guess, that's hard to respond overall in terms of how we think about the pricing environment and the other point I would also reinforce is if you look at the Willis towers Watson clips survey, which we do site frequently and great cited earlier and look at it for the small account sub segment, you're going to see a much lower number in there.
And a lot of the price headline is coming out of the specialty and DNS areas is coming out of the coastal property and very large property accounts, we haven't seen it as much in our core small and middle market.
Lowered medium hazard risk based space that we're predominantly focused on.
Okay, that's a fair comment so.
Is it possible and I completely agree and appreciate your comment on exposure since it's simply not apples to apples looking at your numbers versus others.
Do you have the number excluding workers comp for the quarter or maybe even like talk about it so in generalities, how much the delta with fee. It takes the workers comp from the pricing yeah. So and we gave you some of the pieces and I can calculate on the fly for you when it would be ex comp we'd have to wait it out but so Joe.
Ill, excluding umbrella once was 3.3% for the quarter commercial auto was 7.8 commercial property was 4.1 and Bob for US, which is a smaller line was 5.3 and then you've got workers comp at a minus two seven so you're probably looking at something probably closer to 5% roughly.
If you were to look at an ex comp number maybe a little bit above five on an ex comp basis.
Got it okay.
Okay. That's good.
The other question is also follow up on.
The litigation trends and.
We did talk about this and several conference calls and.
Thank you talked about this I know in the past you've talked a better LIBOR.
The question is non driver.
Can you.
The new set of looking at your trend line on the litigation trends and then you look handled the reports out there, which looked at litigation trends et cetera.
When you look at their own book do you think the reason why we haven't seen.
That level of increase activity versus some of the larger companies is it more because of the account size it.
The geographical make or maybe it's a combination of all of it but maybe just talk about that a little for more so that we can get some confidence that these trends will remain stable.
Versus some of the other larger companies yeah. So I think there clearly our differences said you would expect differences in terms of where the plaintiffs bar is going to target.
In terms of individual companies and the type of company. We do right is going to be less of a target, but I think we do look at that.
Question Harry trends are claims inflation has not just entirely focused on the headline litigation or headline settlements amount that you see to the extent thats happening. It ultimately start to make its way up and down the marketplace I don't think Theres a geographic difference when you look at our footprint our footprint is concentrated in the eastern half of the.
Yes, what some of the southwest expansion, but for us.
I also want to look at the hazard levels, and we do still right a predominantly low medium hazard class of business with a little them as profile and I know a lot of companies site. There are limits profile and ours is certainly on the lower end for most and that will provide some some protection. If in fact, we do see an acceleration of.
Claims I'll also say that while our own litigation rates haven't really moved as we've mentioned and we focus in terms of our view of our reserves on our own experience, we certainly pay attention to what speed stated what others are saying in the into broader industry and have a keen eye on that relative to what might potentially emerge.
But the sit here and say with clarity that frequency or severity trends are going to be X or Y in future years is just talk to to get comfortable.
Got it other than the last question I have is on the GM.
Hello, Thank you and responding to Mike.
And I go back and look at the transcript.
My understanding was there was adverse stuff.
It is and deal with that from.
Right.
2018, 17, I didn't get get that details.
For the moving parts of the five thanks.
Yes amended market. It was 5 billion of adverse development in the quarter.
But I think it's best to look at the full year, which was five bill and a favorable development in the general liability line. So there is obviously always some quarterly volatility it's a relatively small numbers on a big book of business.
Its reflected a little bit of fine tuning in some risk factors go into into the do fit into the new yet and then as it related to the current accident year I mentioned associated to that but just for the sake clarification. It was also 5 billion over 2019 accident year.
But we had a modest.
Benefit earlier the yet.
So for the full year was 3 million so thats, the three and as a five it's a bit of a wash against the card in the prior related to GL line reflects a line of business.
We've had.
Reasonably stable trends.
Yeah, and then there was that related to like an account or is that just more fine tuning across the book.
It is fits more it's more across the book and when you think about that small dollar number across multiple prior accident years. If there is how do you were going to be and individual Uri would look at but I would say would definitely have been more and more recent accident year 17 18.
Got it that's all I have thanks for the answers and a.
Good luck in Euro newness neutral to Greg. Thanks. Thank you. Thank you.
Operator next question.
Thank you next question is coming from Mark you've already from RBC capital markets.
Okay.
Yes, good morning.
Let me just start by giving my well wishes to Greg I very much appreciated your valuable insights and you will always be among the Ivy League of Ceos in my book. So good luck to going forward. Thank you. Thank you Howard.
My first question just something fairly simple.
Corporate expense line item as much lower than the nor other quarters. I think this was the same thing as a year ago. Just it is there something ms or credit or some seasonality or something but I thought the comp expense alone would have been more than 2.6 million in the quarter.
Yes, Mark is smoke Wilcox said, let me jump in and Craig its own could could follow on as well as corporate expense line item does have an element of volatility and a little bit a seasonality to it.
So it was running into $35 billion range of he is back it was 25 million lowest in 31 this year.
It mainly includes it's all but mainly includes stock based compensation in a portion of that call. It 25% is what we call liability based.
And so there is some volatility it is driven really by a couple of back as one that is a big growth factor into.
There's also a.
Total shareholder return back then and the reason it was down in the quarter was soft had a pretty big sell off until well aware in Q4 and that growth.
Benefit or credit in that line item in the quarter.
I just as a reminder, as you look ahead to 2020, there is some seasonality typically see a heavier upfront embedded low could not in Q1 of the year related to their corporate expense line items, given the retirement eligibility as opposed expensing of stock based compensation for those individuals that out replies and eligible and received an award.
And I would say just the changes that we that we made due to the plant overall now that you have all the years that are now eligible to be expensed in theory back three year period under the new plan. It will reduce the overall amount of volatility in line.
Okay. That's a that's helpful. Thanks.
Second question.
John you provided some pretty good.
Pricing segmentation information with respect to the the commercial lines book.
Do you have similar information you can share related to the and I spoke.
Well, we haven't traditionally I can tell you that we do a similar segmentation when it's more based on a industry classification and our targets our target a pricing levels to achieve our target or are we do certainly manage it that way internally, it's just not something we reported about extra.
Finally, but it's the same very granular approach that we take in managing both new and renewal business in the enough segment.
Okay.
Yeah.
Staying on the DNS book.
Additional a insight you can share related to the reserve addition in that business I know, it's kind of gone back and forth over the years, but.
Is there anything different about.
Loss trend or litigation or anything there mark it's so small as it is.
Not even that large solid I would say, it's just minor yearend adjustments that come through based on off slight modifications, it's not material. It really slots significant involved here was to believe that current quarter our than prior to the hearing to delay to the current quarter of the current aggregator David.
Relatively modest again, a little bit of fine tuning goaded as we roll over into new accident year. They can show, we feel confident in our reserve inventory.
But nothing I think we'd point so to the trends I think the good news obviously with the in US segment Intel highlighted in the.
A strong level of profitability, it's best year, yet from a profitability perspective, any that's still to look to be done.
To to drive towards the targets level of risk adjusted profitability. It adds.
The that reserve last year, we had a $12 million additions so.
That is the right direction.
Fourth quarter lighter adjustments.
Yes out now it's going to that Mark I mean, we've come a long way.
Yes about target surcharges to Jami.
We track that we need to tell you exactly where the new renewable list and we are been.
In this market, we fall for the past met several years.
Never been totally satisfied with what we've been getting all the amount of increases that we are getting on renewals side. We have seen changes that we have done a lot of work on our renewal inventory to get them closer and closer to where our target surcharges need to be and we have been very happy relative.
To the new business that we put off the books and where that is relative to target surcharge. So that's come a long way and.
Okay, you know us we put in a lot of discipline in it and we want to make sure that that business is profitable. We always told you that.
The top viable up or down Bob more based on market conditions and that I think.
What will happen over time.
Okay. That's helpful. And then one last question. This is Greg I suppose it's more of a almost a buck question as anything else but.
It's a I'm trying to gauge it kind of the sense of where the where the market tone is or the mom. The from the customers perspective as you go to customers with with renewal rate increase requests at whatever level, they happened to be 5%, 2%, 8% whatever.
I mean, what kind of push back are you getting I mean, our people understanding of the need for rate.
Is it is it more than unusually adversarial, how does that conversation go at this stage, Yes Park. It's John So obviously the answer is going to be it depends it depends on on US the size of the rate increase in it depends on the individual producer who owns that relationship at our independent agency and their approach.
To managing that process I will say for us.
We have really pride ourselves on maintaining that routine balance between price and trend over long period of time. So we're not in a situation, where you've got a 10 or 15% repeat under overall portfolio. So that minimizes the impact overall when you think about what we're asking of our agents in terms of.
Selling increases now that said, we do have very specific discussions and expect our agency partners to be able to have that specific discussion with that smaller percentage of the the inventory that is going to get a higher than average increase based on risk characteristics or experience or that account and I will say that based on our.
Overall retention and our retention by cohorts the customers understand that and our distribution partners do a good job of explaining that.
So I I don't necessarily feel like that's a huge impediment at this point executing on our pricing strategy, but I will say if we just took an across the board approach and we're trying to fix a loss ratio problem, which were not it would be a lot harder to execute in this kind of an environment because there are enough companies like.
We are that are well positioned with their pricing sophistication to go out and take those opportunities that are that look attractive when a company is taking out across the board rate increase the end markets right. So the other sites that to really.
Comes down to more the general economic conditions, so with GDP growing business is growing top line revenue growing price increases are rolled it easier to take in as a customer versus you know years ago. When GDP was not growing and you're trying to raise rate and everybody's looking through their balance sheet looking through there.
PNM to figure out what expense lines. They caught up does make it a little bit easier relative to that and the other points all that John made earlier.
Relative to what we're doing a customer experience relative to everything that we're doing to build more customer connectivity, whether it's our security mentor product that we recently rolled out our drive product the product recalls that we're offering all of the additional work that we do that build more and more contact.
Ability to the end customer we want to make sure that well when we do need to sell larger price increase someone would sit there and say okay. This is all the value that I'm getting from selective and it's not just the insurance policy its way more than that and we believe that over time that should.
To help our help our retention help our net promoter scores help all of our own sat scores and everything else that we track internally that that will make it make a difference long term.
Thanks, very much for that I appreciate the the additional insight thanks.
Thank you and the next question is kind of from Matt Carletti from JMP. Your line is now open.
All right. Thanks, just have a quick one wanted to ask a question on workers comp.
You know growth was yeah.
Up 5% in the quarter in the strongest number we seen in a while actually first positive we've seen in a while just wanted to ask what's going on there I mean, I think you gave us the rates. We know it's not that is that good new business production underlying kind of economic.
Work activity was there some audit premium to catch up just what kind of gave us that growth quarter.
This is John I would say.
Again remember, we write predominantly account business and very little Monoline Workers' comp. So you want to think about workers comp growth in the overall context of the very strong quarter. We had in commercial lines commercial lines growth was down 11% and that was driven by both strong retention and a solid.
New business quarter, and I would say when you look at the growth in comp relative alliance, it's still the lowest growth wanted that percent, but stronger in the quarter, certainly I don't I wouldn't necessarily as you said pricing wasn't that materially different than we saw in the first three quarters. Obviously, we had a stronger growth quarter overall and that helped a little bit the growth in that.
In the workers comp segment, we have not seen meaningful change in the competitive landscape in comp I will tell you that continues to be especially for small lower hazard workers comp probably the most aggressive market and anymore segment that we plan.
A lot of companies continue to be very aggressive and we love our results, we love our book of business.
We feel good about the book of business, we have but we also recognize that.
Loss trends in that line can't continue the downward trajectory they've been on for both frequency and severity and we're just being cautious about growing that relative to the overall growth for the commercial lines operation.
Got you just kinda time that last comment there together I mean am I right 10 for that as you go through the component pieces of you know obviously gave us guidance that implies kind of accident year margin improvement 20 versus 19 for the overall book that this might be a component where it might tweak the other way a little bit that rates rates down a few.
Ascent and I mean, unless trend continues in that direction, which it sounds like it's not an assumption that you'd you'd make off the bat that that might be a component that goes a little bit the other way as we go forward.
Yes, I regret we give you overall combined ratio guidance, we don't give it to be by line, but based on how we talk about rate and trends.
I think the way you've described our view of comp which would be a fairly accurate description.
Great well, Greg and John Congrats and best of luck and going forward. Thanks, Matt.
Thank you.
Coming from Ron Bobman.
Your line is open.
Hi, Thanks, a lot Greg you been awesome I sure have learned a lot and you've always point us in the smart direction. So thanks.
Greg a little while ago in the call you mentioned the commercial auto combined was was at 115 and now.
One of those six but.
I'm wondering what sort of the but what window what quarter or what you were sort of referencing that I had those numbers right.
The the movement occurred over.
Yes, So let me just pull that out in a second homes.
Trend lines here so.
All right so for.
2000, and so year to date.
Commercial auto in an 18 the cap the combined ratio call. It a buck 16.
Was the calendar year trends.
And the accident year was plus eight.
Pretty close to that in the in the underlying combined ratio for that year and now we're running I'll call. It.
You know the Cabot has this 2019 year commercial auto you know the combined ratio was a blockade and the and the underlying combined ratio was like 100 and all in 107 that could look so that gives you a little bit ideas to the movement and what was happening and that's what I was referring too early.
Gotcha, and we'd be given how rates have been should I think that Q4 19.
Numbers are marginally better than the one or wait in one or seven that that was booked for the whole year or have there been pretty consistent yet on I think there the way we build our plan.
Is let's put it this way the we are planning process works. The base year is a four year average and then we're projecting that forward. So we look at any liability line.
We're estimating a free break it down and ultimately to a frequency severity dial in number amount and then that ratio is pretty consistent and liability throughout the year, we're not market waiting our price adjusting a quarter to quarter. So generally speaking on any liability line you'll see on.
Yes, we're making modifications to it it would be to same ratio every every quarter. What you do see in the volatility commercial auto, though could be the property side and that could be whether specific so factory comfort in rock, whether it be comfortable property damage, which would be on the liability side, but it also could come.
Through physical damage on that side, and that's what could create a little bit more up and down on that number versus a straight liability line like GL our AR.
Or workers compensation, where you'd see virtually the same kind of ratio old throughout the quarters.
Okay. Thanks.
You mentioned I think just qualitatively, but I could have missed it retention I'm curious to know how commercial lines retention was in Q4 as compared to Q3 sequentially. Please yes. So retention for commercial lines was 84 in the quarter and I give it a full year number which was 83 I don't have the individual.
Three quarters, but that would suggest that it was relatively stable a year ago Q already seeing it was a little bit already traded throughout the year, a 40 340 or so in the full year these 3% relatively stable retention.
Yes.
Gotcha, that's great elasticity as far as that supporting your to push more rate I guess or.
You said, a baseline as Greg said going into 2020.
Thank you for picking up on that.
Last question the.
[noise], putting aside selective.
And you highlighted really small Ns book as compared to your admitted book from a more general perspective. This this.
Challenge of increased loss cost.
A portion of which you know is.
Driven by attorney representation, and the distinction between that and litigated claims she.
Do you think that in N.S. book would be more resilient.
To that.
Hi challenge than any admitted book.
We're not board pits, both you're going to sort of the face the same delta.
From loss cost inflation being driven by.
Litigation or turn representation in one form or another rod. This is John I I would say generally speaking I don't think it's going to be that they're pretty but it also depends on the on this segment of the N.S. market. We're talking about I do think if you're writing in the in the space of Vms market that is really high exposure proud.
Alex a higher hazard classes of business are you might see a little bit more of an acceleration in terms of claims trends, but I would say for US you know our book is predominantly small contractors small habitational small restaurants.
And Murphy feeling service businesses small women's profile not held high profile exposures it would be more akin to what we would expect to see in our standard lines book.
Yes, Greg Greg quoted a number earlier on that limits profile for casualty with the standard commercial lines familiar to less than 87% of the book at an inadequate casualty for the million dollar and below its 98% so.
Very simple as limits profile, even perhaps a little bit more conservative in it and again and I don't but everybody every as everybody focuses on the issues that could rise will raise loss cost, we do as well and I just want to make sure we get out.
As a tremendous amount of effort internally in the organization John touched on the on wind farm litigation propensity models that the escalation models that we have what we're doing in the area of complex claims some of the other work that I know, we're starting on relative robotics in certain areas, where we're also do.
Going to find out when we looked at losses and sit there and say what is it that we can do to help mitigate some of the losses, whether its notification whether its of education and and we've got a lot of efforts on that and those are things that will pay off on the longer term and normally would not.
Getting enough machining credit come through.
In the in the near term relative to loss ratios, but they are part of App analyzing the loss costs analyzing how you get back to strains analyzing how in some other things you could do uninsured tech tough to help me mitigate that are all things that.
We need that we need to be focused on to reduce loss cost. So you know those efforts are underway.
But we will pay off over time.
Thanks, Greg Thanks, a ton again, great and you're leaving US I think.
Well so.
Well protected and well led with John take care and he runs.
Thank you and me showing no further questions. Thank you at this time.
Hi, everybody I appreciate the comments for everyone. Thank you. If you have any follow up roll on and Mark our available. Thank you very much for all your questions today are interactive call. Thank you and kick.
That concludes today's conference. Thank you I'll be your participation you may now disconnect.
[music].
[music].
[music].