Q1 2020 Earnings Call
At this time, all parties or any listen only mode.
After the speaker's remarks, there will be a question and answer session.
I'd like to ask a question. During this time somebody press Star then the number one on your telephone keypad.
He would like to withdraw your question press the pound key today's call is being recorded.
You have any objections. Please disconnect at this time.
I would now like to turn the call ever to director of Investor Relations, Italy Schoolcraft. Thank you. Please go ahead.
Thank you Shelby good morning, everyone. Welcome to our first quarter 2020, <unk> earnings Conference call today, I'm joined by our Chairman President and CEO, Mike Morocco.
<unk>, President and CEO, Oh, not public so something for senior Vice President and CFO, Steve English. So it was unable to join us today.
Senior Vice President of personal and commercial lines again, managing director of state auto where else can garland.
Senior Vice president of data and analytics to some bercy.
She actuarial officer, Metrotech, and Chief Investment Officer, Scott Joan.
After our prepared remarks, well open the lines for questions.
Our comments today may include forward looking statements, which by their nature involve a number of risk factors and uncertainties, which may affect future financial performance.
Such risks factors may cause actual results could 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, that's all that our annual and quarterly filings with the Securities and Exchange Commission.
Financial schedules competing reconciliations of certain non-GAAP measures along with other supplemental financial information are included as part of our press release and available on our website <unk> Dot com under the Investor section now I'll turn the call. It hurts us steel sees chairman President and CEO, Mike Morocco.
Mike I think you maybe speaking on mute.
Can you hear me, though.
Yes, we can thank you okay I apologize.
Thanks, Natalie and good morning, everyone first so I hope everyone on the folded safe and healthy.
I want to begin with some observations and comments on coke.
I would be remiss docie start by talking about or state auto cheap within one day, we transitioned to a remote workforce.
The foundation that made this possible was or moved to a digital company over the last four years.
I cannot emphasize the Gulf the significance of that work.
As I've spoken with folks that met over the last 40 years in this business I know that many of our competitors struggled and are struggling with constructively working in a remote world.
There was no break into sales service and claims handling for state auto agents and policyholders.
The other factor that made the transition. So Cmos was a unique culture, we have at state auto.
Our associates embrace the need to work remotely and nimbly made to move.
They prioritize it customers and did what was needed to meet their needs. Most importantly, our culture, which places family first allowed them to meet their personal needs at this challenging time.
As a company we made decisions very quickly to work with customers, who need flexibility regarding payments payment plans in fees when possible. We do some of our core. She works. We're struggling financially as result of the stay at home orders and the economic slowdown.
There would be some financial impact it was the right thing to do.
We took a bit more time before deciding about any returned a premium program.
The fewer miles being driven.
Being thoughtful before taking action was critical because things were changing so quickly.
Offering a short term returned a premium based on one or two bought did not seem fair since with the benefit of time. It was clear the Corona virus impact would continue well beyond just a couple of months.
Our two pork plant began by all 3% to 5% discount on personal auto policy holders as of June 1st their full premium beginning that their next renewal.
Approved by our regulators this will allow us to better recognize the fact that the pandemic will last well beyond the spring and the renewal. This call may provide a larger returned a premium rather than only give it a partial one or two months credits.
Second part of our plan was to encourage adoption of telematics.
Oh, good is a harsh awakening that usage based insurance is a smart choice.
Since announcing this plan, we have seen an increase in telematics election and usage.
While our focus has been taking care of customers and making sure. Our associates are safe and healthy we have had to be a wearable legal and regulatory threat as result of cobot, especially on the issue of business interruption insurance.
Our commercial policies require direct physical wasser damage to property and many of them also include a virus exclusion.
We're very confident that our b. I exposure is limited and thus artificially expanded through changes in like legal precedent, a national program or governmental mandate.
Regarding workers compensation, we support the pain of claims from medical professionals, who are on the spotlight of this battle.
Of course overall, our crop exposure is very limited about 5% of our total net written premium and approximately 20% that isn't medical related classes.
Overall, we have adjusted well in these unprecedented times and we simply hope our associates agents and policyholders continue to stay safe and healthy.
This quarter was severely impacted by the Nashville tornado and specifically three large commercial losses.
Tornado had an 8.3 point impact on the quarter and these three losses were 4.6 points a battle.
Overall cats in the quarter accounted for 12.7 points out our loss ratio versus 5.9 0.1 queue up 19.
It was an unusually high level of activity driven by those three large losses.
Excluding the capture was another excellent quarter for state auto and continue to demonstrate how we have emerged as an innovative creative and competitive PMC player.
Virtualized once again led the way with another qual quarter of solid performance all lives, except workers compensation that excellent growth. Another indicator of how agents have embraced our digital platform in commercial lines as well as personal insurance.
In personal lives, we took bold and aggressive steps to complete the process of meaningfully reducing underwriting leakage and improving our pricing model.
These actions along with the reduction of miles driven should lead us to an earlier returned to profitability across our largest slide that I had initially anticipated.
Homeowners continues to perform well with another strong quarter growth.
Growth in this line of business has begun to spread across the majority of our states supporting an important piece of our strategy.
Finally, we are in the last stages of our digital platform rollout.
The product left in watches workers compensation, which should begin by the ended the year.
As I've said on previous calls this moved to a completely digital company and the short a period of time is an amazing accomplishment did as prepared state auto for a long successful future. Sadly you took cobra demonstrate just how well we have made this transition to digital.
As we ended the first quarter of the quality of what we have done has never been clear and with that I'll turn the call over to Matt.
Thanks, Mike and good morning, everyone.
Earlier today, we reported net loss per fully diluted share of $2.62 compared to a year ago at which time, we reported net income fully diluted per share of one dollar and 12 cents.
On an operating basis, we reported today, a net loss per fully diluted share of 18 cents compared to 31 cents of income in the first quarter of 2019.
The impact of unrealized losses on equity securities and other invested assets in the first quarter of 2020 compared to unrealized gains in the first quarter 2019 can be seen by comparing these per share amount.
For the first quarter of 2020 on a pretax basis net investment loss included $138.7 million of unrealized losses, while the first quarter of 2019 included $48 million.
Unrealized gains.
I will comment further on investments in a moment.
While we showed strong growth in net premiums written a 13.2% compared to last years quarter.
Our underwriting results were negatively impacted by greater amount of catastrophe losses.
The GAAP combined ratio for Q1 2020 was one of those 7.2, a 7.5 increase from last years Q1, GAAP combined ratio.
The cat loss ratio was 6.8 points higher this quarter than it was the first quarter a year ago.
As Mike mentioned, the Nashville tornado contributed 8.3 0.2, the one Q2 thousand 20 cat loss ratio.
Less favorable development in the first quarter of 2020 as compared to a year ago also contributed to the increase Q1 2020 combined ratio.
On a segment basis, our personal lines segment grew 10.5% in the first quarter of this year compared to last years first quarter.
With a reported statutory combined ratio of 99.6 compared to a statutory combined ratio of 97.9 in the first quarter of 2019.
The 1.7 point increase and the combined ratio was driven by adverse prior year loss reserve development in both auto and home.
Offsetting improved catastrophe and current year non cat loss in L. AG resolved.
The expense ratio also improved eight tenths of a point.
The adverse development in auto was driven by higher than expected severity, primarily from the 2019 accident year for bodily injury property damage and personal injury protection, particularly in Michigan.
The adverse development in homeowners was related to higher severity on fourth quarter 2019, third party liability and property claims.
First quarter 2020 personal auto results benefited from early trends of lower levels of claims for all coverage is attributed to fewer miles driven.
Kim Garland, we'll have more on this and on pre trends in his comments.
Commercial lines grew 17.6% in the quarter compared to the first quarter of 2019.
With a reported statutory combined ratio of 118.3 compared to a statutory combined ratio of one or two for the first quarter of 2019.
The headline for commercial lines in the quarter, which catastrophe losses.
<unk> increased 19.3 points, while the non cat loss ratio and expense ratio were improved and relatively stable compared to the first quarter of 2019.
As disclosed in our press release, three individual commercial losses, resulting from the Nashville, Tennessee Storm that occurred in early March of this year, we're quite significant.
Adding 11.4% point to the overall commercial lines combined ratio.
The Nashville Storm and total added 19 points to the commercial lines combined ratio.
Development of prior year loss reserves continues to be favorable and in total for the segment was reasonably consistent with the first quarter a year ago.
All in all four of six products produced combined ratios below 100 in the quarter.
With the exception of middle market commercial which was this disproportionately impacted by catastrophe losses.
And workers compensation, which continues to be a challenging market.
Again, Kim will provide additional comments in his prepared remarks.
For investments in the quarter, everyone is quite aware of the impact covert 19 has had on current and future expected economic result, and its impact on market.
I would like to point out that Stfcs equity portfolio does include Master limited partnerships for MLP.
That are involved in the oil and gas industry and was an asset class showing weakness before the emergence of coated.
We have made a decision to methodically exit this class over the next few months as the market evolves.
As of December 31st 2019, the market value. These securities totaled $85.2 million and in the first quarter of 2020, we recognized $1.1 million and realized losses and $46.6 million of unrealized losses.
Both of which are included in the income statement caption net investment gain loss.
The market value of the MLP is in our portfolio as of March 30, Onest 2020 totaled $32.5 million.
These securities historically carried above.
Market dividend yield, but their market values have materially dropped over the past two years.
Exiting this asset class is expected to put pressure on our net investment income results as reinvestment rates are still at historically low levels.
We maintain a portion of our investment portfolio and relatively short term and highly liquid investments to ensure the immediate availability of funds to pay claims and expenses.
On March 19th of this year STFC through its wholly owned subsidiary state Auto PNC.
Entered into a short term loan agreement with the federal home loan bank in the principal amount of $60 million at an annual interest rate of 38 basis points.
The loan which matures on September 2nd of this year is for general corporate purposes, and as intended to provide additional liquidity due to market uncertainties and volatility.
Finally, our reinsurance treaties typically renew each july 1st.
We recently completed a 15 month property per risk Treaty Incepted as of April 1st 2020.
The Nashville, Tennessee commercial losses, along with loss activity from the last six months of 2019 generated recoveries that exhausted the limits provided by the property per risk Treaty, we renewed on July 1st 2019.
The 15 month Treaty, which is on a group basis expanded the term limits from $38 million to $54 million.
We retained the same 4 million dollar retention.
With a $6 million excess of 4 million dollar layer and an additional $10 million excess of 10 million dollar layer.
We are co participating 19.5% on the Sixmillion excess 4 million layer and 14% on the 10 million excess 10 million layer.
With that I'll turn the call over to Ken.
Thanks, Matt and good morning, everyone.
There are a lot of moving parts of this quarter I'll try and walk you through them all.
Our overall personal lines and commercial lines results are the following combine personalize and commercial lines had a combined ratio of one of 7.3 and written premium growth of 13.4% first quarter of 20 versus first quarter of 19 commercial lines had a combined ratio of 118.3 with written premium growth of.
17.6 personal lines had a combined ratio of 99, six with written premium growth of 10.5%.
The place to start for understanding our first quarter 20 results as with the Nashville tornadoes and a large middle market fire loss.
Our Nashville catastrophe losses were 27.4 million. This was primarily a commercial catastrophe for us our catastrophe losses were driven by two large middle market losses that make up 12.4 million of the total. These two losses were 21 miles apart quite rare for a single tornado one on the west side of Nashville, one on the east.
Side of Nashville, we have done a post mortem on these risks and they were underwriting risk engineered and priced appropriately.
We also had a large middle market fire loss in North Carolina in the first quarter, which was worth 2.6 million. The post mortem on this risks showed that it was adequately the not perfectly evaluated at priced there were learnings for us from the post mortem on this risk.
The commercial lines combined ratio of 118.3 includes 19 points related to the Nashville storm and an additional two points from the large middle market fire loss, taking these events into consideration we're comfortable that our core commercial business is on sound footing.
Second part of understanding our first quarter 20 results is to understand the impact of the coated.
I will cover each product in two parts the performance of the core product and then the impact of co that on the product, including what we have seen in our April results.
Our personalized business produced the first quarter 20, combined ratio of 99.6 versus 97.9 in first quarter 19, and a first quarter 20, written premium increase of 10.5% versus first quarter 19.
For first quarter 20, our personal auto results are combined ratio of 103 written premium growth rate of minus 2.9% policies in force growth rate of minus 7% minus 5.1, if we exclude the Georgia legacy business and a new business count growth rate of 11.8% and a retention level.
All of 68.2%.
Recall, our fourth quarter 19 personal auto combined ratio at 114.1 was very poor and last quarter I shared with you. The drivers of this poor result, and our action plans to address these issues here's an update on the progress of these actions.
We have implemented our updated personal auto pricing model personal auto connect to dot one in eight states with new business effective dates between March eight and May threerd connect to dot one lowers rates for ultra preferred and preferred risks and increases rates for risks at the higher end of the risk spectrum. Early results are promising as we are seeing improved.
Those ratios on the more preferred risks and the new business mix has shifted more preferred also.
In early March in the states were connect to Dot one had not been implemented we introduced filters that stopped quoting non standard business, where we believe we were under priced in our old pricing model. The implementation of these filters has reduced our non standard new business by about 50%. These filters are being removed as connect to dot one launch.
She is in the state.
Also in early March we began implementing operational changes to close some of the operational gaps that we had identified we are seeing immediate impact from these changes and recognize that these types of operational changes can have a faster impact than rate changes on our personal auto results.
Our telematics program until first quarter 20 had only offer to plug in dongle option in the first quarter of 20, we implemented a smartphone plus tag as a second option early adoption of the second option has been encouraging.
The impact of Kogut on personal auto that we have seen including April results as the follow.
Miles driven are down about 40% and has stabilized at this level newly reported personal auto claims are meaningfully down preferred new business volumes are unchanged. Our non standard new business volumes are down but these are from the introduction of non standard filters and not coated.
In response to the lower miles driven and reduce claim volumes. We developed the in this together program, which has two pieces a onetime 5% covert discount at renewal subject to regulatory approval for the entire next Paul policy term for all state auto personal auto policy holders as of June 1st 2020.
And an immediate reoffering of telematics to every state auto connect policyholder, which includes a 10% premium discount for the first term.
We estimate the impact of the discount.
At renewal to be around 18 million in premium reductions the impact of our telematics pushes unknown, because we do not know how much additional telematics adoption, we will see but in the early days. After our announcement of the program. We have seen an increase in telematics enrollments, we selected the renewal discount plus telematics approach because no one knows at what rate.
Miles driven will return to historical levels telematics allows us to appropriately match rate with risk across a wide variety of possible scenarios and we also believe that telematics will be an important.
We will be more important than a postcode world our work on telematics over the last five years has prepared us for this moment.
Our first quarter for first quarter 20, our homeowners results are combined ratio of 98.1, a written premium growth rate of 26.7, a policies in force growth rate of 14.4, a new business count growth rate of 27% and a retention level of 75.9.
Last quarter I shared that in 2019, Texas represented a disproportionate amount of state autos total homeowners book of business in the first quarter of 20, we implemented a rate change in the Dallas Fort worth counties of 15% that will be effective in May. We have also finished the work on the next version of our homeowners pricing model connect version three dot, though that will roll.
It out later this year, making us more competitive on the best homeowners risks, which should accelerate our growth in states other than Texas.
The impact of cobot on homeowners, including Aber results has been minimal newly reported claims are stable spring weather has been a more significant impact new business volumes have been stable post coated and the week of April Twentyth weather was our highest homeowners quote volume week of the year.
The biggest unknown and biggest risk for personalized during cove. It is the impact of state insurance regulators and state legislators. This is very dramatically by state over the last seven weeks two examples of this.
State mandates related to grace periods of moratoriums on cancellations and non renewals for non payment.
If payment of these premiums is not eventually receive this will show up as bad debt since the start of co that our past due payments as a percentage of premium are more than 10 times higher in the states with these mandates we are monitoring the potential of a bad debt bubble in these states.
Also state mandates to expand coverage beyond what was contemplated or price for the personal auto contract. The biggest example of this is the requirement to provide commercial coverage for delivery drivers under the personal auto contract.
In 2018, and 2019, our average quarterly incurred bad debt was around $250000 are incurred bad debt for the first quarter of 2020 was 2.7 million, which includes coated related charges of 1.4 million and a large non coded workers comp charge of $800000 bad debt will be an important metric.
To track over the next few quarters.
Before moving onto commercial lines is appropriate to take a moment and recognize the work and resilience of our independent agency partners over the last seven weeks, they have shown amazing creativity and grid in keeping their operations running we admire what they have accomplished and is another proof point that our commitment to the independent agency channel is wise one.
For commercial lines first quarter 20 produced a combined ratio of 118.3 versus a 102 in first quarter 19, and first quarter 20, written premium increase of 17.6% versus first quarter 19 as discussed earlier, the Nashville storms and large fire loss added 21 points to our commercial combined ratio.
Our middle market results for the quarter, our combined ratio of 176.1, which includes 64 points for the Nashville storms and seven points for large fire losses, and total written premium growth of 17.8%, a new business premium growth rate of 43% and retention level of 90.7% we launched our.
First middle market connect state, Indiana in first quarter 20 in early feedback has been positive. Despite the large losses in the quarter. We continue to be pleased with the position of our middle market business.
For first quarter 20 are small commercial results our combined ratio of 99.3, a total written premium growth rate of 4.6%, a new business premium growth rate of 56% and retention level of 86.5%. We're pleased with the position in progress of our small commercial business.
The impact of co bid on small commercial and middle market that we have seen including April results is that submissions have declined by about 25% have stabilized at this level. The biggest issue for small commercial and middle market. During cobot is around business interruption theres not much we can add to this discussion that other carriers have not already discussed.
Two things are worthy of note first for every single claim we look at the facts of the claim and we look at the terms of the policy determine whether the claim is covered or not.
Ill stop.
Second our commercial policies require direct fiscal loss or damage to property and many of these also include a virus exclusion.
For first quarter 20, our commercial auto results are combined ratio of 98.2% total written premium growth rate of 51.7%, a new business premium growth rate of 108% and retention level of 87.2%, we're pleased with position and progress of our commercial auto business the impact of cobot.
On commercial auto the we have seen including April results was the following submissions have declined by about 20% has stabilized at this level miles driven are down between 15% to 20% and have stabilized at this level certain industries are driving more or less than others construction is down about 5% well financed uninsured.
Our down over 40% certain states of driving more or less than others, Texas was relatively flat, Illinois is only down about 5%, while Michigan is down over 50%, Ohio is down over 40%.
And newly reported commercial auto claims are meaningfully down.
For first quarter 20, our workers compensation results are combined ratio of 104.3% a total written premium growth rate of minus 3.6, a new business premium growth rate of 61% and a retention level of 60.5%. The workers comp expense ratio includes 4.5 points of a bad debt expense related to.
Our net comp book, we continued to be on schedule with our workers comp connect core systems build and are pleased with how our workers comp business continues to become more integrated with the rest of our commercial products.
The impact of co bid on workers compensation that we have seen including April results is the following submissions have declined by about 30% and have stabilized at this level newly reported workers' compensation claims are down overall, the biggest cobot issue for workers compensation is that some states have made changes that expand the scope of.
Compensation coverage by creating presumptions of compensable Lydia.
Insurance rates are developed to cover a certain set of claims and when the set of claims that are covered is expanded it creates either affordability issues rates need to be increased or availability issues. When coverages expanded and rates are not allowed to increase the insurers will not offer coverage.
Nursing homes hospitals, and medical office is make up 20% of our workers compensation premium other essential workers makeup another 14% of our workers compensation premium.
We are closely watching what the states are doing and we'll react as they make changes to ensure that we stay true to the core insurance principle of matching rate with risk.
For first quarter 20, our farm and ranch results are combined ratio of 81.9% a total of and premium growth rate of 19.4, a new business premium growth rate of 108% and a retention level of 90.7 and first quarter 20, we launch farm and ranch connect in five states. The initial results are just terrific and March 20.
20 ended up being the largest farm and ranch new business month in the history of state auto.
The impact of Cobot on farm and ranch, including April results has been minimal quotes and new business volumes have been stable post cobot newly reported claims are stable spring weather has had been a more significant factor.
Despite the headline underwriting loss in first quarter 20, driven by the National Cat in the large middle market fire claim first quarter 20 was a quarter of meaningful progress for state Auto March 2020 was the largest new business month in the history of the company meaningful progress was made in addressing our personal auto profitability issues. The initial state launches.
As for farm and ranch connect and middle market connect were accomplished and we quickly transition to a 95% work from home operational model and the business did not Miss a beat.
I cannot thank our state auto associates enough for everything that they have done the last seven weeks. They are leading through this period of time with grid.
And Grace with that we'll open the line for questions.
As a reminder, if you would like to ask your question.
Thanks.
One on your telephone keypad.
I guess.
I'd like to ask your question.
Your first question comes from Paul Newsome.
Good morning, Thanks for the call.
Any early read on.
How big the revenue could be.
Sure.
Just.
Let me just because you in commercial given things like workers comp and other lines are tied to.
Business activity.
Paul I'll ask him the lean in first I'll add some commentary Kim yes, I'm sorry, Paul we had a hard time hearing you could you repeat the question.
Sure I'm interested in what could be the revenue impact.
Of the economy on things like we just top and other commercial lines, where they are tied to economic activity.
Yes.
So I think it's what we're seeing in the early days varies by line. So.
[music].
Commercial auto.
Actually is.
Continued to stay strong and our new business volumes actually increased in April and so.
Also farm and ranch on the commercial side is has been strong so to date, we've not seen anything and so we will just use April results and sort of go for there I think probably the more meaningful impact is around our small commercial business BOP our middle Mark.
Get business CPP and workers compensation.
To date, we have seen submissions down 25% to 30%.
Now this is.
Probably more true in middle market, but the pipeline.
His long so we will get a submission and it will turn into a policy sometimes two to three months later so the decrease in submissions may not show up in new business volumes for us until May or June.
While for BOP in workers' comp at sometimes happens more quickly, but given that submissions are down 25% to 30% one would guess that a new business probably follows without that although our salespeople are out there going after it doing their best not to have a business decline.
That's what we're seeing.
Right.
On the personal line side.
One of your peers, who is tied.
The size of the rebate, they're giving to what the anticipate the.
So windfall because of lower miles driven.
Is your discount tied into two way.
Well the different structures. So I just wondering if there's.
Any sort of relationship that we should think.
Yes.
Paul This is Mike I'll start and Kim can follow up little bit.
I think it's very difficult.
Sure are trying to directly tied to the.
Reduction in miles driven and even claims activity Morse more precisely.
Just to some of the return of premium suggestions that I've seen I mean, I see no huge range I know you have as well in terms of.
The type of credits different organizations are giving.
We did our best to try to look at.
The behavior during code that which obviously has not surprised anybody in.
And seeing the reduction in miles driven the challenge we face when we looked at what others were doing the with too short to month rebate was that.
While the dollars were very small on a per call see basis.
Two they were again focused on just those couple of months and.
It was clear to us at the amount of time that.
You were going to see an impact on miles driven it's going to be longer and we thought it was more fair to recognize folks with a broader just come across the full policy premium. So yeah. We tried to look at Kim is seeing did a pretty thorough analysis.
Of not just miles driven but the early indicators in terms of.
The number claims we are getting.
But it is very difficult to to draw straight line between the return a premium.
The.
The claims impact you're going to get so we chose a looked out we thought would be fair to our our policyholders and quite frankly give them.
What we felt was.
More appropriate improvement in their premium dollars, Jim you want to tag on now.
Yes sure Thanks, Mike.
Thanks.
In the work we did.
Our target combined ratio for personal auto is 96, and so again models based on the data we have or are not going to be perfect. But we did our best to try and come up with a plan that would get us would produce a 96.
Thanks over that period of time right, we did not want to lose money, but we know we're not trying to.
Have a combined ratio in the seventies either.
The thing that.
Probably are.
Most eager to see how it plays out is this push on telematics because if it is a.
This period of time at the time is going to be the hardest to match rate with risk and get rate is is the period of time when things start to open up and then get back to historical levels because.
During that period of time different states will behave differently different individuals depending on the job will drive more or less so having a more just sort of blanket approach felt like that was going to be really hard to thread the needle and get it right and so with telematics, if it's a slower opened.
Being in general than our telematics discounts will be deeper based on miles driven being part of that algorithm and so it's almost a bit self adjusting now that being said, we know that we are no. Other insurer can predict that perfectly or get a perfectly right. So we will keep watch on it.
Thank you Steve safety for everyone.
Thanks, Paul.
Again, if you would like to ask your question. Please press star.
Your next question comes from Larry Greenberg.
Good morning.
I'm wondering if you could just elaborate.
Comments.
Related to business interruption.
You talked about the physical damage trigger and then you said I think many.
Also have a virus exclusion can you just.
Provide a little bit more color on many might mean in that comment.
Yes, again, I'll start and Kim can correct anything as screw up here.
First of all have beat the.
On all more on all of our policies happened the physical damage.
In quotes requirement.
In of itself is a.
His wording that.
Obviously for Texas from these types of claims and limits, obviously or eliminates our exposure.
Then in addition to that there or I think it's probably very little over half of our policies also half the specific language around the virus exclusion.
And I think if you.
If you look at it from our our viewpoint as we've we've received a number of claims and those claims have been denied our point of view is pretty firm in pretty clear that we don't have excess coverage.
In this situation when it comes the business interruption I mean that at the end of the day is is our point of view show very comfortable with that.
Now, having said that and I think you and I chat a little bit about this in the past.
That doesn't mean that as an industry kind of getting away from state auto care and talking about a PCIA. We're looking at ways to try to support some of the plan so that you're seeing from the government terms.
Especially small businesses and supporting them through that process, but when it comes to business interruption in this situation that we faced with code.
As you saw coverage from state August point of view and I think that.
It's just a reality that this was never how this coverage was intended door priced so.
We are very comfortable in our position now can be wanted to tag on to that at all.
Yeah, let me.
I'll try and maybe give you little bit.
More so when we think of like all our BOP and CPP policies. So.
Yes, we have about.
21% of them just don't have business interruption coverage at all so you can think of that cohort.
And then about third of all of the policies have a virus exclusion.
If we add up the ones that don't have business interruption coverage and the ones that have an explicit virus exclusion that makes up about 55% of our total BOP and CPP policies and then the remainder have the physical damage requirement.
Okay. Thank you.
And just wondering if you could elaborate a little bit more on the adverse development in the new auto book and.
I know you mentioned it seemed to be predominantly Michigan, but anything.
Potentially has lingering issues there.
Our Kim.
Yes.
So I think.
Lingering issues.
I don't.
I don't think.
I Wouldnt would not short answer is no.
I might go a little more detailed or geeky, then you might want but.
I think what was interesting this quarter is we saw it across a couple.
Coverages right. So we have we saw some in uninsured motorists, which were just a handful of older claims have settled for more so that just sort of like sometimes that happens sometimes that does does not.
I think we saw some in yep.
As we tend not to see we've been growing a lot in Michigan. So we keep our eye on that so that's something we're looking into.
And then.
You know the.
The others are.
Sort of probably bodily injury as sort of the normal thing and that's one of those things we do is.
As again in a prior life out of the reserve actuary and so anytime you have an event like covidien patterns change and so trying to dial those in and get that right. So I don't know if that helps us a little bit more color, but thats what happened with reserving this quarter.
Okay. Thank you.
There are no other thanks.
Okay.
Speakers do you have any closing remarks.
This is Mike I just want to.
So.
And continue to wish everyone on the call.
Stay safe and healthy during this challenging time and.
Again, we're very proud of.
The quarter and most importantly, how will we responded as.
Keep an eye in our associates, our policyholders in our agents. So thank you all for your time to date Stacy.
Thanks, everyone for your question for participating in our conference call and for your continued interest then and support our state Auto Financial Corporation.
We look forward to speaking with you again on our second quarter earnings call, which is currently scheduled for Thursday August six 2020, Thank you and have a wonderful day.
[music].
Yes.
[music].
Okay.