Q2 2020 Rli Corp Earnings Call
[noise], good morning, and welcome ladies and gentlemen to the R.L.I. Corp. second quarter earnings teleconference. As a reminder, we will open the conference. That's a question and answers after the presentation before we get started let me remind everyone through the course other teleconference or.
Our management may make comments that reflect their intentions beliefs and expectations for the future.
As always these forward looking statements or show subject to certain factors and uncertainties, which could cause actual results to differ materially including the ongoing impact of the novel protein bars Cobot 19 global pandemic. Please refer to the risk factors described in the company's various as you see filings, including in the anyway.
On form 10-K as simple admitted in the form 10-Q, four the quarterly period ended March 31st 2020, which should be reviewed carefully. The company has filed a form 8-K with the securities and Exchange Commission. They contain the press release announcing second quarter results.
[noise] RL management May make reference during the call to operating earnings and earnings per share from operations, which are non-GAAP measures of financial results. Oreo lies operating earnings and earnings per share from operations consist of net earnings after the when nation of after tax realize gains or.
This is an after tax unrealized gains or losses on equity securities or a last management believes these measures are useful and engaging core operating performances across reporting periods, but may not be comparable to other companies definition of operating earnings [laughter]. The form 8-K contains a reconciliation between operating earnings.
And that earnings the form 8-K and press release are available at the company's website at Www Dot R.L.I. Corp Dot com.
Now I'll turn the conference over to our Allies, Vice President Chief investment Officer and Treasurer.
Mr. Aaron decent dollar. Please go ahead Sir.
Good morning on behalf of management welcome to our life second quarter earnings call. We hope you're all staying safe in this new normal and appreciate you listening in.
Joining me are Jon Michael Chairman and CEO.
Craig Kliethermes, President and Chief operating Officer, and Todd, Brian Chief Financial Officer.
Todd will first offer some additional financial details from the quarter and hopefully answer some of your common questions.
And Craig will break down market dynamics in the current climate.
At the close of prepared remarks, well open the call to questions and John will close with some final thoughts Todd Thanks, Aaron Good morning, everyone.
Last night, we reported second quarter operating earnings of 77 cents per share.
We experienced 1% of topline growth posting an 88.4 combined ratio.
Investment income was relatively flat in the quarter well unrealized gains on the portfolio reversed the first quarters trend and positively impacted net earnings and book value.
Value per share ended the quarter at $23.39 up 8% for the year inclusive of dividends.
Greg will talk more about our products and market conditions in a minute, but from the topline standpoint, the 1% growth and gross premiums written was driven largely by rate increases and expanded distribution.
As you would expect premium from some products was down in the quarter given the impact of the economic slowdown and shelter in place orders, but on the pie Dan pandemic.
Most notably transportation premium decline.
Down 12 million in the quarter and 33 million on a year to date basis, excluding transportation gross premiums written was up 6% in the quarter, an 11% year to date.
While overall premium growth was down from prior quarters trends topline results were better than our initial expectations as a quarter began.
From an underwriting perspective, we posted its second quarter combined ratio of 88.4 or loss ratio was 48.5 and included 6 million in cobot 19 related impacts as we increase current loss current year loss booking ratios on several products where heightened exposure exists.
With the 5 million, we set aside in the first quarter our year to date Cobot 19 reserves totaled 11 million as of June Thirtyth.
By segment.
These reserves totaled 2 million for property 1 million for surety and 8 million for casualty.
We also recorded 6 million in storm and civil unrest related losses in the second quarter.
Offsetting these additions we posted approximately 22 million a net benefits from prior years reserve releases with casually, adding 19 million and surety, adding 3 million.
Moving to expenses compared to last year, our expense ratio declined 2.8 points to 39.9.
During this time of uncertainty we have taken targeted actions to eliminate or defer expenses. Among other things actions take it include a slowdown in hiring position consolidations select merit reductions are eliminations.
Travel curtailment in option grant deferral.
We continue to evaluate areas of opportunity for efficiency gains and expense savings, having said that similar to last quarter. The majority of the decline expenses continues to be driven by reduced levels of amounts earned under bonus and incentive plans.
Two performance metrics combined ratio and operating earnings unfair compare favorably to last year third component Brlten book value continues to lag last year's achievement, resulting in lower amounts.
The decline in amounts accrued under incentive plans account for the majority the decrease in our expense ratio as well as the bulk of the decrease in general corporate expense.
Turning to investments coming off the early stages of stabilization in late March.
Capital markets made a significant rebound in the second quarter as outlined in our press release total return for the three months was 6.6% driven by meaningful results from both fixed income and equities.
The portfolio is now in positive territory for the year and once again, a contributor to book value growth since December.
Our liquidity profile has proven durable and this environment and our operating cash flow return to form in the second quarter, allowing us to put money to work in high quality investment grade bonds.
Investment income was flat on the quarter has influenced by larger average cash balance and lower all lower overall yields.
Lastly, the outlook on the economy remains less than certain but we will continue to focus on investing for the long term, what maintaining sound balance sheet.
Outside of the core portfolio our share of earnings in Maui, Jim was down over 50%.
Earnings from Prime were up modestly in the core.
As John discussed in the first quarter call Maui, Jim results are significantly affected by the retail and economic and.
But much of the retail sector shut down during the quarter Maui, Jim results were negatively impacted.
Certainly the length of any downturn may impact the results of these investees, particularly any lasting impact on the retail sector as it relates to Maui Jim.
Overall, a good quarter in an environment that remains challenging and somewhat uncertain.
And with that I'll turn the call over to correct.
Thank you Todd and good morning, everyone.
Pretty good quarter, all things considered as Todd mentioned, we achieve topline growth of 1% an 88 combined ratio.
Year to date, we've been able to achieve 4% growth with an underwriting margin of 10 point.
Rewind 90 days and we would have been pleasantly surprised that these results.
Overall, we see the market is broadly improving in the U.S. businesses are adjusting to the new environment beginning to open back up and people are getting out even if only on a limited basis I see this is a testament of American ingenuity and perseverance.
Great momentum has continued with double digit increases on our property and casualty portfolio on both the quarter and year to date basis, we're still seeing pockets in PNC space and certainly in surety that remain quite competitive, but our results for the quarter speak to our resiliency as a company.
The construction industry, which touches about one third of the businesses, we ensure never completely shut down.
There have been a number of delays in projects, but very few cancellations.
We did not flinch in the face of adversity and continue to execute in markets that we're feeling disruption even prior to the outbreak of the pandemic.
Namely our excess casualty management liability property catastrophe and marine businesses continue to achieve rate increases and some growth.
We remain cautious that a slower economic recovery and new capital entering the market may serve to dampen topline growth opportunities, particularly in the construction industry, where we expect to see some slowing of new projects into 2021.
I do want to provide some introductory comments about our assessment of covert 19, and then I'll go into more details by segment.
As a reminder, we do not offer event or travel cancellation trade <unk> credit or any virus related coverages. We also do not focused on large insurance program business, the entertainment industry or hope or high profile risks, where bespoke manuscript forms or more common.
We are underway in certain high risk classes like restaurants, lodging bars, and Habitational and we have very very small book of workers compensation insurance.
All of our policies require direct physical damage to property to trigger coverage for business income.
We believe all of these mitigating factors will serve us well as we quantified exposure relative to the industry and peers.
The truth financial impact of this pandemic will never be known with absolute certainty. We do believe that it will result in direct tangential and even some moral hazard losses to us and the industry.
As I mentioned last quarter, the bulk of the Cobot claims. We have received are being made due to the suspension of operations based on government orders or business decisions and are not the result of direct physical damage to any property.
Although claim flow has diminished significantly over the last 45 days, we continued to diligently review the individual circumstances of each claim gather detailed information from claim and thoroughly investigate the facts and undertake detailed analysis determined coverage based on the individual facts of each claim.
We have incurred some costs related to these investigations, but have not paid any losses today.
As Todd quantified, we currently estimate our ultimate amount for losses that have occurred resulting from the pandemic to be $11 million.
We have increased our current you're booking ratios and several of our financial related product lines to reflect the protracted impact of pandemic related loss occurrences, we will continue to assess and adjust if necessary as new information materializes.
To offer some perspective on the breadth and relative impact to us I wanted to offer some perspective on the claims that have been reported.
We have received covered related claims in each of our three major reporting segments Cross 18 different products and from 40 States. The claim count began to flatten out in the middle of May, but we're still receiving one or two claims a day.
90% of those claims are being made for loss of business income.
To provide some scale relative to our operations Cobrand related claims and make up less than 10% of all reported claims this year and less than 2% of our entire open inventory of claims.
We will continue to monitor impact in profile of our claims closely.
Onto some detail with its within each of our segments.
In casualty.
Topline was flat for the quarter with a combined ratio of 93 many of the products. In this segment were challenged with stalled exposure basis, particularly in primary and commercial excess liability.
We're pleased with our solid underwriting performance and we were able to continue to grow many products that had momentum prior to the covert outbreak.
Management liability was up 22% with growth coming from rate overexposure to public and private do you know market is hard.
Submissions are up 20% limits are down and rates have risen more than 35% for the second straight quarter.
This significant market shift is beginning to make a dent in the last decade of softening rates and increasing loss cost inflation.
We will remain cautious in this business as we believe it will be impacted by pandemic related claims and litigation at least through 2021.
Our contract package product is focused on small contractors in the admitted space and continues to grow as a result of new production sources and geographic expansion.
It remains a very solid business from a profitability standpoint.
The unsupported personal excess business also known as pop continues to grow significantly as a result of market disruption investments in sales teams and technology and channel expansion.
Our transportation business is by far the most affected by the resulting shutdown and as a meaningful drag on the topline results in this segment.
The public transportation business, which consists mostly of charter school and transit buses will continue to be impacted until there's a vaccine effective treatment or drastically lower number of new cases.
Enforce premium has dropped by more than 50% for this class. We have reported very good underwriting results in this business on a quarterly and year to date. Our team is working closely with our customers and making sure. They know we are in this with them for the long haul.
Rate increases continue in casualty overall, but submission flow and size of rate increases are highly correlated to the most problematic classes and lines of business for the industry, including Habitational automobile commercial access and directors and officers liability.
Although we we achieved very little overall premium lift in the segment for the quarter many of the underlying products continue to grow.
We're also able to achieve a 9% rate increase which should bode well for future bottom line results as we prudently manage any increased exposure from people and businesses resuming normal activities [noise].
Our property segment was up 8% for the quarter and 11% year to date. The combined ratio of 86 for the quarter is much improved from last year all products. In this segment continues to grow the more so through rate than exposure.
Rates are up over 20% on catastrophe exposed businesses marine market conditions continue to harden as Lloyds assesses its future and refocuses on profitability.
Our property portfolio is well diversified and classes geographies and perils, which is supported by another great quarter of results.
We do anticipate further hardening in this segment and we're well positioned and confident in our ability to execute on opportunities that present themselves.
In surety for topline is down 7% for the quarter and 3% year to date, we continue to report very good underwriting results and remain profitable across all products in this segment.
This speaks to our bottom line focus and discipline and what remains a very competitive space.
Topline remains challenged as we still see significant competition. Despite some principal suffering from more financial distress and some underwriting losses felt by our competitors on large accounts.
Demand is down due to the economics due to economic factors less regulation and decrease commodity prices. We believe the best long term positioning is to flex or underwriting muscle and pay play great defense until better opportunities arise.
We will continue to focus on building deeper relationships with our most trusted and valued distribution partners investing in technology, advancing our sales and marketing efforts and listening in responding to the needs of our customers.
The pandemic has allowed us to focus and deliver on several long standing technology projects in our transactional businesses one of the silver linings that this crisis is that has served as a catalyst change.
Given all the disruption and uncertainty we're pleased with our results, which were better than we expected heading into the quarter.
Despite the economic downturn and a heightened risk profile and some financial products, we feel better because we have a broad and diversified portfolio of products and many of these products have only been largely impacted by the pandemic.
We have not missed a beat in our execution in these markets.
Pricing continues to be on the rise in most products.
Customer Retentions remained very strong and cancellations and premium collections have only been mildly impacted.
We attribute this to our focus on selection of the best in class RIS and financially strong and shirts.
The frequency of claims is down with some improvement in the environment to settle and reduce our claim inventory.
And the industry is one a few early court decisions on standard wording around direct physical loss.
Despite this guarded optimism theres still economic headwinds that we'll continue to put pressure on our topline. In addition, the plaintiff bar is very adaptable creative and persistent.
Depending make has presented them with a target rich environment for years to come.
ROI will maintain a prudent approach to underwriting and continued to be opportunistic and niches, where we have unique expertise. We are known in our chosen markets and to all of our stakeholders as a stable successful strong and sustainable partner.
We are especial company made up a very talented and responsible owners that makes us different in our industry and this different works for all our life stakeholders.
Thank you and now I will turn it over to the moderator to open it up for questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to allow your signaled to reach our equipment impress star one to ask a question.
[noise] first question comes from Matt Carletti JMP Securities.
Hey, Thanks, good morning.
Good morning, Matt Matt.
Craig I wanted to circle back on just just one question on your Kobin exposure. The claims you've seen on you know I heard your comments that there's no paid losses to date, you really just investigators and things.
And I appreciate a lot of the stats you gave and it sounds like most of what you're seeing is our claims for be API.
If I go back to last quarter, I remember you, saying that a couple things one was like the vast majority of.
The exposure you have had some sort of not just the physical damage qualifier, but a buyer's exclusion or pentair pathogen exclusion.
You know and that there is some split along those lines in terms of admitted versus surplus line products and I was hoping that you might be able to give us a just a little bit better of an idea how to think about that you know is vast majority kind of 90% plus or is it more south of that or just.
There's a lot of broadly amongst the universe Theres a lot of just qualitative terms kind of be put on things and everybody has a different meaning by it I just hoping to get a better feel for kinda what harder for your book.
Might not have a virus exclusion understanding that doesn't mean, there's exposure that is still has a physical damage exclusion.
Sure Matt.
Well I mean, I think I said last time is that.
The the policies that don't have ER the.
The virus exclusion, specifically are mostly excess and surplus lines policies.
And that's still true or and I guess from the definition from a vast majority I would say I mean, I'll I'll leave you with greater than 50%.
So and that's that's true of both the claims that have been made as well as the as the policies that were written.
Okay with it I guess another way to think about this is are you ready color here is I mean, obviously properties kind of the exposure, where we're business interruption would come in and we think about our allies property book can you give us just a rough split or what might be written on it had been basis versus written on a surplus line basis.
Excluding like lighter owners and things, where there would it be sure. So I mean, so I mean, the businesses that are admitted for us we have small home business insurance product, which is.
It's it's really just that its people that have a business running out of their home. That's all admitted and that those are small policies. There's a large number of policies there.
And obviously, a personal lines products or admitted and then we have a fair amount of property and casualty packages commercial packages for like architects and engineers in the slides professionals.
That contract packed product I talked about in my opening remarks isn't admitted product.
I mean, a lot of that is either a you know.
So the architects and engineers wells those folks are white collar workers for the most part that are working from home much like insurance companies right now.
And the and the contract packed is smaller subcontractors are still for the most part on the job I'm very small jobs.
Yes on the enough space I mean, those classes can be anything from.
A warehouse.
It could be an apartment building you don't do a ton of restaurants, but we do do some don't Dude, Germany bars.
And that's mostly written through our excess and surplus lines property unit. There were mid size risks. So we don't right. We don't write these really big limits right I mean to typical property limit for us would be less than $10 million and then the boat business interruption or income coverage would be sub limited even under that.
So.
Then some of the binding authority business that we've started doing over the last couple of years.
There is also in excess and surplus line space, but again those.
Folks typically by even lower business income coverage or.
Thank the average is less than $100000 business in a interruption or income coverage and it has monthly limitations. In addition to that total limit that I just outlined.
Okay.
The one thing I would add there too just just real quick is.
A number of those parts of the package policy. The general binding authority policy. Those are in the casualty segment. We book all of our package policies in the casualty segment, you that property and liability components I just want to make sure. There's there's clarity on that.
That's helpful. Greg.
That's great. Thank you for the color in any any all those tidbits help been kind of painting the mosaic of what's out there. So that's all I got it. Thank you for thank you for the answers and congrats on nice result in a tough environment.
Thanks, Matt.
If you find that your question has been answered you may remove yourself from the Q by pressing star too.
Our next question comes from Randy Binner B. Riley.
Hey, good morning.
I'd like just trying to ask him more direct question about.
The.
No bid related claims that you mentioned at the top of the call I guess is it possible for you to describe.
One of those.
Be I claims that still open what.
What the dynamic would be too to have something that you still you know you're still determining what the loss might be.
[noise] well Randy So obviously all these things and then come in on one day. So we've had claims that are reported as.
Frequently as yesterday or the around business interruption. So.
There is no we're investigating every claim and talking to every one of the claimants ER.
And walking through an understanding the circumstances, and then evaluating where there's coverage for each claim. So there's no. We certainly are approaching this on a one by one individual basis.
There is no summary, summarily decision or some summarize decision here. It's a we go into each claim looking to see if theres coverage and evaluating the circumstances that I mean, one example would be talking to someone about whether they'd actually had co visit or someone on the premises has been tested for covert.
And as that have turned back positive so that Mike.
Are they might be able to prove that theyre actually was co bid on the premises or in the premises.
So.
You know every situation and every claim is different so I don't think I could describe an average claim in this.
Okay, but I mean, it our some of them.
Dan seen more from a claims perspective, meaning that you know they retain a lawyer and they may have been of there may be they may be in a jurisdiction where they can advance their case for you maybe you could because based on what I'm understanding on how you describe your policy forms and how.
I understand policy forms.
It doesn't seem like.
There'd be a lot of coverage.
I'm just curious if there's if there are some cases, where they're able to push the claim forward.
Well, there's you know ultimate decision is made in a quarter law right. If someone's uses to retain an attorney and pursue that Avenue.
So.
I think ultimately Randy I mean, I mean, those types of things a lot our claim folks and our actuarial folks talking together considered in establishing what we have a from from a reserve from an Ivy in our standpoint.
Nearly nearly a 100% of the reserves we have up are in IB NR.
Yeah.
Okay Fair enough and then just a couple more one quick one just on Maui, Jim Real quick do you can you quantify for US that result is actually a little bit better and I would aside.
Hi, Tech and kind of ticket their ecommerce.
Sales and if so can you give a rough percentage of how much they can operate online.
Well.
Randy It's John.
Actually when wouldn't Maui when this happened.
As you might expect Maui, Jim does have a direct line. They also have Ah.
Our relationship with Amazon Prime.
And.
Thank God, they did because largely their operation retail wise was shut down worldwide.
It was shut down during their three.
That's modes for sales.
So the fact that.
They were able to do roughly half.
On an earnings basis for the quarter.
So at what they did last year as a testament to Belgium's management.
Oh and operations as of quarter a progress.
Retail began to open up.
Not just in this country.
Oh limited basis, but in other places worldwide, so that their orders on a retail basis began to come in.
You know as of quarter progressed, so the latter months were better than the early books.
So.
For example April was not very good mode.
But may and June were much better loves so.
But I will just say that there those.
Direct.
To consumer.
Type.
Distribution channels, we're not.
A very large part because Maui, Jim was really focused on retail, but thank god. They did have those direct channels and that have very good technology around those channel that enabled them to see you had a pretty good increases.
In the use of those channels so.
We think they've done very well.
Through this.
And they think they've done.
Even more important.
Okay, Great and just just one more and I apologize if I missed this did did you all qual quantify.
Submission.
Activity in the Nasiriya specifically.
[noise] no we talk generally that submissions were up in certain areas. I mean, its is a mixed bag I think certainly on the property side of the house submissions are significantly up on the casualty side, realizing the units space.
We right.
Predominantly construction risks. So there are not a lot of new projects that were undertaken during or you know during covert. So the submission flow was flatter to even slightly down in some of our primary general liability.
Got it okay. Thanks.
But.
Our next question comes from Jeff Schmidt William Blair.
Hi, good morning.
The cope.
Hi, the Kobin losses of 11 million year to date could you break that out between the La E component in the pure last component.
These there'd been a couple of court rulings in favor that physical damage requirement does that change the math at all.
He component.
I don't I don't have the breakdown between Lawson Ellie, Jeff I mean, I think as our actuaries go through it.
There there is not necessarily a distinction and what we put up.
Second quarter I know, we talked in the first quarter the bulk of that really was defense related.
But but they really are looking at in the totality from both a loss and defense standpoint, but I.
I don't have the breakdown between IB dollar.
Okay [noise].
And then just looking at property margins, obviously, they're they're pretty good compared to where they were a couple of years ago, you continue to get rate there the markets getting ready for anything that.
Probably more likely to go up and down.
Is there an opportunity there to to sort of pulled back on raid and try and try and really expand that business. I mean I know, it's if you go back 567 years goes 35 or 40% off of gross premiums. It is there an opportunity to try and grow that back.
To a larger book.
[laughter]. So Jeff this is Craig I mean, obviously are under his make those decisions and trade offs everyday and try to evaluate I can tell you from a portfolio level whenever they do the math it never the math never works. So when you do the math to figure out well how much rate do I have to cut to grow more the margin gets they'll send that you end up being.
Bigger, but you don't really make any more money and theres no incentive to do that for US why would we take on more exposure for no more profit so [laughter].
So thats generally the math it doesn't mean aren't going to be pockets of opportunity. There certainly we'd love to continue to grow that business. We think the <unk> right now we're getting rate.
So I'll say above what we'd like to see his technical rate of course, there's there's no such thing is enough, but analysts also keep light that the reinsurers I believe are in the process that they've already started the process, but I believe that will continue for a while is getting rate increases.
So we're gonna be paying more for reinsurance I think us as well as the whole market on a go forward basis. So we need that rate to pay for the additional protection that we are the protection that we currently have.
Correct.
Jeff one more thing on that Jon Michael we are restrained stablex cat risk, we can take too.
So that.
That would restrict though writings.
Got it.
Just one last one on it being asked market.
It seems like there could be more exposure. There you know theres, probably less fires exclusions I mean, I know you mentioned that I think others have because while.
There was already sort of you know some large players pulling back there.
Ah if they have more exposure here on there on the cold and are you seeing sort of even more dislocation there.
Or is it then.
Similar to what you know what it was a quarter to go.
I mean, I think the disruption is on the is the fact that the reinsurers are starting to raise rate and that rate has to get into the primary at some point in time to be able to continue to make your margins.
I I don't think we would classified the disruption necessarily to be covered related or virus related or on the N.S. side.
I think it's just right we've needed to get for awhile and now that the reinsurers are are charging more we know that the cost of our goods sold is going up and we need to pass that along or get more rate to be able to make the same margins.
[laughter] [laughter] okay.
Alright, thank you.
Our next question comes from Mayor Shields KBW.
Oh. Thanks, one question I really felt he said no the answer to this but are any of the defense costs again.
The claims recoverable.
He said.
Recoverable by reinsurers from reinsurance from from.
From the claimants or from the attorneys.
You know I don't I don't think I can answer that question mirror. It you know that's.
It could be litigated right, but largely in this country no, but it could be litigated.
Okay Fair enough is really we can get the both the weather related losses and the cold in losses in dollars by segment just for the second quarter.
Yeah, Yeah merits Todd So if you look at the second quarter, the the storms and civil unrest. The 6 million there splits about four and a half million to the property segment and a million a half to the casualty segment again that that general binding business and other package business.
That we had in the casualty segment. So so that's how that splits and then the coal that 19 is 5 million in casualty and about a million in surety.
Second quarter piece.
Perfect and exists the first quarter, we were 3 million casualty and 2 million property.
For cold with 19.
Excellent. Okay. That's very helpful final question when.
I think I was just talking about reinsurance rate increases Ginnie Mae than to anticipate any change and maybe how much of your gross premiums your seating and reinsurance pricing is right and as primary prices rise.
Yeah, It's Joe and yeah, we evaluate that to all the time obviously.
We view reinsurers as our partners.
So as rates increase on the margins I've heard a I've heard other.
Uh Huh, let's talk about reevaluating their their retentions and we do that all the time, but we you know largely we're viewing our reinsurers as partners in the in the whole process. So.
Yes, and no, but I don't I don't see.
Any significant changes and we.
We haven't I mean as good as long as you know I mean, we've obviously measure we price the stuff up internally and try to figure out what we think it's a fair price loss costs, you know with their margin on top and if we would change retentions. It normally would be around the co participation as opposed to you know our first dollar retention and as John says.
We have long term partners that reinsurers and that's exactly the way, we view them as partners and and we talk about our alignment all the time, we're talking about are aligned with shareholders, but we also have a lot of alignment with other stakeholders, particularly reinsurance partners and.
You know, we need them to continue to be able to thrive and be successful as well.
Okay perfect. Thanks, so much.
Our next question comes from Mark Dwelle, RBC capital markets.
Yeah. Good morning, I, just a couple of questions that have happened already been covered just want to clarify on an all of the coburn related charges that you've taken those are all just being ordinarily run through the loss ratio. So those metrics that you gave us to extent, we wanted to back them out of kind of the run rate of your your your loss ratios we could.
Just do that math off of the premiums and the numbers you gave is that correct.
Yep.
With respect to the casualty in the surety I mean that really is booking ratio based so yes.
2 million that that was put up in property.
That that you just you could still do the same thing whether but it's not truly booking ratio based from that standpoint property is really more of a reported based but similar similar approach either way from your standpoint.
Okay.
And then I mean, you had indicated all of this is sort of IB and are we would I guess, we reduce based on some of Craig's comments it sounds like the pace. It didn't come in claims is you know is continuing to slow.
So I mean, I guess I'm inferring I guess accordingly that we would expect that you know kind of the need for further reserves would likewise continue to slow alongside of you know slowing claim count presuming that persist since that likewise correct.
Mark I think some of its going to determine over what period of time. This ultimately develops over thank Craig talked about that too is it will become more difficult overtime to know whats directly related to co that.
And and indirectly related so it really is going to be a quarterly view.
As our actuaries and claim folks get together and look at loss trends and those have another quarter worth of information.
I would say, it's really a quarter by quarter review.
In that respect.
Okay. That's helpful. I think we've had an old covert discussion for today.
Let's move on.
Craig do you had mentioned on the transport business.
If I wrote it down right. It was the premiums were down 12 million.
Was that primarily the result of land credits or whatever you might call them.
Or maybe I guess, what I'm trying to get out is it was the and was there an underlying growth in the book of business due to prop you know premium pricing and or new business that was then offset town to that level or or was there an actual reduction in the amount of business you are right in that that contributed to the decline.
[noise] Mark so the so on transportation the biggest hit has been taken in the public transportation area and we did take.
All the policies that were in force at the time last quarter first quarter.
We had adjustments we offered to people to be able to lower their exposures because basically on average people were taken nine out of 10 units out of service and storing them and they werent, obviously operating them. So we allowed them to basically.
Take credit for that so the things mid term going to make a bunch of mid term adjustments whatever so now as you start to renew these policies. Some of them are putting some business. Some some buses are going back into production, but not very many I'm going to tell you a public transportation, it's still operating at about.
10% to 20% of what it was prior to the pandemic I think that's always going to be for awhile.
And I think that also as things renew we're additionally, recognizing some or other businesses like a truck in small commercial specialty business within transportation that the exposure bases are down and they're getting credits in their insurance premiums for the fact that the miles there driving or anticipating are going down. So therefore, they're paying less premium.
Because I said, we expect that that business is probably going to cut in about half overall this year and then we'll have to build it back up we've done this before.
The business was as big as 80 million at one point in time and shrunk to 40 million because people. It was just way too competitive ER and our people were willing to cut it to stay profitable in this case this isn't really about rates as much as it is because we're still getting rate, it's really more about exposures and exposures are down there for the premium is down.
Hi, Hi, I appreciate the clarification. Thanks, that's good color.
And then the last question I have this is just.
Kind of a small question.
Within the Prime holdings.
Business is there.
I'm trying to understand is there's some seasonality to that business or is there something that we can track independently.
Kind of get an understanding though you know kind of the ups and downs it seems like a much weren't jagadish.
You know earnings pattern, then maybe I would've expected.
Yeah, well. He is he writes you know he's the market of last resort and where there's disruption he will step in.
Ah so it really is going to depend on where the opportunities offered disruption and if he feels he has expertise in that space.
And he'll step in and so you will see fairly Jagadish results are not results probably as much as topline.
In his business.
Just because it's just really depends I mean, I'll tell you frankly on the surprise is probably you are every month when he reports is premium.
[laughter] as long as real surprise together [laughter] [laughter].
We're just a reminder, we're a small player on is on that business, though.
Understood I appreciate the color. Thanks.
There are no further questions in the queue at this time.
Thank you Jon Michael up Craig.
Was being more modest then.
We're used to around here.
He called the border pretty good quarter I'm going to say it was a great quarter, given the circumstances I'd like to thank our employees for remaining focused on our customers.
The or employees have not missed a beat.
Were effective thereof effective.
And ER and productive.
And thank you for listening stay healthy and keep you in your family safe.
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