Q2 2020 Old Republic International Corp Earnings Call
[music].
Good day welcome to the Old Republic International second quarter Twentytwenty earnings Conference call.
I like to remind everyone that this conference is being recorded.
I would like to turn the conference alter pardon me.
<unk> W. W. Pease go ahead.
Thank you good afternoon, everyone and thank you for joining us for the over topic conference call to discuss second quarter 2020 resolved. This morning, we distributed a copy of the press release and posted a separate statistical supplement, which we assume you have seen and or otherwise have access to during the call.
All both of the documents are available at old Republic's website, which is www dot old Republic dotcom.
Please be advised that this call may it's all forward looking statements as discussed in the press release and statistical supplement stayed at July 20, Threerd 2020 risks associated with these statements can be found in the company's latest FCC falling in.
This afternoon's conference call, we'll be glad by Craig Smiddy, President and CEO of over public International Corporation and several other senior executive members as planned for this meeting at this time I would like to turn the call over to Craig Smiddy. Please go ahead Sir.
Thank you Marilyn good afternoon, everyone and welcome to over public second quarter 2020 earnings Conference call.
With me today, we have Karl Miller, or I see a Po and Caroline Monroe, the president of our title insurance group.
Let us first reiterate our continued best wishes to all of you your family's Brent co workers as we all face the challenges related to the cobot 19 pandemic.
As we mentioned on the release, while some of our associates have begun returning to our offices. The majority of old republics more than 9000 associates continue to work remotely.
Ensuring that our services are delivered on interrupted due our customers agents and brokers, then and Oh, when our remote work efforts have been extremely well.
Given the challenges emanating from Cobot 19, we're pleased with the results we posted for this quarter, particularly the very strong title insurance resolved and the recovery in shareholders equity since the end of the first quarter.
As we noted could be the case in our first quarter release.
The effective Tobin 19, and the associated governmental responses have indeed had a negative effect on the topline in that general insurance group in the second quarter. However, our title insurance group, but yet another production record again, demonstrating that our strategic.
I couldn't between general insurance and title insurance works very well.
So at this point I'll turn the discussion over to Carl Miller to discuss our overall consolidated financial results and also our small RF by GE run off business.
And then he'll turn things back to me to discuss the General insurance segment, followed by Carolyn Monroe, who will discuss the title insurance segment and after that I'll make a few closing comments before we open up the discussion to QNX.
So with that Carl please take it away or good. Thank you Craig and good afternoon, everyone.
Earlier today, we are now second quarter net income, excluding all investment gains and losses of.
24 million or 42 cents per share and that's down approximately 7% from last year.
First six months of Twentytwenty EPS was 89 cents up nearly 4%.
Consolidated net premiums and fees earned grew by one and a half percentage points during the second quarter.
5.7% for the first half of this year.
Our title insurance group as Craig said continues to set the pace with an increase of almost 10% for the quarter.
16% year to date.
General insurance recorded a relatively modest decline of 3.8% has 0.6% for the quarter.
The first six months of the year as the a pandemic further impacted so.
Economic activity here in the us.
Net premiums earned in our mortgage runoff business continued to decrease as expected.
And.
Really they're no longer a significant contributor to the consolidated total.
Net investment income dropped by 3.8% for the quarter and 1%.
Year to date.
It's mostly caused by lower yields, which offset the generally higher invested asset balances.
Turning to underwriting results this quarter's consolidated.
Combined ratio tick upward by less than one percentage point to 96%.
From 95.2% to last year.
For this year's first six months the combined ratio was 95.4%.
It was largely unchanged from the same period a year ago.
Consistent with recent trends the claim ratios moves lower.
The expense ratio higher.
And that's due mainly to are shifting the mix of business towards the title business, making up a greater percentage of total.
And as Weve pointed out in the past titles carries a lower loss.
Higher expense ratio and Thats influencing the consolidated total.
Claim reserves on a consolidated basis drop our developed favorably for the current quarter.
And year to date periods, reducing the.
Reported claim ratios by 0.4.
0.6 percentage points.
Prior year development for the comparable 2019 periods was again favorable by 0.2 0.9 percentage points.
At June Thirtyth, the allocation of the investment portfolio remained relatively consistent.
At least 75% is invested in bonds.
Sure term investments with the remaining 25% directed toward equity securities.
Our primary investment objective is to create a steady and growing stream of interest and dividend income.
And then that lightly do not anticipate any material changes to our investment strategy.
Turning to our during this years.
First quarter disruption to the financial markets.
Felt it in a 24% or $963 million decline.
In the value of our equity portfolio.
During the second quarter financial markets improved considerably.
Resulting in a $354 million recovery in the valuation of our equity portfolio.
And I would also add that as of yesterday's close the portfolio had rebounded by an additional 126 million on top of the 354.
Older public self book value per share increased from $17.29 at March 31st to $19 in 68 cents at the end of June.
Driven both by operating income and increases in the fair value of the investment portfolio.
Book value is now up slightly for the year after consideration of the regular cash dividends paid here today.
Which.
Now generate nearly a 5% yield.
In fact, 2020 marks the 79th year of uninterrupted regular cash dividend sand, the 39th consecutive year of increasing.
Dividends.
So now let me turn briefly and discuss our rough mortgage insurance business.
As previously noted we continue to monitor the impact of unemployment levels, along with the effects of government loan forbearance programs on reported delinquencies.
At the end of the first quarter we.
Cautioned that these factors along with the rate, which for us economy recovers.
Could affect future claims experience and potentially slow the return of capital from the run off business.
During the second quarter, we did actually experienced an increase in reported delinquencies.
A significant portion of these duly reported.
It was 41% of total delinquencies outstanding at June.
Our loans and forbearance.
And our experience with prior forbearance programs suggests that these loans capital.
Have significantly lower ultimate claim rates.
Therefore.
They have been segregated and reserve for separately.
We've also preemptively increase the frequency factors on early stage delinquencies for no normal loan defaults and what I mean by that are.
Loans that are not in forbearance and we've done so and.
Consideration of the current economic environment.
So in combination. These additional reserves resulted in the 5 million dollar pre tax operating loss and escalated claim ratios that were recorded.
So overall, we believe this was a very good quarter and there are number of positives to build upon for the future of old Republic.
So as Craig said in the opening remarks, I will now turn things back then talk about general insurance.
Okay.
So as the release indicates compared to that second quarter General insurance.
Soft quarter over quarter operating revenue decreased by 3.6% and quarter over quarter pre tax operating income decreased by 1.8%.
For the general insurance grew quarter over quarter combined ratio, we saw that it rose slightly to 98.4% from 98.1%.
While the expense ratio remained very steady.
As shown in the financial supplement.
Net premiums earned and commercial auto decreased by 2.5% quarter over quarter attributable to a decline in the exposure base, resulting from the economic downturn.
Along with tighter risk selection criteria offset by the positive effect of rate increases.
That have continued.
At a pace in.
Percentages in the lower team.
Claim frequency has.
For decreased significantly for.
Commercial auto again attributable to the economic downturn.
But.
This was offset by severity that continued to increase.
We believe that comes from.
Higher speeds.
As a result, as a result of less congestion on the highways and also continued.
Effects of social inflation.
On settlements.
Continuing with the financial supplement workers' compensation experience that 14.3% decrease net premiums earned quarter over quarter here to attributable to decline in exposure base, resulting from the economic downturn.
And on this line. That's also further exacerbated by the effect of rate decreases that continued in the low single digits for workers compensation.
Aside from Cobot 19 related claims claim frequency here to decrease.
Again attributable to government and businesses.
And their responses to the co vid 19 pandemic and of course the impact on the overall economy.
Turning to.
The line of coverage claim ratios in the financial supplement our second quarter commercial auto claim ratio increased to 83.4% compared with 79.6% in the same period of 2019.
So our work on this line of coverage continues with necessary rate increases and stricter risk selection criteria to bring that claim ratio back in line with our target in the low seventies.
Turning to the workers compensation claim ratio the second quarter came in at 65.7% compared to 69.3% in the second quarter of 2019.
As we discussed following the first quarter, it's important to remember that more than 90% of our cobot 19 workers' compensation claims emanate from locked sensitive business such as large deductibles.
And Furthermore, greater than 90%.
The cobot 19 claims that we see in workers' compensation, our mild in nature with very low claim payments.
And ultimately less than 1%.
Those workers comp claims are severe and less than 1% resolved in a fatality.
So therefore.
Based on our current analysis, we are confident.
In our current accident year loss ratio selection for workers compensation.
And.
We're confident that they are adequate, especially taking into consideration.
The loss sensitive nature of our business the reduction in frequency, we spoke about and the very high proportion of miles cases for cobot 19 claims.
For commercial auto workers comp general liability combined given that we usually provide these coverages together to our customers.
We'd like to look at it pathway as well and quarter over quarter that claim ratio came in at 74.6%.
Paired to 75.3% last year.
Still looking at the financial supplement the remainder of our.
Other lineup coverage claim ratios are generally within our within our target fan.
We feel very good about though.
So for general insurance, the second half a 2020 will remain challenging from a top line perspective, no doubt but.
But we will continue to seek the appropriate price for our products and continue with our long term focus.
So I am not no I'll turn the discussion over to Carolyn for her comments on title insurance Carolyn along with our team continue to do a remarkable job keeping our title operations executing at an extremely high level. So Carolyn please take it from here.
Thank you Craig.
The trial, just cobot 19 continued into second quarter. Our total employees continue to face the challenges head on effectively serving the needs of agents and customers. We have transitioned to portion of our workforce back to their office.
Our maintaining our nation wide work comes home capabilities are high standard of service commitment in execution really regardless of the location of our employees.
Our first quarter earnings call, we reported that are owned digital closing provider cobots.
At adjusted its platform to allow our agents in offices to be able to offer electronics.
Hanging products that were Q tip, facilitating real estate transactions in the manner predicated in many of the emergency orders implemented by state governments.
Alright, you because like 19 pandemic real estate industry have not committed to adopting the digital closing models based on lead and then following regulations theres been a dramatic increase in this activity.
In the National perspective, these electronic closings are relatively small number of the overall transactions. However, as the results of the emerging interest.
Jamie These methodologies, we've accelerated the development and rollout of our digital plates tools. We also continue to evaluate multiple products.
Automation in the title production segment.
As reported this morning, the title Division second quarter and year to date results remain strong all time second quarter in midyear seismic set so both underwriting revenue in operation profit for the second quarter total premium and fee revenue was up 9.9% and up 16.4 per se.
At year to date.
Pre tax operating income of 65.4 million for the quarter compared to 60.2 million in last year's second quarter was an increase of 5.2 million or 8.6%.
Year to date pre tax operating at 108.7 million compared to 80.8 million in the prior year to date period, an increase of 27.9 million 34.6%.
Year to date 2020, our composite ratio of 93.1% compares favorably to the 94.3% reported for the talking about 2019 period.
Despite all the on loans surrounding told the 19th we remain cautiously optimistic going into the third quarter with a robust order count in both purchasing refinance transactions strong real estate market. The 30 year mortgage rates remain at historically low around 3% and expectations for these favorable rates.
We continue for the foreseeable future.
While we have adjusted to doing business during cold ignite team. We are still mindful of the challenges ahead for our organization and our nation.
Appreciation goes out to all our employees and title agents is they remain dedicated and positive as we all deal with the daily challenges of the pandemic. Our accomplishments are achieved to date commitment of our employees and the support of our agents.
As with past challenges, we rely on the same guiding principles of integrity management for the long run financial strength protection of our policyholders and the wellbeing of our employees and customers, but has served us well over the last 200 plus years and with that I will turn the call back over to correct.
Okay Caroline Thank you.
So again, our second quarter operating results indicate that our businesses continued to perform and our strategic diversification between general insurance and title insurance what is while we.
We will continue to focus on underwriting excellence and we will continue to ensure that our capital position remains very strong as we whether the current economic disruptions.
So with that will conclude our prepared remarks, and open up a bit discussion that today.
Thank you.
We would like to ask questions. Please press star one I attend its own keypad.
If you're using the speakerphone, please make sure that your mute function.
Well certainly a single stage our equipment again that is style. One last question, we paused for a reasonable lips, so everyone an opportunity to see municipal questions.
Okay.
As a reminder that style one.
We take a first question Greg Peters.
James. Please go ahead your line is open.
Good afternoon, everyone.
Wanted to start.
Good question or two around the general insurance business.
So in your press release you spoke.
And I know you'd like to look at things.
Perhaps on the six month basis as opposed to quarterly basis, but.
The decline net premium written in the second quarter on a year over year basis.
Almost 10% is pretty dramatic.
And then we go to your supplement you give us earn premium by five segment by pipeline of business I was wondering if you could.
Help bridge, the gap crack and tell us where the weakness in Britain is coming from which lines and is it just a onetime payroll adjustment say hypothetically through workers comp or is that something that we should anticipate through the balance of the year.
Sure Greg good good afternoon.
Right so.
The net written.
Premiums by line.
They are going to be very proportionate to what you're seeing happen.
The by line.
Net premiums earned so.
It's just an order of magnitude.
So so with.
If you see a decline in net premiums earned.
Line by line you can extrapolate from their end and assume.
That that what you're seeing there is.
His proportionate to the overall net premiums written.
We can take.
A closer look at that in future quarters and.
Perhaps.
Include the net written by line.
Okay, and then I.
Thanks, I appreciate that and I understand.
Yeah earned premiums a lock number but.
Were there some one time issues that hit the second quarter like you know.
Payroll audit.
Customers FC to consider.
Or.
Is that 9% sort of where what we're dealing with the balance of the year and in what striking is that it's down that much yet.
For mall from all reports, you're probably won the best pricing environments you pad.
The last 15 plus years.
Well.
It as I indicated in my earlier remarks, it if the down because of.
A significant.
Impacts from from the Cobot 19 related.
Closures and and the responses that governments and businesses have taken and the overall impact on the economy, so future quarters are going to.
The dependent upon how all of that plays out and I don't think.
Any of us are in a position to predict.
How things will play out and.
Third and fourth quarter.
We all watch on up news these days to know that.
It seems things change daily so.
It is it there isn't any one.
Specific event and that certain book of business or anything that I would point you too.
Yes.
A decline in workers' compensation for sure as I think.
Frankly, the results were.
Pretty much what.
We I think indicated.
Last quarter and that is that given that workers compensation premium.
Our direct function of payroll.
And to the extent that payrolls are down.
We we said last quarter that the impact on.
Workers' compensation premium in particular.
Exacerbated by the fact that there is still you say.
Rating environment, but workers' compensation is still.
Experiencing rate decreases so you couple together the reduced payroll.
And the rate decreases.
And I would say that we were not surprised that at what we're seeing on comp and.
There's an expectation that with economic recovery.
That number will recover as well as I mentioned earlier autos, a different story and I think there too it's playing out as we.
Discussed we thought it would.
After the end of the first quarter and that is at least with auto you have.
The offsetting benefit.
Of robust rate increases so even though we're seeing.
[music].
Volume decrease the number of vehicles decreased or be furloughed.
There is some benefit from the the robust rate increases stat that forgetting the.
The only other thing that I'll just add on to conclude Greg is that.
I think you know and you may recall.
A lot of UBS.
States had.
Introduced regulation, whereby they either requested or required insurers to.
Accelerates credits to two customers.
Based on exposure reductions, so set a different way rather than waiting until audit time at the end of a policy they asked to.
Consider exposure reductions.
Early and we did that.
As as required and and.
Where requested and.
We've kept very close tabs on that in many states we have to report back to the state on what we've done so.
Approximately $30 million of premium was.
Credited.
Because of those exposure reduction.
So.
That that's the only thing that gets out of the normal course of business, where that would have palm later it was accelerated into the second quarter because of those.
Regulations and requests.
Thanks.
Pivot.
Just one question on title and then one on the run off on title.
Carol and that it sure seems like.
The pipeline, even as we close out the quarter.
The second quarter still seems like you have a pretty strong pipeline, which.
Surprising in the context of everything Thats going on.
Can you give us.
Your view of all of how.
The order book looks and what you're thinking for the balance of the year.
Well yeah. Thank you Greg July.
He has been very strong for us and what will put we'll close the month that was really strong orders in both the pie and lease sale and all indications are right now that.
This will continue to the third quarter, Yeah, there was that a little bit of a late spring that is just pushed everything.
And.
And could curious actually all the way to the ended the year if things continue to weigh they are.
It is certainly we're very happy robust yeah, right certainly so things are robust Jim.
Last question just on the run off.
Runoff business and.
Your comments Carl about.
The 41% closure assumption.
How do we apply.
Those types assumptions when we're looking at your just your net risk risk in force because that doesn't seem to be.
Shrinking as fast perhaps is your topline so it should we think about a percentage of your risk in force being in this foreclosure or category and can you give us some color around that.
Well when you look at the financial supplement and the.
Risk in force numbers that we recorded just trying to clip here as I am speaking.
I believe its.
The page six of the a supplement.
The risk in force is running off about.
25% per year.
Continued into.
Into.
2020, with about 5.65, 0.7% running off.
Each quarterly period.
The revenues are continuing to decline.
As Weve projected I would say the.
The right on in line with what we expected them to be.
The due to claim costs that are starting to deviate from the projections that we.
We have prepared a while back and that's largely attributable to what's happening with unemployment in the surgeon.
Reported delinquencies.
But.
As as.
As we disclosed in the supplement the the delinquency count increase dramatically during the third quarter.
And if you look on page eight of the supplement you can see that jumped by about 2400.
Loans from 60 to 80 update a 700.
And.
Oh that net increase.
No we reported net of cures.
Yes majority of that increase was attributable to loans that are part of a forbearance program. So.
What I was attempting to to communicate earlier is that we.
We have experienced with.
Yes.
Types of programs and the ultimate loss costs.
For significantly better than the normal.
On forbearance.
Loan so weve set these aside reserve for them separately.
And.
And to increase reserves accordingly.
And by the same token we have looked at development trends.
While the trends themselves in the early stage delinquencies wouldn't suggest having to take any dramatic.
Reserve actions, we in fact used.
Our judgment.
To try and get ahead of what we think might happen.
With.
With loss costs and increased the frequency factors.
This quarter as opposed to waiting to see it manifests itself in the underlying development data so.
Those things in combination.
Drove the underwriting loss and operating loss for the corn.
That's great to the premium run off pretty much in line with expectations.
Got it. Thank you everyone for your answers.
Thank you Greg.
As a reminder.
Got a star one last question, we know take our next question.
Kevin I see from JPM Securities. Please go ahead.
Thanks Index, although JMP.
Good afternoon.
Good afternoon from Alabama.
Hey, good afternoon.
First one I just want a follow up on.
To Greg's question when I got one other one.
On on that follow up.
Craig You mentioned I think there's about kind of $30 million dollars.
For lack of bedroom kind of exposure change related premiums.
And I just wanted to clarify there is that does that the actual kind of exposure in in the quarter that actually took place as well as call. It mid term adjustments for future exposure.
And if it is can you even roughly kind of break that out I'm, just trying to going to feel for what kind of the three month exposure was whether its actual payrolls or actual kind of miles driven or receipts or whatever it is versus how much of that might have been.
Something likely to come in at future quarter. They got fast forward into this quarter because of the midterm adjustment.
Right right so.
Yes.
If I fully understand your question the.
The premium the 30 million dollar figure that we talked about.
Comes from a reduction in exposure as you described it's against written premium so that written premium would would go out over a one year period. So.
So to the extent that.
The majority of policies, our one year.
We would be adjusting.
Premium.
That would span over the course of that have that year. So for some policies.
That credit May have come in the first quarter. The policy was written whereas for other policies, perhaps they were written.
In 2019 and and therefore.
The credit is for a shorter period of time.
So yes.
Okay.
That's helpful I'd Rogers number as opposed to earn numbers to that.
Yes.
Yes, and then the written ended up.
Perfect.
And then the other question I had just I was hoping you could expand a little on what you're seeing in the market pricing.
Maybe just in the three major general insurance markets. You, you mentioned kind of low single digit rate decline scale on workers comp.
That said I think one of your peers called the bottom of the market.
Starting on their call. So I'm curious what you're seeing there. If you could you think we're kind of nearing an inflection point and then any comments you can provide on just what you're seeing in commercial auto as well as Joe.
Sure sure I'd be happy too so.
Now, let me first start with with Tom as you say.
I had indicated low single digits.
In the way of.
Decreases.
You know and as we've said in prior quarters and for several years now.
We're not we havent been terribly concerned with those kind of decreases because our own data combined with bureau data, whether its NCC API or the individual state bureaus.
All of it is very consistent.
In reflecting a decrease in frequency.
And the the decline the those small declines in workers' compensation rates that that were giving.
Our.
More than offset by the declines in frequent and frequency now of course this quarter.
Frequency is way down so it's.
Best to look at frequency, excluding the impact of Cobot 19, and if you look at at our data and if you look at industry data again, excluding the impact of that covert 19 has had on on.
The workforce and payroll.
That the.
Frequency is still coming down.
You know as an industry, so I would not be one to say that.
We would expect a bottoming and.
It hasn't been.
As we said.
On merited in the.
The amount of rate that we've given up.
Has been more than offset by frequency. So it seems to us that it that it's justified for for comp.
Moving to tip auto.
I think I mentioned in my comments that we were seeing rate increases still in the low teens.
And as I mentioned in my comments, we think those are necessary.
Sure there is a temporary.
Reduction in frequency, but.
Severity is still driving the need for rate. So you know on comp. It you have a tale of two cities here on comp you have frequency declines that are justifying some reduction in rate on auto you have severity.
That continues that justifies the need for the robust rate increases that were getting.
We're just commenting on other couple other particular lines that that we write that.
Our certainly noteworthy in the way of rates.
Aviation is still getting very robust rate increases in the neighborhood of 25%.
And DNL email.
Here to extremely robust rate increases, we think they're necessary.
And as same goes for aviation.
But in Indiana OE at all the rate increases were getting our in the neighborhood of 50.
Percent.
So.
And then you asked about GL, specifically GL because there is some knock on effect similar to the the issues affecting auto rate is needed there and right now.
Even though it's a smaller.
Portion of our portfolio for general liability, we're getting rate increases in the mid to high single digits.
Great and it's very helpful. Thank you for a while the answers and that's a lot going forward.
Thanks, a lot Matt.
Thank you.
Well take our next question.
Greg Peters.
Raymond James. Please go ahead your line is open.
Great.
A follow up or too.
All right I wanted to.
Go back to page four of your financial supplement.
And specifically I wanted to and I know, it's a smaller line of business for you, but I wanted to.
Give you a moment to talk talks about the other coverages category. This is this is the line that includes the home in the auto warranty the aviation and travel accident coverages.
And.
I was wondering if you could give us sense of what's going on price in that business and then if you looked at the claim ratios that you reported.
In the second quarter. It was up to 65.1 from 57.7 during the year ago.
You know if its auto and home warranty I felt feel like everyone's at home I'm not sure where the pressures coming from I'm sure. There's really good explanation for it.
Well, there is and I'd be more than happy to give you more granularity on that Craig I guess.
The.
The only.
Categories here that I didnt speak to our the financial indemnity the property and the other coverages.
As you can see on financial indemnity, which which includes our sturdy our DNL handheld business.
You can see the claim ratio there at 59, six for the quarter, which as I indicated my earlier comments we were.
Very.
Happy with and that's very similar to the six month ratio Similarly on property here to pretty much.
Pretty much flat.
As a pancake whether you're looking at.
The quarter or the year to date. So we were happy with that when you get to other coverages.
As you point out in the footnote for their it's made up of.
Home and auto warranty aviation and travel accident and I can tell you that.
Auto warranty aviation and travel accident are all pretty much flat.
And it's our home warranty business that has seen an increase in.
In loss ratio.
So what's what's behind that are a couple of things one is.
The cost of work orders has.
Increased.
Much faster than we expected and much faster than normal.
And then secondly, the number of of claims that we've seen has increased and we think Pat.
Part of that is actually cobot related in that people are hole and discovering.
Issues with whether it be appliances or systems in their homes and are making more claims. So you can you couple of those things and we've seen a.
An increase in our home warranty business. So the good news about home warranty as you well now is that it's extremely short tail and we can react extremely fast.
As we always the one that business with pricing and.
It's a fairly straightforward business.
And when we see those kind of things, we immediately take pricing action and is.
Really that simple so.
Those are that's what's underlying that that increase that you're seeing there Greg.
Excellent color.
I just wanted to pivot back to your comments around.
The benefit from the lower claims frequency.
Set.
Rising severity.
You know if I think back to just the way you approach your loss picks and the reserving methodology is accompanied already.
Strikes me that it's usually pretty cautious and so.
You May see for example in my mind, you, maybe seeing a trend better claim frequency, but may not be fully taking that into accounts and your assumptions around loss picks.
So I guess the question.
Question becomes or is this one of the cases, where youre, where you're seeing the severity and fully accounting for that the numbers really sort of discounting the benefits of the lower claim frequency or am I just over thinking this altogether.
No I think I think your question is a good one let me just clarify what's your question specific comp or.
It.
You could apply it to your auto line, we comply to comp I mean, where.
The context of our previous conversations Craig where you've talked about.
How you hold on to your IB are.
For several years out before you start taking down.
Particular year I'm, just thinking about it you are having an aberration theoretically and lower claim frequency.
Does that mean that you automatically are taking down your reserves or does this mean that you're going to wait for several years before you recognize that benefit just trying to understand sort of the cadence of what's going on its economy in the context of the numbers you've reported in them.
I mentioned the major coverage lines.
Right so.
So on on a comp and in particular.
The frequency decline there.
Is we think a very temporary.
Phenomenon.
And therefore.
As we stated.
We have taken a very close look at our loss picks and and we have taken into consideration the unknown ones of Covidien 19, we wait that against.
Our.
The reduction that we're seeing in frequency when we look at the accident year, and we say in totality.
And there's other factors as well, but in totality there isn't severity in comp that is is creating any concern.
Yeah.
And but it is a matter of frequency down and then and then as I went into detail in my opening comments. There. There is some impact from cobot 19, So we put it all together and we say we're confident in our accident year loss.
And I might just take the time to say you know that that is why.
We know a lot of our competitors our peers.
Might be putting up bulk reserves or they all are going out with headlines on.
They're cat the cat number that they're putting up and we just we just don't see that as necessary first off.
We we don't write international and I'm moving in a little outside of the top question, but we we don't write any international business other than Canada, We don't have political risk exposure trade credit exposure entertainment and insurance exposure. So far we haven't seen any surety losses.
From a commercial property standpoint.
We have an immaterial amount of policies out there without a virus exclusion.
Our loss on our travel accident business is is.
In material after reinsurance is applied.
So far GL losses have been immaterial.
We're not a main street retail unsure.
And you put all those things together and they're just there's no reason for us to put up a specific Colgate 19 number.
The only thing that that we certainly will have is is the work comp.
Losses and.
That's where we took a hard look at our our accident year loss pick and we're very comfortable with it and we have no intention of reducing it prematurely. So we will hold that and if things change with respect to covert 19, if they change for the worse.
We would actually looked at maybe increasing it but.
Right now given all those reasons you know the loss sensitive nature and the mild.
Proportion proportion of the losses.
We're very comfortable with where we're at so.
And then on on auto the other the other big one.
There.
Yeah frequencies down, but again, we think that is it's temporary and we.
We need.
The reduction, we're seeing and frequency to offset the increase we're seeing and severity. So therefore, there too we would say that.
We're comfortable.
Confident in our loss pick for auto we're not looking at decreasing it or.
Increasing it because it's a different dynamic out on that line and that is that the reduction in severity is helping along with the rate increases to offset the things we are seeing what severity.
Well I have to say I got a lot more than a bargain for.
In terms of your answer.
And I certainly appreciate it so I'll take that as a car upticks that.
I'll take that as a complement Greg.
Yes, you should thanks, thanks extra answers.
Yeah.
At this thing one moment, please renewal for the questions I would like to turn the call back to management.
So as Rex.
Okay, well, we certainly appreciate everyone's participation.
As we said we feel good about where the business fifth relative to the overall.
Economy.
In America and throughout the World then and.
We're very proud of all of our more than 9000 associates that have that have stepped up then are doing what they need to do to make sure that our business moves forward and that we continue to serve.
All of our constituents so.
Thank you all and we'll look forward to talking to you again next quarter.
This concludes today's call. Thank you for your participation you may now disconnect.
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No.
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Hmm.
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