Q2 2020 CNA Financial Corp Earnings Call
Good morning, and welcome to see a nice discussion also went to trial <unk> second quarter financial results.
Yeah, nice to second quarter earnings release persist they show financial supplement well to lead this morning and are available.
Its size. That's one example of W.G. a nice dot com.
Speaking today will be do not a bullish though teenage chairman and Chief Executive Officer.
All my knowledge <unk> Chief Financial Officer.
Following their prepared remarks, well open the lines for questions.
Today's call May include forward looking statements and references to non-GAAP financial measures.
Any forward looking statements involve risks and uncertainties that may cause actual results could differ materially homes. This place that's my joining the call.
Formation cooked selling those risks is contained in <unk> earnings release, and they see a nice most switched from Italy seed feeling.
In addition, the forward looking statements speak only as of today Monday August 22 Tracy.
Yeah, and I expect for disclaims any obligations to update only by any forward looking statements may enjoy coal.
Regarding non-GAAP measures reconciliations to the most comparable GAAP measures and other information has been provided.
And I shall supplement.
This call is being recorded as Alaska.
During the next week the called May be accessed on CMH website.
If you're reading a transcript of this call. Please note that the transcript main also reviewed for equity that's just make one thing transcription errors.
That's really all country intense meaningful displacement.
With that I looked on the call over true yeah, They chairman and CEO being I don't want so.
But your Deanna.
Sorry.
It's very good to be with you today and I Hope you on your family.
Our coping well when these unprecedented Charlie.
Second quarter is going to challenge you want to put on can make continues to and talk to like a whole lot.
Let's see NATO strongest had been multifaceted Robyn bucket, our underwriting results considerably as we disclosed in our pre announcement on July 15th.
Before I will provide more detail on the impacts of cobot 19, another catastrophes in the quarter I wanted to start by commenting on our underlying business, which performed extremely well in the quarter.
Starting with pricing rate increases continue to accelerate as we achieved.
11% European CE overall.
Reports from the first quarter.
The 11% is inclusive of workers comp.
Dropped slightly negative right.
Importantly increases were broad based each business unit, which you player right.
What about written rate increases over the last four quarters earned rate increases are now 7%.
Sure clearly above our long lost cost trends of around 4%.
But as I said before.
It's the same discount for several more quarters before on with favorable your job.
Our current accident year selection.
We experienced almost four years the rate changes a little long lost cost trends prior to this hardening market.
No sorry, I, probably like I said on prior calls we experienced writing severity trends drilling up here again, several product lines like agent services.
The primary and excess auto liability.
In terms of go what's written premium next captives and 7% well net written premium growth 3%.
<unk> International what else are still impacted by our re underwriting in our London operations.
In the U.S. gross written premium products captures a 3% for the second quarter consistent what you want.
It's cheap its level of growth, even though exposure.
Although there were no big minus 1% of the quarter versus last too.
Last year second quarter swing of almost three points due to economic disruption.
This growth, while modestly up 1% over the prior year quarter, it's actually a very good result.
Right essentially the same amount of new business, where we had last year.
It's like a disruptive event in this years quarter.
We're also able to increase our retention by one point the first quarter at 83%, while we treat stronger rate increases.
Oh, yes, which we invested into shrinking our age and broker relationships or the last few years had been a key driver.
And our ability to continue to effectively meet their new business needs.
The second quarter, it often involve responding to shorter time frames on commissions.
We don't need the disruption of converting to a remote work environment contending with an increasingly hardening market.
Underlying combined ratio in the border when we set aside the various cobot 19 impacts, which I will detail shortly.
Oh boy.
0.8 points from year ago.
It's considered atop a point improvement in the underlying loss ratio.
And 43 points improvement in the expense ratio.
One compared to the first quarter up its year expense ratio, excluding the impacts it's called it looks like.
Now, we obviously did have less travel and entertainment expenses.
He also made additional investments in technology as well as operation staff.
Sure our sourcing capabilities transition she wants me to our remote work environment.
After all it could still be awhile before we fully repaired.
Recall that office work environment, and we are well prepared for this.
Turning to your Doctor overnight gene architecture be losses due to the pandemic 482 million pretax that's we pre announced in mid July.
This number reflects our best estimate of open that insurance losses, including anticipated legal expenses from the thing that occurred during the second quarter.
Which we believe claims will eventually emerge.
Charging the quarters almost entirely I'd be an art.
The projections are also broad based upon the various people statute that have already been put in place.
June thirtyth, whether workers comp assumption or state health care immunity.
In addition to the direct over 90 losses of 182 million, we accrued for future audit mature and premium based upon the pattern of lower exposure as we saw into policies renewing during the quarter.
It's a cool adversely impacted our underlying combined ratio for the quarter.
But it was offset by improvement in our underlying loss ratio.
Variable frequency in several of our commercial casualty product lines due to the shopping on place falls.
As mentioned in our earnings Preannouncement.
The loss frequency benefit was muted because a substantial portion of our insurance during a central industries.
She's health care.
Construction and manufacturing, which were not subject to shelter in place restrictions.
And so a little frequency reduction.
In addition in casualty lines like auto in general liability.
Central for higher severity compels us to be prudent.
What did the ball the longer before reacting to favorably.
Taken together.
The combined impact of the reduced net earned premium and the lower frequency of losses decreased our second quarter underlying combined ratio.
There's no 0.4 point beyond the 0.8 point improvement I referenced without the Golden 19 in talks to the reported 93.4%.
Yeah underlying loss ratio decreased in additional 0.9 point, partially offset by a hot for increasing the expense ratio from the accrued audit German premiums.
In the earned premium and a moderate increase.
Bad debt expense.
As we also indicated our pre announcement, we incurred 61 million up the faster if you losses due to the civil unrest events.
In addition, we had 58 million of losses due to the severe winter storms.
That's a borrowing base is between categories of catastrophes.
17 aircraft points door second quarter loss ratio.
Our prior period development in the quarter increased our combined ratio by 1.4 points.
This includes the impact of the 50 million of adverse development drum recognition of perpetual Watson's due primarily to the New York Rifiber statute.
We also plan to.
Yes, maybe losses were developed as part of our annual mass to work with you, which we completed in the second quarter.
Excluding the mass tort charge me at favorable prior period development of 25 million.
Including the Brexit catastrophes and prior period development. The total combined ratio for the quarter was 112.3%.
Moving to investments you have all portfolio fared well in the second quarter with young unrealized gain position increasing significantly as fixed income markets stabilize.
It's well net investment income whats wrong, driven by real time healthy positions.
A common stock investments.
I like the group segment produced 40 million of core income in the quarter driven by better than expected.
Do you experience as usual.
Oh, we'll provide more detail on the investment portfolio and long term care.
Finally, our core income for the second quarter was 99 million or 36 cents per share and net income was 151 million or 55 cents per share and with that I'll turn it over to out.
Thank you you know good morning, everyone. Geno indicated I will now provide details of our core results by business segment.
Starting with specialty combined ratio was honored and 4.2% this quarter.
The combined ratio includes favorable prior period development.
2.9 points.
15 points from catastrophe losses.
A lot or essentially all due to 'cause it nice game.
Favorable prior period development was largely driven by favorable outcomes in professional management liability predominantly for accident years 2017 2018.
The underlying combined ratio for specialty was 92.1% this quarter 1.1 points of improvement compared to second quarter 2019.
Underlying loss ratio was 59.9% expense ratio was 32%.
Expense ratios improved by 1.1 points compared to second quarter 2019, due to both gross and net earned premium and lower expenses.
The gross written premium growth ex captives.
7%, especially for the quarter and this 4% on net written premium basis.
We continue to accrete that 12% up from 9% last quarter.
Retention was 85% this quarter, which was up a point compared to last quarter.
New business volume was at the same level prior years quarter.
The combined ratio for commercial 118.5% this quarter.
18.8 points higher than the second quarter 2019.
It was 19.6 catastrophe losses.
Pointedly favorable prior period development.
The cat losses included 7.7 points teaching civil unrest.
5.9 points from weather related events.
0.4 points attributable because it 19.
As previously disclosed pre prior period development included a charge for mass tort, primarily due to New York, We diver statute related claims.
Excluding that toward commercial prior period development and $2 million favorable that's favorable workers compensation development across multiple accident years.
Sorry, 2009, seeking offset by adverse development in property.
Accident year 2019.
Auto liability for accident years 2017 through 2019.
The auto development was due to higher severity than expected.
Underlying results were very strong for commercial with an underlying combined ratio of 93.5% this quarter.
1.4 points improvement from second quarter 2019.
The underlying loss ratio was 59% compared to 61.7% benefited somewhat from lower loss frequency.
Expense ratio at 33.9% compares to 32.6% in second quarter 2019.
And this adversely impacted by the decrease in has committed audit premiums in the second quarter.
Excluding the closing 19 impacts on favorable claims frequency and additional return premiums the underlying combined improve by your 0.7 points driven by the loss ratio.
Gross written premium growth. After this was 9% in commercial for the quarter and that was 4%.
Rate change of 9% was up one point from last quarter.
Attention to the healthy 83%.
New business growth strong again this quarter at 10% is puppy events in the quarter was again broadly distributed across our target market segments.
Combined ratio for international was 115.3% this quarter compared to 97.5% in second quarter 2019.
Combined ratio reflects 19.9 points of catastrophe losses for the quarter substantially due to cope with 19.
Underlying combined ratio for international was 96.6% this quarter.
Moving on to your 0.8 points compared to prior year quarter.
The underlying loss ratios 50, 59.9% any expense ratio was 56.7%.
The expense ratio compared to 37.3% and second quarter 2019.
Lets continued improvement both acquisition and underwrite hill underwriting expense levels.
The gross written premium declined 3% international for the quarter.
Net written premium declined 4%.
Rate change up 13% was up five points from Q.
Jason was 74% this quarter, which is slightly higher than in 2019.
Reflective of the progression as our re underwriting strategy.
As Deno indicated are liking group segment produced $14 million core income in the quarter.
These results were moderately favorable to our expectation and were primarily driven by persistency experience.
Also note that amid depends in that we've experienced a decline in new claims frequency.
<unk> increased in claim terminations.
A slowdown in clean transitions from home health care for long term care facilities.
We wouldn't be attribute this to policyholders choosing to avoid these facilities where possible.
Europe contracting 'cause it 19.
Given the in mature nature of these trends.
Not recognized favorable morbidity experience in the second quarter.
As we expect to conclude any more long term care reserve review, he's a third quarter.
We didn't can do evaluate these trends in more detail and addressed in the context of this process.
Our corporate segment produced a core loss of $11 million in the second quarter.
Pre tax net investment income was $534 million in the second quarter compared with $515 million in the prior year quarter.
The results reflected favorable churns for more limited partnership and common equity portfolios, which produced pretax income $84 million compared to $43 million during the same period last year.
I should note that the results from our limited partnership investments reflect the current period feasible and Pat.
Recovery is invaluable real time investments.
I'm not offset by negative first quarter returns for investments on a lag basis.
We would anticipate season investments on a lack of reporting basis should have a favorable impact on third quarter income given positive market returns in the second quarter.
Pretax net investment income from our fixed income portfolio, that's $440 million this quarter.
$465 million prior year quarter.
The pretax effective yield on our fixed income holdings was 4.6 for the period.
Pre tax net investment gains for the quarter were $69 million compared to last $18 million from the prior year quarter.
The games.
It was primarily driven by recovery of the Mark to market on our nonrenewable preferred investments.
Our unrealized gain position on a fixed income portfolio stood at $4.4 billion.
From $2.1 billion at first quarter.
The change in on realized during the quarter was driven by the tightening of credit spread across the market is something that recovery and stabilization of the fixed income markets.
Fixed income assets that support our PNC liabilities had an effective duration of 4.1 years at quarter end in wanting with park portfolio targets.
Effective duration of the fixed income assets that support our luck and group liabilities.
8.8 years at quarter end.
Slide 14, and 15 it'd be earnings presentation.
I do with additional details of the investment results and the composition of our investment portfolio.
Our balance sheet continues to be extremely strong at quarter end shareholders' equity was $11.6 billion or $42, a 91 cents per share.
Good luck the increase in our unrealized gain position during the quarter.
Shareholders equity excluding accumulated other comprehensive income was $11.5 billion or $42.34 per share.
We continue to maintain a conservative capital structure with a low leverage ratio well balanced debt maturity schedule.
At quarter end, all of our capital adequacy credit metrics remain above target level supporting our credit ratings.
The second quarter operating cash flows for $38 million.
In addition to our positive operating cash flow you continue to maintain liquidity and cash and short term investments and that's sufficient liquidity holdings to me obligations and the Skandi significant business variability.
And we are pleased to announce a regular quarterly dividend of 37 cents per share.
I'll turn it back to Dino.
That's all.
Before we moved to the pushing that's a portion of the call on up lots of perspective on the hardening market landscape.
Well with the unprecedented events for the second quarter hurt our underwriting results overall.
However, the good news from Mark Nije women in the quarter, but I am even more bullish that the hardening market conditions will persist while at the 2021.
All of the dynamics that have been broadly expressed by industry participants, namely an even lower interest rate environment. Several years of placing below long one loss cost trends social installation elevated catastrophe losses and of course the impacts of this unprecedented pandemic.
Our currently well appreciated by the brokers as evidenced by their articulation of the dynamics in their quarterly calls which means that insured.
Being effectively educated in the need for higher pricing.
And we see evidence of that to our conversations with our insurance, it's hard market conditions similar to only a few historically will enable us to drive further needed improvements in policy terms and conditions that she's stronger pricing across the portfolio and secure more high quality new business.
Second quarter execution evident that we are well positioned to take full advantage at the hard market I could not be more proud of all the C N a employees.
For all their efforts during these unprecedented times and what that we'll be glad to take your questions.
Ladies and gentlemen Assembly line just to ask a question. Please press star one.
Let's take a plus questions on Josh Shanker with Bank of America. Please go ahead.
Yes. Thank you.
No we're doing well.
It's tough times, but or.
Thank you talk a little bit about the expense ratio you mentioned, no skinny spending and you're not a big Teeny company <unk> focus on expenses, but really wasn't any loss Arctic front for sure.
Compared to one Q 20.
And.
[music] 19, you talk about how premiums are factoring into that what do you think the impact Okine savings was and how we should think about that going forward.
Josh All you know I'll start and I felt once that any common yeah. So I mentioned it didn't move Oh from the first quarter in some of it as you point out a function.
Oh, the denominator earned premium, but we'll see you know the strong written premium or that we thought a lot few quarters. We anticipate you know the earned premium.
The catch up until that'll that'll help going forward and as I said, you know we did investable extra in making sure that we could handle all of this oh switching from a remote environment. Some technology. Some additional operations after left.
All of it'd be a the numerator oh.
Oh, the so if you look at it against the first quartile at about 33 33, one I think email in and around 32, <unk>. One way you know give and take a point up a point down based on how we're putting in place that was probably a run rate to think about Josh going forward.
Okay.
And then.
You talked about how there were some line feeling like construction that were non backed by the cobot another.
I'm looking at page one comp ratio.
In the sixties, which is obviously phenomenally low can you talk about.
The idea that maybe there were some claims that have yet to be there were delayed in terms of filing and so you're pretty accurate.
You're talking about it does any issues are paying claims it doesnt seem to me with a Pedro <unk> ratio in the sixties that there maybe should have been.
Well we're encouraged.
[laughter] shockingly low number.
You trends and what the impact from covert arm patrons and wipes temporary.
Okay. So.
Absolutely and then Oh you can you can jump in let me just we just get to the point about called the claims and and and filings as he indicated a vast majority.
I'll be a charge, what's clearly IDN or so.
And and as I indicated a good portion of it.
Cabot for the health care area. So so let me give you. An example of how you look at it and how we looked at it in particular, what agent services, we bought.
Relatively speaking a small number of Oh, Oh wait notices however.
We also have access you don't get the public information about that.
That have occurred in agent services facilities around the United States not going against.
Our own ensure getting what we've been doing.
Well use our experience that are actually speak to try to figure out well, how many of those might turn into claim notices and.
Oh, and what might that be potential claims that emerged from that and our legal costs and it doesn't need $2 and so eating as you suggested.
Mostly.
They are and we estimate you know relatively low claim.
No. This is an filings and then we.
Football estimates from there he thought our experience based on what we are what we saw from Nick you know what we have an exposure what we saw from some of these external information.
I'm not sure all if you want to add anything else.
But I just.
Answered.
Before.
Got a non comp claims during cold, but even if I if I take all corporate claim Tonight back them out we're still on I guess, the low to mid seventies and paid to incur I'm weren't payment patterns of claims in general not necessarily covert claims, but the impact of over claims payment and on it.
How you think about incurred losses, it's a very very low poor even for non cobot claim.
Okay.
Yes, I can just jump in here, Josh looks like next year I I would say, we're not seeing anything extraordinary in terms of.
On on claim payments I think there's probably a bit of the timing effect and you're seeing a little that kind of pages incurred perspective, as well as it showing up a bit in our operating cash flow, but you know, we believe that that upper bound salads and timing.
Okay, and if I can sneak one more.
A little bit I'm sure outerwear drachman in long term care more complicated to settle teaching them that it jumped up a bit in the quarter hopping about that.
Yes. So just a reminder, Johnson is al.
Yes, I mean, the liking group segments. The Shadow Reserve is intended to no largely parallel movement in unrealized.
Concept there is that.
Given that you've got.
That's been Sun life and group.
That's purchase.
Book yield higher than prevailing rates or unrealized goes up.
And it's essentially protecting against the extent you sold those investments in that book yields went away.
That's it could lead to a reserve again, so what you'll see in the quarter really that sea change you're not realizing our life and group segment pretty much titles in lockstep with the change in the Shadow It was there.
I'll try and truck that myself. Thank you for the answers.
We announced that come next question Meyer Shields KBW. Please go ahead.
Great. Thanks, good morning ill.
Beat that comment you talked about a loss and 4% and that seems I won't say about a point in house higher than prior commentary just hoping you could explain football what's driving the different.
And second of all that Ben your 2020 issuers that now embedded in part of your reserves as well.
Okay. So oh, that's a good that's that's an important question actually so.
If you look at our long one loss cost trend.
Ah all off and we include the affinity programs. They actually it's cool it's closer to what we have suggested.
In the past a lot about perhaps potentially slightly less then add three and a half the 4%.
Oh, God I quoted or even excluding the affinity programs that I I want it to qualify that so that is it just deferring because as we've indicated before if you look at our long one loss cost trends for fit any programs, it's very low.
Does that help.
Did that yet I'm curious on the Lady though.
If somebody called and subject to social inflation.
You know Oh, a lot of the affinity program or is it did you all practitioners.
Hi, Greg indicated before there's nurse practitioners to that did but there is a physiotherapist et cetera, and as Ed as you know football ended and literally you know hogs route.
One of these Paul a team.
Oh for individual practitioners in so you just don't see it.
You don't see up there and also on on on some of these individual practitioners, they're also ah excess over any other on the line Oh policy, so well because of the nature of a lot of individual.
Oh, yes, there's really not in there's you know you know medical possible nonmedical part of the sort of professional E N O.
Book also so.
But lucky that up.
Hey, Fletcher, Okay, I guess, I'm, sorry to be pretty well.
Not at all it's dependent say you know because you have also mutiny bought runs you have architects and engineers right, where you don't have any other medical costs and and so.
That's why it's much lower and don't really think it impacted by social inflation like the rest of our health care portfolio.
Okay. That's very helpful. Then one final question I'm, just hoping you could update us probably.
You're seeing in what you see what you're booking in terms of security to give us generally see as an economically sensitive line.
Yeah, actually Oh, well get the well in mind, you my rough our portfolio email E wallet.
Like between.
Oh about 50 50 about contract surety to larger Contractionary business, but then we also allows.
You know that smaller.
Commercial bond operation.
Both of them actually have continued to.
But before he does very well.
No you know it's when you look at Covidien. We included Oh, you know over all charge.
And what what we're seeing very you know you could have full potential bankruptcies or some other smaller contracts do they want.
Sure they experienced during the second quarter, but overall against the pull though I'd be in our charge. It was very small for surety. So.
So far they both well thanks, both operations continued to perform well.
Great. Thank you so much.
Welcome.
Oh no.
As a non tech on next question I'll sell gather that celebrates its downlink and Fox Ma'am. Please go ahead.
Yes, good morning, I I wanted to dig in a little deeper on the overall trends in pricing and we know we do ahead of time going up there's been inadequate for a long time, there was social inflation, we have lower interest rates and now we throw in cold and which isn't quite as.
Clear or consists of a force across the lines of business.
I just wondered if you could.
And help us understand or just your thoughts on where you think coal has accelerated the rate impacts the most and where it might have tempered those trends.
Oh, Gary you know well.
I think.
[laughter].
A little bit like Ah you know this law Oh fleets, the proverbial formal stuff and then I think the uncertainty or well.
Coal.
Or just a impacted.
Overall, you, while we're going to need.
Hardening market.
Probably faster.
And the longer.
ER and I think.
Certain areas clearly more.
Well there.
Think about.
ER health care for Us yeah.
Yeah, I think if again Wade increasing.
And.
In the quarter particular on professional liability.
Worried you certainly see our rating tweets world.
40 points well, what's interesting is also our retention the went up a little bit so.
And and and what while we continue that others are starting to react.
More like we had been reacting for the last couple of years, So I think words.
They elect.
Causalities, there and just in general.
Oh, I didn't get out of them before they do not seem to lead me to believe that post Jose.
So she'll inflation.
Isn't going to continue to do while doing into question.
Well, it's cold bid exacerbate social inflation and I think we just need to lead time.
Tell us more.
Bob each added just a sense a level of uncertainty, but I think had.
Additional pressure and clearly in certain places as I indicated.
Like in health care for our portfolio.
Thank you that's helpful. I I also just wanted to ask about workers comp actually maybe the question is more about what can happen in the future on coal. So we have certain things that you're not assuming they deserve for like on workers comp assumption change and yeah.
Yeah, maybe that other things that can happen in professional liability line later could you just help us understand what you think might what are the things that can happen in the future that might trigger some additional cobas call.
Yeah, Okay, what do you feel like with comp interesting only.
When Oh, you know was back in March.
And the first sort of thought in reaction and I believe I mentioned that also on the first quarter call well, let's all.
The net issue for workers comp again, a function of not having you know the first responder and and truck line health care providers, but then consumption.
Notwithstanding the fact that it does have some guard rails, you know birds eye, Doug June 30, yet, which is all we could go body at the top line.
Do you think.
Presumption, then and and and five of them.
A with a very broad definition.
Employees and you can send.
Oh Wow.
Lumps shouldn't something of interest you potentially other stage inflow.
We can only take it to 16 states.
When we chose all ideologues effective on June Thirtyth, which is what we did.
And I guess, one can see if you end up with a lot more spins.
With consumption you can be say, Oh, probably what some more it's hard to say because it's one it looks like sites. The amount you know we put in for the 15, saying if you look at the amount we have already paid it's actually very small and beyond what you want severity Gallery you are in line.
From a whopping work comp Reagan, you're always been saying is down about you know, 40% why because you know the cold the pieces I usually model no hospitalized patients. So when you look at the claim count we took a number based on the principal Sharon.
Oh, it's conservative the plays out to be conservative, but even if you have some additional states what presumption, it's Mike subsume. It. So it's hard to know exactly I feel I give you the same.
I thought on.
Agent services as I was sitting before.
Oh, when not answering Josh it's a it's a question a part of his question.
I mean.
We look at the claim notices we actually see.
And it's relatively limited.
So what we gave was because those those there's reliable external information on that set of current those communities don't get map our agent services facility.
Oh, we again talk all about even what we didn't have claimed older kids and we made a decision about what might turn into claim notices and what Dan.
Might emerge Oh, I payments or even.
Even the legal costs. So she didn't know if you will have a tremendous second wave.
Oh, well potentially you're gonna be faced with more if you have a moderate increase then point I made on workers comp.
The number.
It's one of the exact quite late so.
Well increase we tried to be conservative based on the information we have as of June thirtyth.
I think what was the kinds of dynamics.
That but can't quite well if that helps.
Yes that is very helpful. I appreciate you know.
Okay. Thanks.
Our next question comes from Jeff Schmidt with family and Blair. Please go ahead.
Hi, good morning.
Did you mention what hock you know rate increases were 9% over on the commercial book did you mention what that was without workers' comp I presume workers comp to still negative.
Yes, yes, it's about.
But a negative one.
So that you know the overall up the 11 included a included the included the negative one so.
Ah that's that's sort of its impact on the commercial so.
It's up.
Oh.
But he pretty much over the first quarter.
Okay.
And then commercial policyholder retention, maybe a little over again sorry.
So a little over right because of the benign them to minus what I'm sorry go ahead.
Okay, Yeah, just looking at policyholder retention into the commercial segment trending down a fair amount I mean, it looks to be.
Our particularly middle market, obviously, you're getting a lot more rate there, but the market overall, it's too could you speak to that or why why that's really not as much as it is.
Yeah, that's it that's that but that's a good question because when you just look at the number any really.
The market.
Obviously, we're able to get rate and obviously, we're also able.
To retain the accounts, even with strong rate, but in middle market in our manufacturing segment, specifically, we have decided that we need to do we underwrite a couple off a few essay sequels and within the manufacturing and so let's just say the fishing.
Hey.
Ah two we underwrite or some of that some of the segments within manufacturing of middle market and that's all that is up in the absence of that you can get the right and you can get the increase in the attention.
Okay.
And then looking at the International book, where do you stand in that re underwriting process actually raised our up and.
Almost genes.
When should we expect that girl could turn it off.
That's great question I, you know as late as I've been commenting on.
On prior calls re underwriting a substantially over by the end of all the third quarter. So I think you know going to get 2021, we expect to be able to.
So turning positive growth.
On the international but it doesn't really do you know if you look at the underlying loss ratio in the quarter you look at the underlying loss ratio in the first time.
The trend now more in line with the rest of art portfolio. So you know a long process starts out the effect and.
And we expect to see positive growth in 2021.
HM Okay.
Okay. Thank you [laughter].
Our Q.
And we'll now take a falloff question film Josh Shanker with Bank of America. Please go huh.
Thank you for taking follow ups are two quick ones, one remaining ones off or just what do you think is the state of the reserve situation for the industry right now in PMC, we really haven't seen that much unfavorable development in the face social inflation is this waiting to come.
Okay.
Josh.
No I think I'm Oh become qualified I can tell you.
You know, how we feel about our portfolio and are we being transparent in the corridor and talk about what we have seen what we saw in severity trends, we talk about when we raised our long run lost cost trends in certain along.
And even multiple times like aging services I think I'd have to leave it up or just commenting on CNN [laughter].
Okay.
And then one of my question about Oh lows, it's been buying in a lot of stock.
I think we've spoken to pass about how the part of the reason for the stock being a a floating is remuneration of employees through shares or is there any impact this ongoing or by end of the stock how I'm. How you guys think about you were.
Capital.
Apple situation and whatnot.
No I don't know al if you want to make any comments or and also a obviously a Josh let me talk a little too Oh after that.
[noise] Josh Yes. This is out no I would I wouldn't say, there's any significant impact obviously there was a big.
Buying there and as well, obviously, we had some activity.
Suite filling our treasury stock, but not significant impacts on our overall capital management strategy.
All right that makes sense.
All right I appreciate it thank you.
And Josh Josh just one quick follow up on your but she known paid to incurred so for the quarter overall paid to encourage and you'll see this obviously in our filed documents a buzz about 78% and that was 81% on commercial.
So a bit different there and again kind of.
Certainly some lines.
Yes, 78%.
Hamburg, 81% for commercial and obviously, there's some variability across different lines right, because we have some longer tails and shorter tailed up again, but nothing really extraordinary.
Okay very good thank you.
No no further questions at this time I would like to turn the call back to a host of Dino stuff when any additional on closing remarks.
Okay. Thank you everyone and thanks for listening in and your questions and we look forward to talking to you will get into quarter. Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you final participation you may now disconnect.