Q3 2020 ProSight Global Inc Earnings Call

In this call and webcast.

At this time all participants are in a listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the session you'll need to press Star then one on your telephone keypad. Please be advised substrates conference is being recorded if you require further assistance. Please press star zero I'd now like to have the conference over to your speaker today, Joe Hathaway.

Corporate Communications Director. Please go ahead Sir.

Thank you and good morning, everyone welcome to the third quarter 2020 earnings conference call for products like Global Inc. with me on the call today are CEO and President Larry Penn Chief Financial Officer body, Purcell, Chief underwriting and risk Officer, Bob Bailey.

Following our prepared remarks, the call will be open for questions.

Yesterday afternoon, we issued our third quarter 2020 earnings release, which is available on our website at investors Dot Procyte specialty dotcom.

Let me remind everyone that during this call management may make comments that reflect their intentions beliefs and expectations for the future we.

We caution that such forward looking statements are not guarantees of future results and actual results may differ materially from those forward looking statements.

For a discussion of some of the risks and important factors that could affect our future results and financial condition. Please see the cautionary language regarding forward looking statements in yesterday's earnings release, and the risk factors sections of our most recent reports and filings made with the SEC.

Except as required by law, we undertake no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise.

Additionally, during today's call, we will discuss certain non-GAAP measures, which we believe are useful in evaluating our performance a reconciliation.

Deletion of these non-GAAP measures to the most comparable GAAP measures can be found in our earnings release with that I'd like to turn the presentation over to our CEO and President Larry again.

Thank you Joe Good morning, everyone and thank you for joining today's call I'd like to start with acknowledging how proud I am of pro sites employees for their dedication throughout this global can't make an extremely busy cat season has been outstanding and their collective effort affirms why our customers and distribution partners choose to do business with <unk>.

Turning to our results for the third quarter I'm disappointed that we delivered a combined of one or we'd 0.3 yeah.

Yes, it was primarily due to an abnormally high almost 12 points of cat, but I would be disappointed in any quarter, where we do not make an underwriting profit regardless of the reason, we take great pride in our underwriting execution and expect to consistently deliver an underwriting profit as we had in the previous 12 quarters before this one.

In fairness, we did have several positives in the quarter that bode well for our future normally I would spend time detailing that success on this call. For example, I read execution was very strong at 11.8%, excluding work comp and 10.9% including workout.

Our underwriting our underlying loss ratio was 59.9%.

Just over 60% of our niches collectively grew 25% in the quarter versus the third quarter of 2019 and even for many of the niches that were significantly impacted by Cohen, and where we have not yet seen a bounce back in written premium we continue to grow our customer base.

Submission counts for many of our niches are up and our pipeline for adding new niches in the future is very strong.

Our investment income results were excellent our DNA spend was $3 million less than it was in the third quarter of 2019.

And there are certainly other positives I could spend time on because I missed these achievements I understand that the quarter was not successful when I turn it over to Bob He will spend time, specifically on what drove the quarter's underwriting results.

Lastly, I would like to affirm the guidance that I provided during our last call for written premium Tobin related losses, and our expenses I believe the range is still hold and would not change any of them, assuming what we know today to be how the year finishes out at.

At this time I will turn the call over to our Chief underwriting Officer, Bob Bailey, and then our CFO body puzzle.

Yeah.

Thank you Larry.

Good morning, everybody.

As chief underwriting officer, I take our underwriting quality and the measures of it very personally.

And this cat quarters performance is not how we built the book or design the book to before.

I can assure you that we have reviewed our procedures and asked ourselves all the questions you might be asking now and concluded that the losses in the quarter are largely an aberration driven by one of the highest frequency caps seasons, both knockout and otherwise in history and are not the result of our failure to manage the growth and the risk profile of our book.

For perspective.

We experienced about 46 million in gross non attritional property losses in the quarter.

Or about 23 million net of reinsurance.

That's considerably more than what we would've expected so what weve ever experienced.

We have reviewed our aggregations and <unk> and in fact, our tier one counties know that touch the coast those counties that touch the coast continued to decline as a percentage of our property book as they have every year since 2015.

In short we are not becoming more exposed to coastal wind perils in fact, just the opposite.

It's also important to note that about 23 million about half of our total noninterest funnel gross loss was driven by just three single large property losses said differently. If just those three buildings had been spared we wouldn't be having this discussion.

This was much more about bad luck with a few large losses and any real build up of exposure in a cat zones.

I've personally met with the entire property team to redouble, our common understanding of the kind of risk profile that we want to build I don't feel like there was no is any misunderstanding.

Obviously this much activity in the quarter focused against property, both weather and otherwise created more opportunity for things to just go well.

We will continue to minimize and reduce our tier one footprint going now.

We believe as we believe this is the best way to reduce that exposure to quote unquote being on luck.

Matt I do feel like I need to say, how pleased I am with hardly everything else that is evolving and trying to.

As Larry mentioned Andre our underlying loss ratio ex cat hasn't.

Great execution, nearly 11% for the quarter was outstanding, especially considering we don't like right those lines of business, such as deno contingency high excess.

You know that like that that are being the hardest hit in the market. We continue to shrink our workers comp profile because ultimately we believe that rate levels, there are increasing less at increasingly less adequate.

Our inventory of cold weather related claims continues to shrink and is now below 150.

Our pipeline for new business is growing we are finding ways to win and we are strengthening the book that I'm proud of.

Now I'd like to ask but he presented to share with you more specifics about the performance of the core body.

Thanks, Bob.

Bob and Larry already said this was a tough quarter for pro site.

Or otherwise positive underlying performance was overwhelmed by 22 million of cat related losses.

<unk> reported net income and adjusted operating income of $1.5 million.

Go through the drivers.

Gross written premium came in at $203 million down 10% versus last year's quarter.

That's an improvement versus a 20% decline we saw into Q.

Many of our customer segments performed well.

Construction Marine and energy and professional services combined grew by 11.7% from last year's quarter with again strong great execution.

We're still seeing a severe low in our large media and entertainment segment.

Well premiums have not yet rebounded we continue to add customers and believe we are strongly positioned in that space launch touring entertainers begin to tour again.

In transportation gross written premiums for taxes in buses taxis and buses are down 50% from the prior year quarter.

Like media, we are adding accounts, but until economic activity restores we won't see the premium pickup.

A real positive in the quarter is our captive effort that we just launched earlier this year.

We added about 17 million a premium in the third quarter.

We have a very active pipeline and captives and feel positive about the long term prospects for this addition to our capability.

On the loss ratio front, we reported a 71.5% loss ratio and ex cats, a very solid 59.9%.

Recall historically since 2011, we have averaged around one to two percentage points of cats with no year.

Significant outlier so.

So 2020 is truly an aberration.

As Bob indicated we feel good about our underwriting controls.

As they relate to our property exposures and expect to return to historical averages in the future.

On our DNA expenses, we continue to manage aggressively.

Year to date, our head count is down as he is our t. any and I T cost and in the quarter DNA is down over 11% from last year's quarter.

In the first half of the year, we added two and a half a million dollars a bad debt expense due to potential deferred premium collection concerns in Q3, our premium collections at over 90 days.

Our stable and we concluded that no more provisioning for collectibility concerns are worth it.

As Larry mentioned, we have a clear line of sight on how we will achieve our 34.6% expense ratio in 2020 to 80.

A 200 basis point improvement from 2019, and we are fully prepared to achieve that goal.

Net investment income came in over $20 million another strong quarter.

And at this point, we have fully recovered from the negative market disruption in the first quarter.

Our credit complex should a solid we made progress in reducing our floating exposure and we were taken positive actions to reduce market spread compression.

Our investment portfolio grew double digits over last year's quarter and again, our limited partnerships performed really really well.

The unrealized gain in the portfolio grew 20, <unk> $24 million in the quarter.

From Q2 to 18 Im sorry grew in the quarter, a 24 million to 85 million, which contributed to our book value growth per share of 4%.

From Q2 to $13.34.

Just a reminder, our senior notes mature later this month and we will start to benefit from lower interest costs that even with higher debt level levels should save us $3 million to $4 million annually.

So to sum it up overall, a tough disappointing quarter.

Despite the worst cat quarter in the company history, we managed a small profit and grew book value.

And though not obvious in the results there were several positive underlying factors that give us momentum going into 2021.

With that I hand, it back to Larry.

Thanks, Buddy operator, we can open the line for questions. Please.

At this time, if you'd like to ask a question over the phone lines. Please press Star then one on your telephone keypad.

Pause for a moment to compile that you into your elster.

Our first question comes from line of.

Your own <unk> of Goldman Sachs. Your line is open.

Hi, good morning, everybody.

That's my first question goes back to the catwalk.

Maybe you can offer a little more color as to where exactly those catastrophes were were in losses were incurred.

And your thoughts about the potential impact of climate change here you talk about.

Lowering your exposure to the coast, but what about your exposure in other parts of the country.

Good morning, Ron This is Larry I'm not Bob tackle that one go ahead Bob.

[noise].

Hey, you're on.

You know obviously.

Yeah, we talk about the Hurricanes, we talk about when storms, we talk about those sorts of things, but let's face it where I live in.

Northern California.

Pretty rough year as well.

We from from Calfire perspective, we did we set records this year on the West coast too.

Didn't want to be outdone, apparently by by the East Coast.

I think the you know how how we feel about it.

We're definitely going at 1 million next year when.

Property treaties come up we're definitely going to have to sit down and think about.

What what our aggregations look like I can tell you you know from a.

From a top top aggregate perspective, there's really we buy very very conservatively.

Theres no evidence, we're anywhere near that kind of level, but.

As we look at how the footprint is evolving.

From a property perspective, we're definitely going to have to sit down and say do we think a normal of six Allen at a wildfire season of ACS is what we should continue to al to buy reinsurance to accommodate or do we think six is really going to 12 like it was this year or some number in between so to me I think it's less about.

Ill responding specifically to these losses [noise].

Which frankly I don't think you know given the you know the the magnitude of the cat season, particularly well performed in an outsized way.

I think we're just going to have to ask ourselves what do the experts think about.

Ongoing weather weather patterns, and how to react to that.

I'm, sorry, there's a [noise].

[noise] iron in the background is that our me me sorry, all new Braun I hope you're okay, and that's not for you [laughter] not that I know.

Yeah, no, but I mean, I think the bobs point, you're on right like in our particular case the quarter right was Oregon wildfires and Hurricanes.

Dominant cat pieces that we look at.

You know and as Bob just talked about right. This is two times the than what you would see as the average cat season, right 12 storms versus six.

We've had other storm seasons, obviously, where we've gone in and that traditionally had our point to two points of cat for the year, there might be a little bit of that in the second quarter under normal circumstances, sometimes is a little bit in the fourth quarter, but you know the majority of that would have been in the third quarter. Historically and you know there were some storms last year. As an example, we had zero points of cat in the third quarter last year. So we do have.

To continue to watch and assess that I think we're we're you know being as smart as we can be around the aggregations that we will look at that are exposed to win fire as a bolt on the west coast is evolving consistently quarter by quarter year by year end, we're obviously taking measures for that.

Knock on wood, we've had in the past some convective storm in the middle of the country losses, but it wasn't what we saw in the second or third quarter of this year. So.

We're going to go and were not significantly exposed in the center of the country either in the way that our book. So we'll have to continue to watch that you're on but it is something that that you know we're.

We're paying attention to.

Okay.

And can you remind us do you have.

We have an aggregate RIN catastrophe cover and then would you consider maybe building that up more considering lessons learned lessons learned from this year.

Yes, yes, you're right we do obviously.

The.

As I mentioned, our true aggregate you know that the topside cover I think we buy incredibly very conservatively.

Always have and that's primarily driven because of so far some of our concentration out of.

The New York area in New York City surrounding counties there.

We probably by you know I would say all in to somewhere in the one in 400 year return period range. So it's a very conservative bye.

I think the question is you know is more about sort of the retention and or do we do we think about how do we think about a sideways covered you know that that limits. The number of Retentions, we have yeah, and I think they're the you know I'll go back to I think we have to let you.

Experts applying more.

This is the season finishes on what we think the nature of some frequency is if it you know I don't want to overreact to this event this year, which was obviously not what we would have expected given that there was also some some really bad luck too.

No compounded with that.

I don't want to overreact to that but the same time I don't want to sit there and and assume everything is going to go back to normal from a weather pattern and or you know fire season pattern when it when thats not what what the sign said if it does say if we if we do conclude that now you know what maybe it's not 12, but it's it's a number more like that.

Now.

Then we need to you know that and we need to adjust I think.

Yeah, now that there's lots of ways that doesn't immediately me, we run out and buy reinsurance I think ultimately what that's telling us us meaning an industry is that.

Property in these places is still not priced its yeah, what still needs more rate whether were yeah, whether the rate is kept.

Yeah, I'll take that to fund the loss to continue it at a one and a half even though the losses or greater or we're turning it over to reinsurance as you know to reinsurers either way you know it it probably me if we do believe that there is more risk from from the storm.

Patterns.

It means property is not done getting right not by a long shot.

Got it that's very helpful color I'll re queue for additional questions. Thank you.

Your next question comes from the line of Mark Hughes of Truest. Your line is open.

Yes. Thank you good morning.

Good morning.

For what it's worth.

Lot of people have had some unusual losses this quarter in years don't seem particularly are obviously out of line.

So.

Uh huh.

For a lot of folks.

The workers comp pricing in the quarter was that you just see that line.

[noise] workers comp pricing I'll take a.

Let me, let me get you an exact number.

Because I have it handy.

The exact number for workers comp was actually minus 0.6.

Quarter to date.

So maybe a little bit better I think you were down to last quarter.

No I think Thats right Mark.

Yes, okay.

We've also Bob you might want to comment on the fact that we shrunk the primary comp book as well, Yeah, I think thats. The real story there. The real story is well definitely 0.6 is moving in the right direction I guess.

The real story is it negative.

Negative 0.6 on a much smaller book I mean, you know three.

Three or four years ago are the comp line represented about a quarter of a billion dollars premium this year it might be I think.

Primary and excess comp I'm talking the primary and also will you know it might be 60 now.

So it's it's a fairly fairly dramatic change and now.

I think we're just seeing less and less.

Well priced accounts out there.

Yeah understood Okay.

The loss ratio in the quarter.

And what is the.

Very good.

So that was a little bit related or a good experience.

Yeah, we don't wasn't it really wasn't covered related work.

The real benefit we saw and it wasn't a lot because we got about a point of improvement from a lower fares dam frequencies.

So that came through in the quarter, but other than that it wasn't.

Direct Cobra related.

Good.

Larry You had mentioned the guidance that you discussed last quarter, you wouldn't really change.

Given what you saw in Q3 I'd be curious to sort of the.

Refresher on what that implies you thing with respect to fourth quarter, maybe written premium.

[noise] any other any other items youd like Hello.

Yeah, No. It's a great question and I think it's it's an interesting one because it for us and we've shared this now a couple of quarters in a row as you know Mark is that our topline has been the most significant thing affected by co that for us and we've got roughly a third of our premium when you think about it that's going to be between.

So things that we do on the transportation space that have yet to bounce back and the media and entertainment space. So when we look at those two pieces right being down you know roughly.

Roughly 40% or so year to date.

When those bounce back is going to be you know directly related to when we see you know kind of the premium kick back into a very significant growth year.

When I said that you know in my opening comments that we had about 60% of our niches that grew 25% for the quarter as you might imagine those are the ones that are not significantly affected by co but for the most part right. There is a combination of rate. There is a combination of new business, but it is you know a significant number of our niches right. It's it's nearly 30 of our niches that are in.

A very significant growth period, and we're looking at those as just being kind of lost in the fact that we have yet to see anything really bounce back for us.

The entertainment space and the transportation space So.

School buses come back online, which they get a little bit in September a little bit more in October you know, we'll see a little bit of growth there. The charter bus book hasn't come back yet it all taxis are still relatively light obviously, our entertainers, there's not a ton of filming going on there's not a lot of Tory entertainers that are out there. So when you think.

Talk about those pieces are they going to come back in the fourth quarter, where we're looking for our assessment on that Mark would be no at this point right because we're looking at whats going around the country from a cobot perspective, and it's likely that that's not going to extend sometime in the next year now.

The news we saw yesterday on a vaccine when does it get delivered what does that mean, how quickly does that rebound in 2021.

That's something we're watching very closely you know that way, we would think about it right now absent a vaccine or something that was significant we would tell you that it would probably be second half of the year next year, when you'd see that significant bounce right you'd see a very large bounce and transportation of very large bounce and entertainment coupled with the all the other things and you kind of hit the growth accelerator then with it.

Exceed it probably goes a little bit faster and we'd have to watch that but specifically to your question I don't see that rebound.

So in the fourth quarter, so that means probably for us.

Quarter, that's consistent with what we just did in the third quarter will happen in the fourth on the other guidance. The cobot part from a loss perspective, as we've shared before we see a little bit in the comp space, a little bit that's kind of evolving and kind of seeing itself through but a very small number of claims in the media space.

And other than that we don't see a lot. So when I said zero, one and a half points last quarter, its probably leaning towards the good side of that range.

And when I talked about you know what we look at from an expense perspective.

The expenses that were looking at you know we done the studies, we feel good about the bad debt provisioning. So it probably isn't going to be a drain on us in the fourth quarter just like it wasn't in the third and we'll get back to some of the real discipline. We've had on the expense side starting to show through in the fourth quarter and into next year. So.

Hopefully that gives you a flavor for the pieces that I provided the guidance on last quarter and a more specific way.

Yes, very helpful. If I might squeeze one more in the.

But net investment income on a run rate without the lot of moving parts, we've had lately, what's the outcome of the.

Sustainable.

Run rate on the leasing portfolio.

Yeah.

Fair question, Mark I mean, because spreads are down accordion on the portfolio that excludes the Lps are down about 50 basis points from last year's quarter.

So ah portfolio on a year to date basis, the core yield excluding Lps is around 3%.

Our reinvestment rates are more around 2%.

So we would expect continued pressure there that we're doing some smart things with.

Private.

Placement and private placement corporates.

And taxable munis non taxable munis to me.

Mute that compression but.

We would consider that we're probably under a little bit more pressure on the yield going forward, probably sub three excluding the Lps.

And then if I translate that into net investment income you did 20 million.

This quarter.

Back to the kind of the high teens mid teens.

Yeah, I think that yes.

High teens mid teens remember the portfolio is growing so we would expect another 10% plus growth in 2021, so that will mute some of that pressure on the on the yield.

We wouldn't expect better yes.

Yes, I just would close or we wouldn't expect investment income to go backwards next year, we just wouldn't expect it to go forward as much as we would have hoped.

Got it thank you.

Thanks Mark.

Your next question comes from line of Ron Bobman of capital return your line is open.

Hi, good morning. Thanks.

Taking my questions.

I think it was Bob who was commenting about the.

Reduction in the property booking you Bobby I think you referred to tier one to tier one.

Portion of the property, but what did you mean by tier one I heard your runs you yes, sorry.

Let me be a little lending a little nursery show here.

Tier one counties are essentially are simply just counties that that touch the coast.

So thinking all the counties that kind of ring, the golf and from from Florida up through Maine.

We do augment that a little bit there will be some some counties that you know they.

They don't necessarily texaco's, but they're really close so we'll call we'll call them tier one as well, but on that for the most part that's as a percentage of our book that that has shrunk. So the overall property book can grow, but obviously as a percentage of the book it would be less.

Yes.

Sorry, the I think you also mentioned that if it weren't for <unk> and <unk> and.

Larry you provided some good sort of sort of accountability Hum.

Acknowledgement wording, but I think Bob you mentioned or maybe with Larry except for these three buildings.

And I'm, sorry, if I Miss I got distracted for a moment or two earlier in the call. The <unk>. If I heard you right. The three buildings contributing to how much of the 22.

This rebuild.

The three buildings, where about half of our gross loss.

Didn't convert that into net just because you know it depended on what else happened as you know so it's kind of tough to to pull them out and do the what if game because you know.

But on a gross basis of the 43 million.

Those three relocations separately, where about half of that.

Okay that was actually I was going to ask you what on a.

On a per property basis, what's the gross policy limits that you that you're willing to issue.

Max Wise and what's the Max net you're willing to retain per property. Yeah. We will we can do it.

In house gross limit.

Up to 45 million.

Turning to calm and by the way, but we can.

More common is probably somewhere under 10.

However, we have we have trees support up to 45, our net on anything.

Would be $3 million.

For for.

Per risk now that that does exclude some things there, there's some things where it's actually far less than that.

For example, you know some of our niches will buy specific covers for just that niche. If you know if were now were you were building into a book and we're a little less certain than we'd like to be we don't have you know a good dataset to rely on we might buy now.

[music].

We might buy some some cover lower on but the most it would ever be would be three so.

So these three buildings did not contribute more than 9 million of the net loss 22.

Thinking about that right.

Oh, you have to put the reinstatement part of it in there too so it could be a those three and you know again, we didnt parse it out that way, but in theory that $5 million of reinstatement as part of the $22 million net right $17 million, where the net losses $5 million of reinstatement gets you to 22, so the whole.

All five part of the five you'd have to figure that part of it out if you're going to look at it that way okay.

Oh I thought on the casualty side. Your limits were you know sort of like under a million Bucks.

Workers on the casualty side, we can do we can do that in house as much as a 10 million dollar abroad.

So far in 11 million gross loan growth.

When Larry Larry has historically referred to.

Asked majority of our limits are under $2 million. He's just talking about the vast majority of our policy limits, what that which we actually do you.

Yeah, it's different by 80 by 85% of our policy limits are our $2 million or less is the is the common you're referencing.

You know I'm, just sort of focused on you know when lightning strike seems to find.

Yep.

Understood.

It does okay.

Shifting gears on loss reserves I was wondering is there sort of a irregularities so to speak of seasonality, where you sequence. Your your your loss reserve reviews.

And can you talk about you do that with any sort of regularity you know every.

Fourth quarter every first quarter, whatever it might be and and do you bring in an outside firm to aid you in that.

Do the work thanks.

Yeah, we have a pretty rigorous quarterly process that we go through the only thing that we do seasonally is generally in the third quarter, we do a deep dive on our excess comp for evaluation in the fourth quarter and then generally we're going to have our independent actuaries actually do their first review.

Using the June 30 numbers they take a second look at 930 and then they finalize their report at the end of the year.

We've had the same independent actuary for a pretty long period of time, so that's pretty routine at this point okay.

Okay.

That's it for me Thanks, a lot.

You're welcome thank you.

Once again, if youd like to ask a question over the phone lines. Please press Star then one on your telephone keypad. Your next question comes from the line of Meyer Shields.

The VW your line is open.

Great. Thanks, Good morning begins workers comp a little bit if I can rehearing somewhat big message as well.

If a company of about workers compensation pricing I was hoping you could talk about what you're seeing in the market on excess workers' compensation side I am not you should be back in it yet, but I was wondering whether that's trending any differently than you'd expected.

So this is Bob I'll I'll take a stab at it but Mike.

Mike If you could when you you mean excess workers comp pricing specifically or.

In General Yes, yes, yes, you talked about the primary layer or earlier, so I was wondering whether that if anything.

Attractive yet in excess.

You know.

I'd I'd be lying if I if I told you you know we.

Keep our we've kept our finger on the pulse of that market I mean, we exited it now almost two years ago.

Largely because.

We just we saw more risk.

We saw risk building up in that space that wasn't priced in on a go forward basis. So yes, we.

We chose to part ways and with that marketplace.

I don't I can't say, there's less risk you know.

That's the you know the I would say I wouldn't say vast majority a big percentage, perhaps even a plurality.

Of that space is you know is first responders police and fire municipal type workers I can't imagine that you know in this in these troubled times with coal bed or social unrest that that's that's a a feel good space right now so I don't believe that the exposure pro.

While we sort of predicted not that we knew cove, it was happening or any of that but we certainly saw a buildup of exposure I I would tend to still believe that.

In fact, maybe even more so what I'm, what I'm not certain on so before I go pull firearms I don't mean to what I'm. What I don't know is what is happening to the pricing I will tell you that historically over our experience the excess market tends to run consistent with the primary market. So when you see sort of a flat flat.

Cluster pricing environment in the primary market it tends to be what customers expect in the excess market. There's no reason for that they're completely different development pad. It's a completely different loss scenarios I realize that but that does tend to be the way. It worked over the better part of a couple of decades, maybe that separated.

And maybe that that's not true anymore.

But.

That's as much as I can give you my or on a kind of a college.

College knowledge, but understand Mike.

Mike.

Prospective is dated about a couple of years.

No that's there.

That's very helpful answer.

I think Larry you talked a bit or made the point that obviously the biggest impact of cobot. So far has been on premium volume I was hoping to dig into secondary impacts and not looking for prediction, because who knows but if we were in a normal environment. This year, if that turns out to be more normal how should we think about the impact of what the recovery median entered.

Payment recovery transportation premium on the expense ratio part.

So.

It's a it's a great question, it's very very dependent on when we start to see that bounce back of course as you know right because we need to see the earned come through so if we get it earlier in 21 for example, if we had fourth quarter. If we had a vaccine that we have that's an area that you played out that it started to bounce back to normal yes. The premiums will go up by 25 30, 40%.

And that you know as compared to where we've seen over the last couple of quarters. So you'll see that bounce on the premium side and then is when that starts to earn that will certainly help.

On the expense side.

We think it's probably like you know the way that we would model. It just to give you a general sense. It was a first half.

Normal versus waiting until the second half for that to be normal the impact in 2021 could be anywhere between like you know 305 hundred basis points on the expense ratio. So that will give you a general flavor as to what the timing would be in 21 the impact in 22 would be very significant.

Right and that's one of the things that we feel confident about when we talk about the 200 basis point improvement.

That that could be a pretty significant number.

Okay. That's helpful. Two other quick questions. If I can with regard to DNA in the quarter was there anything unusual maybe a pullback in expense then because of other constraints or is that.

A decent run rate for the World RIN.

No, it's not a decent run rate.

On a low we did some co big.

Tightening of our belts in the quarter were also still benefiting from lower T. anyway. So.

So I wouldn't use the $23 million as a run rate.

Meyer I, we're still trying to figure out ultimately what is the run rate post cold it based on the timing of that so well be doing some work in the fourth quarter, but the 23 is not a run rate number is too low.

Okay, well that's helpful and then suddenly.

Is there any way of getting a sense that to exposure to the fourth quarter Cat Treaty you've had so far.

You trailed off there could you say that I'm sorry.

Yeah. So we've had a couple of fourth quarter hurricanes or whatever and I was wondering whether there's any sense yet in terms of of your exposure or are there on the net or gross basis.

This is this is Bob I'll I mean as far as data goes weve.

We've experienced very little it it's probably too you know far too soon to say.

Despite the ball.

It's only been a couple of claims.

That had been reported.

Prior to that I'm trying to make sure I understand.

That's what got pushed into the third threeq versus Fourq versus fourth Q versus I think Delta I think Delta is probably what we know right now is a few million dollars Zeta too early to tell but doesn't look significance.

And.

Those are I think those are the big ones that I think about it for the fourth quarter.

Okay. That's very helpful. Thank you Philip Yep.

Yep.

Your next question comes from the line of Mark Hughes of Truest. Your line is open.

Thanks Mark.

Well you know it's a good meal you want to comment.

[laughter].

Delta.

Yes.

A few million dollars that grocers that net.

Net Debbie.

Well, probably both frankly, yes.

Yes true but.

Okay, Yes, given then the.

The three buildings or do we do assume those are fire losses, just total losses.

Let's see the three buildings actually.

One was the one with the fire loss.

And the rest were wins.

I'm sorry, two were far along what wasn't Oregon last one was a fire loss one was.

The Big one was was a wins.

It was part of the part of a harkins was Laura Yeah. We're okay.

Okay and.

And then.

There are no 2050 [laughter].

Yeah.

The gross earned premium in Threeq you.

Gross I was all in.

Or just property.

All live.

The gross written for all in was $203 million.

How about the growth there this quarter.

Oh, the earn number do you have the EUR number at your fingertips I'm looking for it.

Uh huh.

Okay, Oh, a broad also the you talked about the.

Opportunity and captives.

Active pipeline and captains, please talk a little more about that what's what's driving it.

Material that could be.

This is Bob from a from a captive for.

Perspective, we're.

We're excited about it.

We've we do have you know a good number of high quality opportunities I think in the pipeline we've already executed on about half a dozen of those about five or six.

To us it's very consistent with the strategy is in terms of when it is sort of the ultimate manifestation of an it strategy when they're actually coming together in forming.

Taking on their own risk and.

Starting to determine their own underwriting selection standard. It's just it's a yeah. It's it's a wonderful thing to see quite frankly.

That said, yes, we're generally looking at.

Ill.

Certainly providing providing front so its largely fee income from a front largely fee income from loss from claims handling.

And then you know depending on the specific so the risk depending on specifics of the you know of the.

All of the exposure we might provide.

Some sort of per risks per risk stop we might provide an aggregate cover you know hack stopping might provide any some combination of that.

So.

I don't know how much more you know.

Specificity on.

Yeah, Mark at a gross earned gross earned in the quarter is too low seven.

You have them.

Okay.

Great. Thank you very much.

Sure.

Your next question comes from the line of Darren <unk> of Goldman Sachs. Your line is open.

Hi, I'm back for seconds as well outstanding track, it's always good to have guessed back yet.

Okay.

In transportation I think you called out a 50% decrease in bus and taxis, but I think overall premiums are up for the quarter can you maybe talk about some of the officer.

Well you're seeing growth.

Offsets or on the growth side and the captives. So theres a couple of places that you have on the transportation side that you know of that $17 million I don't know the number one stop me if I want to say it was like 13 or $14 million the predominant part of that where the captives and so we just categorized in the transportation sector Euro.

Got it okay and that would of course been against a zero last year right.

Great.

Yep and then on the limited partnerships can you just give the dollar and percentage amount of the returns this quarter.

Yeah, the returns for the quarter.

Were $5.5 million it was a 30% annualized return.

For the quarter and that compares to about a half a million in last year's quarter.

So again pretty sizable if you remember you're out in the first quarter. We lost 8 million. We got you know a lot of it back in the second quarter and again this has been a really strong quarter.

Right.

Got it well thank you.

Good luck.

Thanks.

There are no further questions over the phone lines at this time I'll turn the call back over to the presenters.

Thank you and.

Well, we appreciate everyone joining for the call today. Thank you for listening into the third quarter 2020, Procyte Global earnings call have a great rest of the day.

Thanks, everyone. Thank.

Thank you. Thank you.

Chairs just concludes todays conference call you may now disconnect.

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