Q1 2021 ProAssurance Corp Earnings Call
Yeah.
[music].
Good morning, everyone welcome to crash Umc's conference call to discuss the company's first quarter 2021 results.
These results were reported in a news release issued on Macy's and if anyone.
Please review that document.
Management expects to make statements on this call dealing with projections estimates and expectations and.
And it's basically identifies and b's as forward looking statements within the meaning of the U S. Federal securities closed and subject to applicable safe Harbor protections.
The contract these call and cracked rich audio and Lee Smith, San Antonio along.
And except as required by law and regulation pressure and will not undertake and expressly disclaims any obligation to update or alter information disclosed as part of these global and Lucas statement.
This management team a brush events also expects to reference non-GAAP items during today's call.
The company's recent news release provides a reconciliation of these non-GAAP numbers to their GAAP counterparts.
Now as I turn the call over to Mr. Tan and Mckeeman I would like to remind you that according to be and recording and.
And there will be a time for questions. After the conclusion of our prepared remarks.
Mr Mckenna and if please go ahead.
Thank you Francesca and good morning, everyone.
And our call today, we have Ned Rand, President and CEO, Dana Hendricks, Chief Financial Officer, Mike Bogusky, President of our specialty property and casualty lines and Kevin shook President of our workers' compensation insurance operations net.
I'll turn it over to you.
Thanks, Ken.
And the landscape looks much different than it did at this point in 2020.
And not just regarding the pandemic.
This time last year, we were looking at a very challenging quarter and.
A long road ahead and pursuit of our planned acquisition of the Norcal group.
Today, However, I am pleased to say, we've made outstanding progress and both areas.
For the quarter, we got off to a strong start in 2020 one.
And as each of our major segments reported improved results.
This represents the continued benefit of the work we've completed over the past two years and.
And we will look to build upon this momentum through the remainder of the year.
And Lisa as exciting as the improvement and our results. However.
Is the latest news from the Norcal transaction.
I am pleased to announce that after over two years of discussions planning and play and hard work on behalf of employees at both companies.
We closed the acquisition of Norcal yesterday afternoon.
This is a major milestone for pro assurance and nor accounts and we're excited for the opportunities the deal delivers for our customers and our shareholders.
We're excited about the close of the transaction and the strategic value. It presents however.
We know the true measure of our success will be the successful integration of the organizations and executing on our strategies to deliver on our short and long term goals.
To our new colleagues at Norcal, welcome and I cannot overstate, how pleased I am to add your many contributions to our business and culture.
Now I'd like to turn the call over to Dana So she can lead us into the results for the quarter Dana.
Thank you Dan for the first quarter, we saw meaningful quarter over quarter improvement and our underwriting results along with a strong performance from our L. P and LLC investment portfolio.
Further each of our operating segments recorded quarter over quarter improvement and its bottom line with the exception of the Lloyds Syndicate segment.
As a result, we reported non-GAAP operating income of approximately $2 $1 million or <unk> <unk> per share.
Gross premiums written decreased quarter over quarter, driven primarily by the non renewal of two large accounts and specialty P&C, which Mike will address momentarily.
The decrease was also attributable to our reduced participation in Lloyds Syndicate, and 17 29 and to a lesser extent continued competitive conditions and all our lines of business.
Even in the current competitive environment, we were able to secure $18.8 million and new business at quarter over quarter increase of $5 $3 million driven by our specialty healthcare and medical technology liability lines of business.
Our consolidated net loss ratio was 79, 9% a quarter over quarter decrease of one percentage point attributable to our specialty P&C and workers' compensation insurance segment, largely offset by natural catastrophe activity and our Lloyds Syndicate segment.
While overall favorable reserve development was lower due to the adverse development at Lloyds, we recorded higher levels of favorable reserve development, and our specialty P&C and workers compensation segment.
Our consolidated underwriting and expense ratio for the quarter was 31% a slight decrease from the prior year quarter. Despite lower topline revenue further evidenced that the strategic initiatives to improve our underlying expense structure executed in 2020 are having.
And the desired effect.
From an investment perspective, our consolidated net investment result increased quarter over quarter to $21 $8 million driven by $6 $8 million of income from our unconsolidated subsidiary.
We invest and various L P and L. L. CS and the results of those investments are typically reported to us on a one quarter lag accordingly, and the earnings from unconsolidated subsidiaries and the current quarter represent the gains in value of L. P and L. L C and the fourth quarter of 2020 <unk>.
Consolidated net investment income was $15 million and the quarter down from the year ago period, primarily due to lower yields from our short term investments and corporate debt securities in the current low interest rate environment as well as a decrease and our allocation to equities.
In addition, the decline in net investment income reflected the impact of capital planning in anticipation of closing our acquisition of Norcal Ken.
Yeah.
Thanks, Dan and Mike will you please take us through the specialty P&C segment.
I will turn the specialty property and casualty segment continues to execute execute the comprehensive business strategy to address our operating and underwriting results.
Although we recorded net underwriting loss from the quarter. We are encouraged by the 6.5 percentage point reduction and our combined ratio from the first quarter last year and continued positive momentum.
As Dana mentioned gross premiums written and contracted in the quarter.
Primarily due to the non renewal of two policies and specialty health care.
Representing $13 million of premium writings.
The retention loss of these two accounts reflects disciplined pricing and underwriting decisions.
We will continue to focus on underwriting discipline and achievement of our long term profit objectives.
Managing the segment's top line is necessary to improve our bottom line.
As a result of these aforementioned non renewed accounts premium retention for our specialty line of business was 56% in the quarter.
Standard physicians, however, increased to 86% a quarter over quarter gain of six percentage points.
While standard physicians retention has largely stabilized from the impact of price strengthening and state strategy re underwriting initiatives over the past year and a half.
It remains slightly lower than other than our historical average for this line of business.
Retention and our small business unit and medical technology liability business.
This increased to 91% and 87% respectively.
With the non renewal of the two specialty accounts behind US we anticipate retention rates for this segment will continue we will continue to normalize going forward.
We achieved renewal pricing price increases of 6% and this segment driven by price increases and our standard positions and specialty businesses of 6% and.
And 8% respectively.
However, in addition to the pricing increases and specialty we continued to strengthen rate adequacy through adjustments to product structure terms and conditions.
The increased level of new business written in the quarter totaling $12 1 million was primarily driven by $8 $7 million from our specialty business and increase of $6 $8 million from the comparable period of 2020.
Furthermore, new business and our Med Tech line increased by $1 $1 million to $1 8 million.
The current accident year net loss ratio decreased four four percentage points.
Which primarily reflects the improvement from our re underwriting efforts and pricing gains.
We observed a reduction and claim frequency and 2020 debt has continued in 2021.
Some of which is likely associated with the pandemic as courts and jury trials and most places have yet to return to normal schedules.
We remain cautious and recognizing these favorable frequency trends and our current accident year loss pick.
The long tail nature of our lines of business and a high degree of continuing uncertainty that COVID-19 has introduced into operating conditions.
Speaking of COVID-19.
We have not seen significant emergence of additional suits.
From the incidents reported to date with with only nine actual suits filed as of the end of the first quarter.
We continue to carefully monitor pandemic related claim activity and no additional IV and our reserves have been book since the second quarter of 2020.
Despite the challenges of the current loss environment, we recognized net favorable development of $2 $7 million, primarily and our med Tech business, which is an increase of about $300000 compared to the first quarter of 2020.
The specialty property and casualty segment reported an expense ratio of 22, 8% for the first quarter.
And improvement of one eight percentage points from the year ago quarter, Despite lower net earned premiums.
We continue to benefit from organizational restructuring efforts and proactive expense management.
To conclude and as Ned mentioned in his introduction.
We are delighted with yesterday's closure of the norcal transaction.
We are especially pleased with the response of nor Cal policyholders to our tender offer.
Through which we have acquired over 98% of the stock of nor Cal insurance company the successor to Norcal mutual.
This is an exciting day for pro assurance, one that represents the hard work and dedication of employees at both companies.
And I'd like to thank them all for their contributions to the close of the transaction.
We look forward to the discipline.
Integration of the companies and a very very bright future together.
We are confident and our ability to deliver a premier health care professional liability platform on a national basis.
Ken.
Thank you, Mike and congratulations again to you and the team now.
And now I'll ask Kevin to give us some details on the workers' compensation on share.
Segregated portfolio cell reinsurance segments Kevin.
Thank you Ken the Workers' compensation insurance segment produced underwriting income of $1 $9 million and a combined ratio of 96, 2% for the 2021 first quarter compared to 98, 7% in 2020, the decrease and the combined ratio quarter over quarter.
Reflects improvements in both the net loss ratio and underwriting expense ratio during the quarter. The segment booked $72 $3 million of gross premiums written a decrease of eight 7% quarter over quarter.
Renewal price decreases and our traditional book of business were 2% in 2021 compared to 4% in 2020 and premium renewal retention improved to 89% for the first quarter of 2021 from 85% in 2020.
Traditional new business writings for 2021 were $5 $9 million compared to $8 million and 2020 audit premium and our traditional book of business decreased $2 $5 million quarter over quarter, reflecting the economic conditions associated with the COVID-19 pandemic.
<unk> and its impact on final audits of policyholder payrolls.
The decrease and the calendar year loss ratio from 66, 9% in 2020 to 65, 5% in 2021 reflects prior year favorable development of $2 $2 million and 2021 compared to $1 5.002 million 20.
Partially offset by an increase and the current accident year loss ratio from 72% in 2020% to 71% in 2021. The claims operation closed 18, 2% of 2020 and prior claims during the 2021 quarter.
Consistent with first quarter historical trends.
The increase and the current accident year loss ratio reflects the impact of renewal rate decreases and the reduction and audit premium partially offset by the impact of favorable prior year trends on the 2021 loss estimate.
Reported claim frequency for non COVID-19 claims decreased 19% during the first quarter of 2021 compared to pre pandemic run rates.
Most undeveloped incurred losses for the 1754 reported traditional COVID-19 claims since March 2020 totaled $2 $9 million as of March 31, 2021 and.
Importantly, 96, 4% of all 2020, and 2021 reported COVID-19 claims are closed as of March 31, 2021, and the reported COVID-19 claims trajectory trended downward in 2021 compared to 2020.
And we continue to monitor legislative attempts to broaden and workers' compensation coverage and our underwriting territories.
While many legislative enactments or proposals expired at December 31, 2020, new Legislative sessions that commenced in 2021 may revive efforts in this regard.
The 2021 underwriting expense ratio decreased one one points to 37% compared to 31, 8% and 2020, primarily due to the restructuring initiatives implemented in August 2020, partially offset by a decrease and net premium.
Earned gen.
General expenses were $7 $3 million and the first quarter of 2021 compared to $8 $7 million and 2020, a decrease of 16%.
The segregated portfolio cell reinsurance segment produced income of $545000.
And a combined ratio of 99% for the first quarter of 2021 premium trends and the SPC re segment were largely consistent with those and the workers' compensation insurance segment, we renewed all of the captive programs that were available for renewal during the current quarter.
The SPC re segment reported favorable development of $1 $4 million and the first quarter of 2021 compared to $1 $8 million in 2020 <unk>.
Reported COVID-19 claims since the beginning of the pandemic through March 31, 2021 for this segment were one 417 with $3 $3 million of gross undeveloped incurred losses Kent.
Thank you Kevin turning to Lloyds Syndicate segment now I would like to ask net to take us through the results for a moment of investment there.
Thanks, Ken.
As you know we reduced our participation in syndicate $1007 29 for the 2020 underwriting year from 61% to 29%.
And the gross premiums written and the segment this quarter reflect that change.
The adverse development and our Lloyd segment came from higher than expected losses and development on certain natural catastrophes.
Our participation and the results of Syndicate, 17, and 29% and 61 and 31 led us to record a loss of just under $3 million and the quarter.
As we disclosed last quarter, we have further reduced our participation in syndicate and $17 29 from 29% to 5% for the 2020 one underwriting year.
Additionally, we reduced our participation in syndicate, and 61 31 from 100% to 50% for the 2021 underwriting year.
Due to the quarter lag these changes will be reflected and our results beginning in the second quarter of 2021.
Thanks, Nick any closing comments for us before we open it up for questions and I do have some thank you can I.
I think the progress, we're making is clear and our results for the quarter. However, it's important that we maintain this momentum.
And that COVID-19, and settled over the healthcare professional liability and workers' compensation insurance industries and will.
Take time to dissipate.
But in the meantime, our objectives are clear.
And responsible underwriting rational pricing.
And an unwavering dedication to our customers.
Again, I'd like to add my welcome to our new colleagues at Norcal and I look forward to our journey together.
Thank you.
Francesca that concludes our prepared remarks, and we're ready for questions.
We will now begin the question and answer questions to ask a question you May Press Star then one on the touched and plan to.
Sir your question please.
And then too.
The first question is from Matt <unk> JMP Securities.
Net.
Hey, good morning.
I was hoping you might be able to give us a little more color around.
Market conditions and pricing and.
Terms and conditions that youre seeing.
The nominal price increases moderated a little bit.
And understanding where we're several years into the increase now and Youre compounding quite well.
Talk about.
The state of the market.
And if it's right now and and how we should think about cash.
Our reported numbers in that context.
Thanks, Matt and good morning, I'm going to I'm going to let both Mike and Kevin kind of just give a quick update on market conditions from for both the healthcare professional liability and work comp lines, Mike do you mind going first.
Of course, thanks, Ned and good morning, Matt.
And what we've seen and.
First quarter is some some moderation.
The rate increases, but you do have to keep in mind that as you described earlier this has been compounded.
So.
We have and as an example, and core physicians.
Our loss pick that makes really good sense for us.
And our core stage, so that we've moderated that we want to make sure we retain that great. Great book of business. It has been a little bit more competitive as a result.
And maybe some of the slowdowns on the claims side as a result of the pandemic and.
Certainly we have competitive pressures from.
Mutual players on a state by state basis, but we're pleased with the consistency of the rate increases.
We want to retain that quality book and standard positions and we're certainly have taken most of our underwriting actions and what I would describe as non.
And non core states from a state strategy standpoint.
And the specialty business the market has been firmer.
Really nice improvements and terms.
Product structure and.
And overall rate adequacy on top of the premium rate increases so.
We're hopeful that that continues or medical.
Professional liability business continues to be competitive.
As it is and our small business ISG area.
But definitely a little bit of a slowdown from from.
Some of the terms and conditions that we were able to secure and 2020.
And then Matt quickly on comp.
The environment remains competitive certainly despite COVID-19, and the associated economic conditions, but we are starting to see indications that the market may be bottoming out.
Accident year combined of 100 or greater for the industry larger package players looking for right.
Loss cost normalization and.
And so a lot of insurance carriers feeling expense ratio pressure.
From payroll decreases and the need to underwrite a little bit more so our.
And our rate was down about minus 2% and we are starting to see rate on some of the more difficult risks, which also is a good sign so.
Yes definitely.
One more question if I could just.
And then in past quarters, you had referenced.
And kind of a significant reduction and frequency.
And <unk> lines.
But largely COVID-19 related and and Mike I know you touched on it and your opening comments.
Maybe you could just kind of.
Update us on your thoughts there more so around as condos.
What the timeline might be in terms of when you might have.
Recognize that a little more and the numbers if you will.
Do we need to get to kind of the back end of a full reopening and but.
And that things work through the courts and that might be several quarters away and just help.
Help us understand condo and we.
And we know you are observing and kind of cautiously optimistic I guess will be my takeaway, but can you help us understand that.
Okay.
Hey, Matt I am sorry.
Your question Youre audio was not good but I think it was respect to the to the claim frequency reductions as a result of COVID-19 and some color on that.
Yes.
To address that.
As we stated we're taking a conservative view to it because of the slowdown of the system.
It is material reductions and this is particularly and the healthcare professional liability.
Area, and you really expect to see that play out.
And as.
As you look at the.
Next kind of 12 to 12 months to 24 months.
And a record and recognition of the benefits of that I mean, you might see some at the end of 2000.
'twenty, one, but youll see.
Really true understanding of that I think as we go out into 'twenty two from.
And the standpoint of recognizing it.
Great. Thank you very much for the color and congrats on getting norcal clothes and best of luck going forward.
Thanks, Matt I really appreciate your questions.
The next question is from Greg Peters, Raymond James and forehead.
Good morning can you hear me okay.
Yes, Greg we can hear you I think that may have just been unmatched line.
Okay to spectrum share.
So.
I know you are excited about the debt.
Norcal acquisition.
So im looking at I think which the statutory.
Summary of the results over the last five years and.
The loss ratio and 16, 17, and 18 look to be at the high Seventy's and then in 2019 popped up to her.
<unk> hundred 40, fives and as the debt I have it might not be the right data and then in 2020, it's still elevated to 106 and that loss ratio is higher than your group average so.
Maybe you could just comment on what we should be thinking about as you merge this entity, which looks like it was running.
At a higher combined ratio a higher loss ratio from where your company is up.
Yeah, Greg Thanks for that question, Mike do you want to respond first.
Yes, sure I mean, I think as we look at their force first quarter results Greg.
Net through their underwriting re underwriting efforts and and.
Throughout 2020.
And the loss ratio has come down.
To the 96 level.
Really closer getting closer to us than the historical results. So that's an encouraging trend, but I think that.
The big picture of it when you start looking at a.
Roughly a $300 million core physicians book that they have roughly the same on our side is.
Is that.
And the re underwriting side of that will really be focused on.
And just.
And right trends and state strategy. So as we look at the integration of the companies. We will have the opportunity to really evaluate that from our re underwriting perspective.
Our state strategy perspective, and and.
And really kind of move the loss ratios incrementally the way we have.
With with with our book of business over the last two years, but they have been working hard throughout 2020 on their book of business as well.
And the other thing that I would just say as you look at the combined the combined companies.
We stated this public.
I think from a competitive position standpoint.
The synergies with the expense synergies on the norcal.
Transaction and kind of in that $20 million range.
And we've kind of and the same thing over the last two years with specialty P&C and in particular, particularly HCP.
And so.
Roughly and that $20 million range as well so the other the other strategy here is really to.
Run a what I would say a very competitive expense structure.
We reduced the loss ratios through.
Pricing and state strategy.
And really bring this closer together as we go out into the future net that will take some time, but I'm confident and our ability to get that done.
Just as a follow up to that.
<unk>.
No.
Versus your specialty business.
It looks like and I may again, my data might be wrong, it looks like they've actually grown their.
And their top line and in the last two years and if I compare it with your results. Your topline has been under pressure and re underwriting and repricing. So.
<unk> been able to grow where you guys habits.
And assuming my numbers are right here.
And Greg I'll, let Mike I'll, let Mike add one thing to keep in mind, especially when you look at what the debt through last share.
As the pending de Mutualization of norcal and the benefit back to the policyholders of norcal.
Cause them to have much higher retention levels.
And then probably the industry average certainly higher and higher retention levels and then we have and we see that kind of any day mutualization that we've been involved and you see that kind of between the period of announcement and the and the close of the transaction that Mike you want to add some color.
Yes, Greg it's a good question.
Their growth on on the new business side has really been in that core physician book.
Book, and a company wide basis.
And it was higher than our new business.
In 2020, but the other thing on the top line trends with durability to secure to secure rate.
Also to re underwrite some of their they have a much smaller specialty.
Portfolio and.
And did some re underwriting on that side, so I think both organizations.
Really focused on net.
I think the real differences net state as the de Mutualization and probably more growth on their side and the core physicians book.
Thank you for those answers I'm going to ask one more question on nor Cal just just because I'm.
For the benefit of everyone and just try to make sure I accurately sort of run the numbers through my model and make the best guest possible is there any seasonality to the.
Earned premium or the written premium and then do you anticipate I look at their investment income results do you anticipate any change in their investment portfolio as you wanted to to flow assurance.
And certainly there is not a lot of seasonality and their and their earned premium Greg.
Mike You May know better on the seasonality of the written side of things I don't recall, there being tremendous seasonality.
On that and and Dan I'll answer your question on and an investment so it might be.
More specifically about the written and side, yes, it's relatively consistent and Craig I just wanted to go back to that previous question as well.
And they did have the norcal team had a large tail.
Tail premium also during 2020 that drove the top line a bit more than usual and it was a one off so I just wanted to mentioned that as well.
No I think with the Corp core physicians book.
And not a lot of large large account business and.
Hospitals and facilities and larger stuff.
The seasonality will be more consistent.
Okay.
And hi, Greg its Dana here as to your question about nor accounts investment portfolio and how to be thinking about that as we move forward and we.
And we'll be looking to take down risk at norcal to be more in line with our investment to add portfolio allocation. So they certainly have.
And more in terms of equities and we'll be looking to take.
Take that some of that risk out of the portfolio.
Well just stay and have just one quick follow up on that what's the total invested asset base and it's going to transfer to pro assurance.
Yeah.
And we've got over.
Alvarez, a $1 billion invested asset base.
That will come out over I can give you a more specific.
I can give you I think number momentarily.
And we can take this offline.
Thanks.
I've Hogged up and up for your time, Thank you for the answers.
Thank you Greg.
The next question is from Bob Farnam with Boenning and Scattergood. Please go ahead.
Yes, hi, there and good morning, guys just kind of.
And maybe a couple of questions on the specialty P&C segment.
I'm trying to get a feel for it and it sounds like probably Matt and Greg I'm trying to get a feel for what your accident year loss ratio is going to be doing going forward you are getting the rate increases and loss trends.
Have been favorable but youre net recognizing net.
And youre getting the changes in terms and conditions and whatnot. So I'm just trying to figure out should we expect your kind of your accident year loss ratio to improve going forward or is this kind of where it is for the time being.
Hey, Bob Good morning, it's Mike.
What we're waiting to see here is we've made tremendous progress on our on our re underwriting efforts and were starting to see the early benefits of those re underwriting efforts.
And our goal obviously is to bring that down.
Bring that down further into the future and it really comes down to.
When we start to see it and the data.
And then also the second piece and which we are starting to see the early returns of that which is why we were able to.
And we reduced the accident year loss ratio in 'twenty and and in 'twenty one.
No.
And we would be cautiously optimistic that that will continue to improve.
And you have kind.
Kind of a goal youre trying to get to I mean, you're kind of around 90% right now in terms of accident. Your loss ratio. So is that something that youre trying to get down to the Ats at the 76 is there is there a goal in mind for you.
Yeah, absolutely I mean.
And we look at it Big picture.
Our initial goal.
Is is really to get into the into the mid seventies and better on the loss and <unk>.
<expletive> la.
Side of our business, our core book and standard physicians is running.
Much better than that when I say core.
Our physicians business and some of our core states, our noncore states are running a bit higher and.
And again one of the challenges is really bringing that specialty loss ratio, which is.
<unk> did not meet our expectations on loss ratio.
Aggressively down.
I think that.
I'm, just really confident and the underwriting actions that we've made and it just kind of needs to earn out over over the next.
Quarters, and we should be able to make improvements going into the future as well.
Alright.
And then the non renewals that you had in there and is there any anything in particular about those accounts that.
That you can note force.
Yes, absolutely.
The first of all.
It was really what I would describe as the last quarter of heavy re underwriting and specialty we've been at this for two years.
The first one we had and $8 $5 million.
Large accounts that <unk>.
Was on a two year policies. So we did not have the opportunity Bob two two to re underwrite that back in 2020.
This was the first time and that was a result of significant price strengthening.
We wanted to make sure we hit our premium targets for that and.
And we lost debt to competition the second one pretty important.
And roughly about a $4 5 million.
Correctional care.
Accounts that we Nonrenewed and importantly on that Bob.
That business has not been profitable for us over the last five years.
Correctional care segment.
We believe we have roughly five to seven accounts and we are effectively out of that business.
As a result of this non renewal so I think the thing to keep in mind.
Over the last five quarters.
We've taken out about $45 million of what I would call more volatile large account business.
That was not meeting our financial targets for loss ratio and.
And we certainly reduced our volatility and senior care and then we really jumped out of effectively jumped out of Correctional care, which was not profitable as well so when I look at it big picture going into the future. Those are the those are the strong underwriting decisions and I'm really proud of our underwriting teams have done a terrific.
Terrific job that I think are really going to help us on that accident year loss ratio as we go forward, but again.
But we're seeing the early signs and.
Im excited about where we can go with this.
Great. Thanks for the thanks for that color Mike and.
And one last question I had is the cat losses and now you mentioned this.
<unk> segment had cat losses can you kind of quantify the amount of.
Cat losses that you saw.
Okay.
But we're going to have to I'm not necessarily we have that at our fingertips.
Two things that were going on there one was cat losses and.
And recall that for us is a quarter lag. So this is fourth quarter last year.
And it was both cat losses that occurred and that fourth quarter as well as kind of increased attritional losses on.
On prior catastrophes and true.
And 'twenty, while it doesn't have any.
One large catastrophe had had a high and high number of individual catastrophes. Danny you may have more detail on that I'm not sure.
Good day net yeah, I have some detail on that and happy to address it.
And we did share a little bit.
At our year end earnings call in early February that the syndicate Sal.
Natural catastrophe losses in their fourth quarter related to Hurricanes, Laura and Sally and the wind storms that came through the Midwest and.
And.
When we talked then those losses on the storms and other natural catastrophes and the last few months of 2020.
From all of that we were expecting a segment loss and the first quarter of about $2, five Neely and and so as we expected.
And the syndicate did say that deterioration.
Relative to the past quarter on Lora Sally the windstorm.
And approximately $2 million net.
Net deterioration there and then also had losses related to the fourth quarter Hurricanes Delta and data around $3 million there.
And it gives you.
Sort of the highlights net a little more detail.
That's it for good thanks, Dan.
And that's all the questions from me.
The next question is from Paul Newsome of Piper Sandler. Please go ahead.
Good morning.
Wilkes.
First of all.
And it won't be the norcal and little bit dinner.
But it's really an accounting question.
We will be accounting and you work through norcal.
Nor Cal and if you end up taking a reserve charges for door count I recognize that there is a piece of the purchase price that changes, but I'm just curious.
That will offset those reserves.
Changes.
I'm just curious about how the accounting will work so we're not <unk>.
Confused when we pursued them and the second quarter results.
Okay.
Yes. This is.
Paul This is Dana and essentially any adjustment to reserves that we make will be made through the purchase accounting adjustment on the front end.
So you if.
If you have reserve changes in the second quarter.
After the purchase agreement would you would that flow through or is it.
You saw from one shot to do it at the beginning of the purchase agreement.
Yeah.
And we would fair value that.
And at the onset and the transaction.
I think Paul to your question and typically there's a there's a period of time after the close and if theyre kind of.
Things that come to light.
That would affect the fair value at close and as we've pushed back into and.
And a goodwill number that.
And is associated with the transaction up or down.
And our actuaries will will get and starting today and really begin to pound hard on.
On the reserves come up with what we think the overall reserve number should be.
And that will be reflected and the fair value of reserves that we establish and the opening balance sheet.
Our objective there would be that.
And we get that is a really solid number.
But if something were to come to light shortly after that it would it would flow back into the goodwill number.
I think that May answer your question.
Yes, I think so.
And then cash.
Similarly, the Lloyd's business I believe next quarter will be pretty darn small I think very small participation will it will it be material enough to have a separate segment anymore or you can tell and this can we get rolled up into other.
Deposits are good question and that's something that we're looking at is the best way to display that going forward keep in mind that well.
While our participation goes down to a much lower level.
We've got to earn out all of the unearned premium that is there and and a lot of the contracts from 2000 and Winnie because it's free of August reinsurance are still pushing premium and of the 2021 year as written premium.
And the full impact of that reduced participation will take a number of quarters to really be reflected and the premium number, especially the written premium and earned won't both written and earned premium and.
But that is something we're looking at is how best to display that with that reduced capacity.
Is there any possibility that we might see senior and losses at the same kind of.
Losses that we've seen and requests.
True.
Yes so.
Largely because of the large number of.
Catastrophes that did occur.
And throughout 2020, and and kind of and into the beginning of 2021, the way that the range structured reinsurance structure.
And that we have for the syndicated structure. There is there is an aggregate cap on exposure.
Essentially.
Been breached and so we will get reinsurance recoveries on the vast majority of those claims.
Great.
Thanks for the call congratulations on closing the norcal deal and obviously very interesting.
Strategic thing to do so congratulations and thanks.
Thanks, Paul.
Okay.
This concludes tax year and also I would like to turn the conference and that call that to kind of makena and for any closing remarks.
Thank you Francesca and I actually I did want to say one thing earlier Dana you had mentioned that the.
Net losses from the Q4 Hurricanes and Delta and the data was $3 million, that's actually the total for the Hurricanes and the windstorm, there was $1 million from Delta and the data and then $2 million from Lora, Sally and the windstorm. So just wanted to make sure that was clear.
Thank you.
And for that correction.
Hi, certainly had $1 million and my head and just said around thanks. So thank you for that correction.
And the rest of I thought you did I just wanted to make it clear. So just want anyway and just wanted to say thank you to everybody who joined US today, Please stay safe and healthy and we'll look forward to speaking you and again in August.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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