Q1 2021 Old Republic International Corp Earnings Call
Good day, and thank you for standing by and welcome to the Old Republic International first quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
The advice of today's conference is being recorded.
If you require any further <expletive>istance please press star zero.
And the conference over to your Speaker today, Joe calories with and Ww group. Thank you. Please go ahead.
Thank you.
Afternoon, everyone and thank you for joining us for the Old Republic conference call to discuss first quarter 2021 the results. This.
And this morning, we distributed a copy of the press release and posted a separate statistical supplement, which we <expletive>ume you have seen and or otherwise have access to during the call.
Both of the documents are available at old Republic's website, which is www dot old Republic Dot com.
Please be advised that this call may involve forward looking statements as discussed in the press release and statistical supplements dated April 22021.
Risks <expletive>ociated with the statements can be found and the Companys latest SEC filings.
The news conference call with the led by Craig Smiddy, President and CEO of Bulb Republic International Corporation and several other senior executive members as planned for this meeting.
At this time I'd like to turn the call out of a Craig Smiddy. Please go ahead Sir.
Okay. Thank you Joe.
Well good afternoon, everyone and welcome again, the old Republic first quarter 2021 earnings call.
With me today, we have our CFO, Carl Miller, and we have Carolyn Monroe, the president of our title insurance group.
So we're here again with another great quarter that we're very happy with.
The exceptional performance and both general insurance and title insurance drove the strong consolidated results, we posted for the first quarter.
Total net premiums and fees increased to $1 84 billion and the quarter up 18%.
With consolidated pre tax operating income of $255 million up 47%.
And the consolidated combined ratio that was four two percentage points lower for the quarter coming in at a 99%.
In general insurance, we saw slight growth and premium relative to the first quarter of 2021 premiums were not yet impacted by the effects of the pandemic.
And then title insurance, we grew premiums and fees by 40% and that was on top of of record setting first quarter and 2020.
So as demonstrated in the strong results our specialty strategy continues to produce growth and profitability.
And our diverse portfolio of specialty products and both general insurance and title insurance has again delivered value to our shareholders.
So with that I'll turn the discussion over to Carl to discuss some of the per share figures along with some added color on our investment portfolio.
And then he'll turn things back to me to cover general insurance and that will follow by Caroline who will discuss title insurance and then of course, we'll open up to Q&A.
So Carl would you go ahead and take it from here.
Thank you Craig and good afternoon.
This morning, we announced first quarter net income.
Excluding all investment gains and losses of $206 million or 69 cents per diluted share.
Which is a 47% increase compared to last year's first quarter.
Additionally, shareholders equity rose to $6 four of 5 billion and.
And book value per share grew to 21 day.
And <unk> 59.
And that's about a five 1% increase for the quarter.
Inclusive of all regular dividends.
So now let me briefly address.
A couple of key elements regarding old republics financial condition.
First of all relative to the investments we did not make any fundamental change to our investment strategy during the first quarter. This year.
And at this point don't anticipate any material shifts in policy in the near term.
The investment portfolio at March 31 consisted of approximately seven.
72% debt were directed towards highly rated bonds and the short term investments.
With the remaining 28% allocated to large cap stocks.
That have a long history of paying and increasing.
The dividend distributions.
The valuation of the equity portfolio improved by 367 million current.
And finally, our first quarter excuse me.
And ended March with and unrealized gain of $1 5 billion.
Net investment income.
Actually decreased by eight 6% per the quarter.
As the impact of lower yields on new investment purchases.
More than offset a modest increase and the invested <expletive>et base.
The average maturity on the bond portfolio remained consistent at approximately four years and.
And the average book yield declined slightly at the end of the quarter to two 6%.
New money was invested that yields just below 2% during the quarter.
And putting downward pressure on net investment income.
That is likely to persist throughout the remainder of 2021.
Turning now to the liability side of the balance sheet claim reserves grew to $10 8 billion at the end of March.
And were affected by lower paid loss trends due to the pandemic.
All three segments recognized favorable claim reserve development for the quarter.
And in total the cash.
<unk> claim ratio was benefited by one eight percentage points.
For this year's first quarter by comparison to 8% a year ago.
And then finally with respect to our mortgage runoff operation there is really nothing particularly noteworthy this quarter.
Other than to point out that we did in fact resume.
Dividend payments following last year's temporary suspension of capital returns.
And during this first quarter the business received approval from our regulators and.
Paid a $25 million dividend to our parent company.
So at the end of March our mortgage Companys GAAP shareholders equity totaled $435 million.
So thats the highlights and with that I'm going to turn things back to Craig to dive into the general insurance group.
Alright.
Well turning to the general insurance.
Net premiums written increased and the first quarter net.
Followed increases and the third and fourth quarters of last year and we also saw net premiums earned and start to increase.
And the first quarter compared.
Compared to the first quarter of 2020 pre tax operating income rose by almost 28% primarily from our improved claim ratios and the overall combined ratio for the general insurance group improved four percentage points from 95 six.
<unk> to 91, 6% quarter over quarter.
The claim ratios reported where of course inclusive of favorable prior period development, which was two seven percentage points in this quarter compared to favorable development of seven percentage points in the first quarter of 2020.
Net premiums written and commercial auto grew by 8%.
With positive effect from continued rate increases and the auto liability line and those were rate increases and the 15% range and that comes along with.
Growing the exposure base in recent quarters as well.
Our first quarter commercial auto claim ratio improved.
73, 8% compared to 77% and.
The first quarter of 2020.
Claim frequencies still lower than pre pandemic levels, but continues to be offset by higher severity due to greater speeds and continued pressure on the settlement values.
Turning to workers' compensation net premiums written and earned were 15% lower when compared to the first quarter of 2020, where premiums were not yet influenced by the effects of the pandemic.
Slight premium rate increases.
The continued this quarter on the workers compensation line.
The workers' comp first quarter claim ratio came in at 56% compared to 71% and the first quarter of 2020.
And the non Covid related claims frequency remains lower than it was at pre pandemic levels.
As we've talked about and prior quarters and the impact of COVID-19 Workers' compensation claims remains insignificant with about 95% of the Covid.
COVID-19 workers' comp claims coming from loss sensitive business and greater than 95% of the Covid claims continuing to be mild.
And I can also report that newly reported claims dropped significantly over the course of the first quarter.
As most of the you know, we typically provide commercial auto workers' comp and general liability together and our product offering and this combined claim ratio came in at 69, 2% compared to 74, 1% and last year's first quarter.
The financial Indemnity lines property property line and and our other coverage category.
The claim ratios remained very healthy and very steady when you look at.
<unk> over quarter results.
So in the in general insurance, we continue with our strategy to enhance underwriting excellence through better segmentation improved risk selection pricing precision.
Increased use of analytics, along with our focus on providing loss sensitive programs.
We believe this strategy will continue to facilitate strong underwriting profitability, which we believe is even more important now in order to offset the declining investment income that we that we just spoke about.
And the good news is the marketplace remains favorable for us to continue to obtain appropriate prices for our products.
Maintaining high retention ratios.
So I'll now turn the discussion over to Carolyn who along with the rest of her team and the title insurance group continue to knock the cover off the ball so.
Carolyn.
And I'll turn it to you.
Thank you Craig and good afternoon, everyone. The <unk>.
The group is pleased to report record setting first quarter results for both the operating revenue and operating profit our employees continue to effectively balance the challenges, although improving and the in person commerce with the opportunities provided by the current U S mortgage origination market.
Total premium and fee revenue for the quarter was just shy of $1 billion at $967 million up approximately 40% from the comparable prior period.
This was achieved with the contributions of both our agency and direct operations for the quarter agency premiums, which are typically recorded unabashed, a one quarter lag compared tried direct premiums were up nearly 43% and premium and fees from our direct operations were up around 32 per.
Percent.
Our pre tax operating income of 103 million for the quarter compared to $43 million and last year's first quarter.
And increase of $60 million or 139%.
The combined ratio of 93% per the quarter represents around a 5% improvement over last year's first quarter combined ratio of 95, 1%.
Having begun the year with the solid foundation, we remain optimistic for the remainder of the year mortgage rates are expected to remain near historic lows throughout 2021 providing a catalyst for continued robust real estate market.
Other refinance transactions are projected to drop over 35%. This is in comparison to 2000, Twenty's record setting volume and relatively speaking and we will still be at a healthy level.
To offset the recent and strong purchase money transactions are forecast to be up around 16% of course. This is good for our business as home sales offer greater opportunities for premiums and fees.
As always we will move forward with our guiding principles of integrity managing for the long run and financial strength protection of our policyholders and the wellbeing of our employees and customers.
With the Nat and emphasis of appreciation for our employees and their dedication and ingenuity and positive attitude and with that I will turn the call back over to Craig.
Alright, Caroline and congratulations again.
Well again, we're very pleased with this quarter's operating results our strategy of providing specialty insurance and related specialty products to core industry served by general insurance and title insurance.
<unk> to produce strong results for our shareholders. So.
That concludes our prepared remarks, and we'll now open up the discussion.
<unk> Q&A, we're I'll answer your question or I'll ask Karl or Caroline to respond.
And at this time I'd like to remind everyone in order to ask a question press star one on your telephone to withdraw your question press the pound key.
I'll pause for a moment to compile the Q&A roster.
Your first question comes from that current Lady from JMP.
Hey, Thanks, good afternoon.
Hello, Matt.
Hello.
And so you got a few questions maybe Craig can I start with your general liability and workers comp color that you gave the I'm trying to understand the.
The the exposure impacts from Covid and so is it possible for you to even and rough numbers break apart the reduction we saw and premiums and the quarter. I mean, obviously there is retention of Theres new business production. There is pricing and then there's exposure. So how should we think about that in terms of the exposure piece versus the other items.
Yeah.
Sure. So if you look at workers compensation.
Relative to the the last few quarters.
The the exposures have begun to recover so set of said differently the decline.
In the in the fourth quarter over the prior year was greater than the decline is this quarter over again.
The first quarter of 'twenty and when there wasn't any.
Really reflection.
Of the impact from from Covid.
So.
And we would expect that beginning in the second quarter, especially when we're going to start comparing.
Premiums too.
Premiums in 2020 that were in fact.
Impacted.
And then.
The the shift.
Should be considerable but.
What we saw and the first quarter was just simply of continuation with some improvement and exposure over where we were in the last three quarters of 2020.
And with regard the rate it's very slight.
Thank your.
The <expletive>umption Ken can be just that theres, a slight rate increase that we reported on in the fourth quarter.
And it was about the same in this quarter.
Great and then my next question I want to switch the title for a second I think in the past maybe as recently as last quarter I can't recall, you've touched on the idea of making the technology investments and along those lines I was hoping you might be able expand on that a little bit just in terms of.
Some of the which areas in particular, whether it's underwriting or more of kind of interfacing with the agents and and what what you might be planning on doing and the.
The title business on the technology front.
Sure Caroline would you please address that share.
So it's we kind of half of two pronged approach, we're working on things that speed up processes that just so that we can provide better service to our customers and our agents.
And we're also working on things of that will help our agents have.
Better.
Activity too.
Two things out there that the debt.
Start coming on the market so that.
The only have two might go to one place to be able to connect.
Our two other technology that would benefit them so.
We're sort of working on all of it if the truth of known I mean, its something you have to continually evolve around.
And focus on.
Okay, great. Thank you and then last one if I could just a broader company question.
Can you talk a little bit just about the capital and specifically.
Are there are there tangible benefits of kind of having diversified businesses and old Republic in terms of general insurance and and tie it all and I know <unk>.
And run off of.
Or are they kind of on a standalone basis, and you should think of of more of like independent under under a holding company from a capital standpoint.
Well Matt.
I would point you to the.
The comments.
The comments that we made and our March 31.
Annual report letter and in that letter.
And we talk about the fact that.
And that general insurance and title insurance are very complementary under the <unk>.
The umbrella.
And.
There is.
A large amount of synergies with regard to the.
The specialized insurance underwriting approach and products and services that title and and general insurance both.
The focus on that are that are keys to our strategy.
And.
Included in the enterprise risk management attribute.
Of having general insurance and title insurance together.
As we point out and that letter.
We believe the the.
Businesses are counter cyclical.
It's important to our tax planning strategies as well as R.
Our capital management allocations and you may have seen.
The press release yesterday from and best whereby.
And they make similar comments when they affirmed the ratings and our general insurance group and increased the ratings and our title insurance group.
The pointing to the.
Strategic position and importance of title and our.
And our.
Over of public international family and and being integral to the overall of the organization.
With common branding and talent synergies as well so.
I would just.
I'll leave it at that and tell you that.
All of those things, we said and that March.
March 31st letter.
Our.
And how we believe the two businesses fit underneath the.
And the old Republic International umbrella.
Great. Thank you for all of the answers best of luck.
Yes.
And as a reminder to ask a question Press Star One. Your next question comes from Greg Peters from Raymond James.
Good afternoon.
It's interesting.
Most of switched locations because usually during the course of your comments, we get to hear of Chicago's finest the fire Department.
Going back coming back from the lunch break so.
Kudos to hover used you switched it is the first time and a long time I don't remember hearing them and the background.
Well now now you of James that's Greg I'm sure they'll be coming by shortly.
Yeah.
And it's we're here and the same room.
It's it's it's like.
Every year every every time you do the calls it's the timing.
Listen I was I wanted to sort of go at this.
Differently first of Carolyn.
So I was I was interested by your comments about the outlook, both for new and refinance and.
So I was wondering if you could give us some perspective, if I look at just the 2020 premium and fees earned which is about $3 $3 billion. How much of that was new business versus how much is refinance and so when I when I put together the one's going to be down one is going to be up.
And it sort of gives me a benchmark of how what I should think the number should look like for 'twenty one.
Carolyn.
No.
Sorry, Greg.
I would say about 25% of our business was refinanced in 2020.
Okay, and then just to reiterate you said that the the refinance we can you give me the numbers you said in the prepared remarks, which which was going to be down which is going to be up.
So they are projecting that.
Refinance will be down about 35 per cent.
Over two.
2020 and net.
Purchases should be up around 16% over 2020.
Okay and so if.
If I.
Sort of.
Ballpark it that means that force.
Based on that outlook.
Debt year.
Premiums and fees should be.
The stable or stop.
Modestly positive as that I.
And do the math separately, but thats sort of ballpark is that sort of the right guests.
Yes, I would have true.
We were thinking that it should be stable, yes, yes, yeah excellent and then and then the.
The the expense ratio in the title improved in the quarter and I don't really want to get too hung up on one quarter's improvement over another quarter.
But the.
The annual trend is better and obviously there was the volume there is of volume component to that but and there is.
You also went through some restatements so talk to us about.
Where do you think the expense ratio that should look like given the restatement given the results of that.
I would say that it should.
It should stay stay about where it is right now.
Okay.
We don't like to do prediction, but.
And what we're seeing right now.
We think it should be and.
And about the same ballpark as it is right now.
And can you just walk me through the restatement issue.
And I was just I know it was called out to me and I. Just if you just walk me through what was one of them on here.
Yes, Greg why don't we have Karl.
With that.
Okay Greg.
This isn't an accounting policy.
Change debt.
The.
Prior practices date back several decades actually wear for a portion of our business we were reporting.
Premiums and fees earned net of <expletive>ociated expenses.
And it.
And it became apparent given the.
Growth of the business that we really needed to to create consistency and our accounting per.
Practically and so at year end of 2020, we made that change to of prior periods.
To make.
The comparison.
Equivalent to the year end 2020 presentation. So it's basically a gross up of revenues and gross up of expense and the to the same dollar magnitude.
And no impact on pretax underwriting of our operating income.
So it had a relatively minor.
Impact to the reported combined ratio point of one or two.
So, it's totally and consequential and.
And really doesn't drive.
Drive the numbers of significantly.
And all periods are now presented on a comparable basis and.
Youll see chain slight changes as we go throughout the year on a quarterly basis.
Thanks for covering the call I appreciate it.
Let's go back to the general insurance.
And I appreciate your comments around pricing and and.
Guess what.
And what I'm as I look at your results for the quarter trying to understand yes premium was up a little bit.
Is it is it.
All right that's driving the premium higher are you getting any unit count growth.
It seems to me that at some point youre going to the rate environment is going to become more stable and.
Ultimately in order to grow the business, we need unit count growth and so I'm just trying to understand the balance between the two when you reported results.
Sure.
I know, we've said this and that.
To reiterate the point, but.
When you look at premium.
This quarter.
In General insurance, you have to keep in mind that we're comparing those to first quarter of 'twenty, where.
There was still growth and those premiums and it was pre pandemic. So.
The premiums fell commensurately with the reduction and exposures in the three quarters of 'twenty as well as the first quarter of 'twenty, one, but we stopped.
Got it bottomed out and in the.
The third and fourth quarters and start started to come back in the first quarter. So.
Our view is that.
As the economy rebounds, and reopened that exposure units, particularly and workers compensation will increase.
Fairly rapidly.
And.
And like I say once we get out into the second.
Third and fourth quarters, and we're comparing those to 2020 quarters.
Those premium levels.
I think we will be.
We will be greater.
And perhaps significantly greater so.
We are seeing exposure return as I say their workers' compensation exposures.
Bottomed out in the third and fourth quarter, and what we saw and auto exposures were.
And.
A drop off in the second quarter of <unk>.
Of 20, and then and then things have picked up in and auto exposures.
And the rest of last year and again this quarter so.
Exposures are definitely coming back.
And would expect them to come back and of <unk>.
More robust way as we.
Move throughout the year and and the economy.
Continues to to improve so.
Right now, it's a mixed bag Greg the the.
What youre seeing and that that increase is is just.
The effects of coming off of a reduced exposure base.
20, and rebuilding that exposure base and.
As we go forward and then of course Youre getting Youre also getting lift from rate, but the.
And the exposure base is going to have much more of the contribution.
The exposure base increase is going to have much more of a contribution to top line as we go through 2021.
After this first quarter.
Got it and.
Craig I think is essentially and email.
Recently, and I think of in the email I was just raising.
A question from one of your investors around the your home warranty and auto warranty business.
And I think now might be a good time for you to talk a little bit about it.
And obviously understand relative to the the three main coverages, it's minor but.
I thought it might be worthwhile to to let you give us an update on.
Old Republic perspective on that business why you think your <unk>.
Positioned to do well and that business relative to theirs.
Startup to one or two startups that are trying to make waves and that space.
Sure sure.
No.
And both of those.
Areas, the auto warranty and home warranty, we have continued to invest and technologies.
To improve our efficiencies and our customer service levels.
And both are.
Very strong profitable business businesses for us.
And I would I would say that something that distinguishes us.
Is.
And we don't.
And the m<expletive> market I'll call. It as you might see on television or what have you where.
You see home warranty and auto warranty companies m<expletive> marketing and and.
And using that as their distribution channel and our distribution.
Channels for.
Auto warranty and home warranty are really point of sale.
The majority of our partners on auto warranty our dealerships and.
And the various.
Administrators that work with dealerships and.
And.
And that will always be a and important distribution and touch point with the customer at the point of sale and similarly on our home warranty business.
And the distribution is key there as well, even though as I say.
And we're investing and technologies to improve the efficiency at which we.
Manage that business price of the business.
And how we distribute the product.
But.
And the.
Our focus is there to point of sale with Reorders Reorders are.
Our key to that and.
It's another example of where there are synergies with our title business where.
The key focus of their distribution is on.
Real estate agents, as well and and home warranty.
And that that is the focus and.
And here too I don't believe Thats going away.
And we'll all point of sale will always be important however.
And both out of warranty and in home warranty. We're also looking at expanding our distribution.
Necessarily to the math, Mark and marketing.
Ways of some of the competitors that we all see when we watch television but through other strategic.
Relationships.
And making sure that we expand our distribution approaches.
As well so hopefully that answers your question Greg.
And those those great color. Thanks.
And I know you've.
You talked about this upfront Carl about the.
And Craig about the.
No real change in your approach to the investment portfolio.
One of the questions that crops up from time to time is the the equity exposure you have.
And.
I know you guys are long term and strategic and all of that I'm just.
Curious based on.
The market returns and equities and.
If if you're wondering if this risk reward is still there in the near term, even though you might have long term.
And <unk>.
Confidence and some of those investments.
Just curious how you're thinking about those variables and the context of what we're watching and the market.
Well, Greg This is Carl let me, let me take a crack at answering your question, Craig can fill and if necessary but.
Our objective really hasnt changed with respect to the the equity portfolio.
As we've stated on a few of patients are the key objective is to provide.
Yield enhancement to the portfolio overall.
Above and beyond the yields that we can earn on the fixed maturity portfolio.
And we have selectively chosen.
Our portfolio of.
Something a little less and 100 securities.
And companies that have a very long history of paying.
And steadily increasing the dividend payout ratio.
So it's.
It's an opportunity for us to invest and enhancement.
<unk> income.
And two.
The large extent with.
What we believe it to be manageable risk, we do perform a number of stress tests.
At the company level overall as well as for each of our subsidiaries that hold equity securities to ensure that under stress situations. Our capital base is not significantly impacted and any negative way so.
Youre right it does into.
Introduce a greater degree of volatility at the net income line item, but.
That's why our focus and explaining the results.
It tends to focus on operating income debt excludes.
Excludes.
The mark to market on the equity portfolio.
Got it alright, thanks for the answers.
Sure. Thank.
Thank you Greg.
Your next question comes from John Healy from Dowling and partners.
Hi, good afternoon, and I just had maybe one or two quick number of follow up questions.
On mortgage insurance, you said the the upstream dividend was $25 million is that correct.
That is correct.
So that's on a.
Stat surplus base of the 100 and call it out of 120 at year end of 'twenty.
<unk> 'twenty sort.
And then where you're able to release some of the contingency reserve and that.
We were and I figured out exactly.
You are.
Yes, yes.
Yes.
And the number I mentioned earlier and my comments was the GAAP shareholders equity the.
The statutory capital, which would include the contingency reserve is.
And that same neighborhood 430, some odd million dollars.
And I don't have the exact number at my fingertips.
No that's fine, but then presumably you are.
So I'm just looking back that's a higher dividend and generally kind of over the past four of five years, I mean, theres been a little bit coming up so.
I would <expletive>ume then is the.
The risk in force running off a little bit quicker or are you getting state approval to take down of the contingency reserve faster.
Well the should we think about the risk in force run off actually.
Yes, well first of all just to clarify we have not until the first quarter of last year received any dividends from our mortgage insurance companies for.
Several years part of that because I can remember.
So we started last year and in the first quarter.
Received state approval to pay 37 $5 million before.
Further.
Turns of capital were.
Put on hold.
Secondly, your question regarding risk in force.
And do include statistics and.
The financial supplement on page six that has a multi year.
Year.
And comparison of risk in force.
And you can see debt the runoff is about 25%.
And during the year.
And that continues.
The continues through the first quarter of this year.
Since year end, there was about a seven 1%.
Decline and.
The annualized it's even 125%.
But it's in that neighborhood and it's been pretty consistent year after year.
Got it so I can't use that what's happened is a proxy to kind of model this out.
Going forward for the risk in force.
I would I would think so.
Thank you and then.
The other one question I had in title.
Approximately how big is the commercial book of business and there.
And remember somewhere around 18%.
And discuss what that might of been several years ago at this point.
Caroline can you.
Address that.
Right for.
The first quarter this year it accounted for about 14, 2% of our total premiums.
And is that roughly in line with what it is on an annualized basis.
No that's down debt.
It's down.
About 10%.
Got it so it's actually.
It's actually 20 to 25 per cent of them.
Portfolio of how we should think about commercial.
Yes.
The right the first quarter of 2020, it was about 22, 4%.
Overall, it's generally around probably 18 to 20 on an annualized basis.
Got it perfect.
That's a that's it for me thank you.
And you.
Thanks, a lot John.
Your next question comes from Boris <unk>.
From Crawford investment counsel.
Hey, guys.
Just have a couple of questions one and the general insurance side spin.
Specifically, the commercial auto of the improvements and the claims ratio is great and.
After many years of kind of.
Issues, there, but I.
I guess the question is are you still getting of frequency benefit from kind of lower.
Driving overall and how.
And how sustainable this improvement is I guess is the question.
Yeah.
Yes.
Very good question the.
And there is a.
Frequency benefit that continues it is not as great as it was.
And some of the prior periods in 2020.
But.
It is.
And a lower frequency.
I would say.
And the low.
Right now, it's about say at 10% frequency reduction.
Yeah.
I think at the highest last year, we saw about a 20% frequency reduction.
And then.
As I mentioned and Mike My earlier comments.
Severity is still an issue.
And then unfortunately.
The severity of his offsetting the benefits of frequency.
So the the.
And the reason that we're continuing to get rate increases.
And the 15% range is to continue we would expect frequency to return to a more normal level.
And.
And severity.
Not counting on any change.
Change and that trend so we have to get.
That 15% to 15% rate increase to address the ongoing.
Severity issues.
The last thing I would just say is.
And the.
The.
The.
The claim ratio has improved and I know quarter after quarter, we were.
Talking about how hard we were working to try to get that down from.
The peak claim ratios of.
And of 2019, and 2020 and all of the things that we were doing I think are starting to show up but I would just point out fixed debt.
And when it comes to.
Our both our loss ratio pick and what where and when it comes to.
Recognizing favorable development.
We have a very.
The patient approach were very slow to recognize favorable development.
On a longer tail lines of business like.
Auto liability and.
And therefore that debt reduction that you see and the claim ratio is.
Is not one that's coming from.
A reduction of the current year.
Same ratio or even the last few year of claim ratios.
So.
And as to the extent that.
And that there is some frequency benefit.
And last year and continuing into this year it'll be a while before we would recognize that and our resolve.
Gotcha.
Appreciate that and then the.
Another question.
So you're Greg and your annual letter that you referred to in the annual report you mentioned that the stock price performance was I think you said the incongruent.
With the strong <unk>.
Operating performance so I.
I guess the question is why not have a buyback program in place for situations like this when your stock trades below book value and.
Sure.
Seemingly not reflecting the strong fundamentals of the business.
Right so the the.
Income growing comment is <unk>.
Certainly how we.
How we felt last year.
<unk>.
Our stock was not alone.
Majority of of.
Others and in the insurance and the broader financial sectors of value stocks, and particular dividend paying value stocks were not treated very timely last year. So.
As we said.
With those strong results you would expect commensurate.
Changes in <unk> and your price and.
That didn't happen last year, but it was it was I think more of the result of.
Broader market forces at work and.
With regard to the question.
Buyback.
And we also have in addition to that.
<unk> thousand 20 annual report letter that you just mentioned we also.
<unk> a letter.
That's available on our website.
January 6th.
And in that letter.
Tried to lay out.
For our shareholders, our thought process on capital management and.
I would refer you perhaps back to the back to that letter and.
I think but.
I guess the letter it didnt really address buybacks versus dividends you guys outline why you paid the special dividend, which no one is arguing about.
In terms of you having capital to do that but wouldnt. It have been better to do a buyback because of those two.
It could have been and immediately accretive to book value and earnings as opposed to.
You know paying another special dividend.
Yes.
We're aware that some.
Some of our shareholders have raised that question and and.
Yes.
The the matter is the subject matter.
Currently before our board and.
The board.
Is going to address that issue at its upcoming May meeting after which time.
We expect that they'll provide a written response to that question.
Okay. Thank you.
And as a reminder to ask a question press star one.
Your next question comes from Ryan <unk> from <unk>.
Good time.
Hello, just a quick one I noticed almost all of your other miscellaneous debt was extinguished or matured. This quarter. So I wanted to ask about that and then have you provided the long term guidance range for your debt to capitalization ratio.
That's all thanks.
Brian This carnival first of all we had a very small balance of debt of.
Bank.
Issued notes that matured and the first quarter of this year. So that's.
What's driving the declines since since year end.
Yes, we do set parameters for ourselves, what we refer to as our ear and metrics and.
And generally speaking the range that we.
And try to operate within is 10% to 25% debt to equity or debt to capital acquisition ratio.
And we're well within that and.
And trending towards the lower lower and currently.
Great. Thank you.
And that was our last question at this time I will turn the call back over to management for closing remarks.
Okay, well, we appreciate the.
And the interest by everyone appreciate the dialogue and.
And the questions and.
And again, we are.
Thrilled with the operating results that we put forth for year end 2020, and then.
And the continuation of extremely strong operating results.
In this first quarter of 2021 so.
Thank you all for your participation and we look forward to talking to you again next quarter. Thank you.
This concludes today's conference call and thank you for participating you may now disconnect.
Okay.
The.
[music].