Q3 2021 Employers Holdings Inc Earnings Call
Good day, Thank you for standing by welcome to the Q3 2021 employers Holdings incorporated earnings conference call. At this time, all participants lines are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask.
I ask a question during the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero I would now.
I'd like to hand, the conference over to your speaker today Ms. Lori Brown. Thank you. Please go ahead.
Thank you, Brian Good morning, and welcome everyone to the third quarter 2021 earnings call for employers today's call is being recorded and webcast from the investors section of our website, where a replay will be available following the call presenting today on the call will be Kathy Antonello, our chief executive.
Officer, and Mike Paquette, our Chief Financial Officer.
Statements made during this conference call that are not based on historical facts are considered forward looking statements. These statements are made in reliance on the safe Harbor provision of the private Securities Litigation Reform Act of 1995, although we believe the expectations expressed in our forward looking statements are reasonable risks.
And uncertainties could cause actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission. All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments.
The company also uses its website as a means of disclosing material nonpublic information for complying with disclosure obligations under SEC's regulation FD such disclosures will be included in the investors section of the company's website accordingly investors should monitor that portion of the company's website.
In addition to following the company's press releases SEC filings public conference calls and webcast.
In our earnings press release, and in our remarks or responses to questions. We may use non-GAAP financial metrics reconciliations of these non-GAAP metrics to our GAAP results are included in our financial supplement as an attachment to our earnings press release, our investor presentation, and any other materials available in the investor.
Her section on our website now I will turn the call over to Kathy.
Thank you Laurie and thanks to everyone for joining us today.
On today's call, Mike and I will outline our financial results for the third quarter of 2021 and discuss our observations of the current workers' compensation market.
Despite the economic challenges presented by the pandemic employers continues to perform well and we are encouraged by the rebound we've experienced since may of 2021.
As businesses have reopened and restrictions have been lifted and our appetite has expanded we've seen year over year increases in new business submissions quotes and bind and we once again closed the period with a record number of policies in force.
During the quarter net written premiums increased 16% year over year, and our new business average policy size was up 15% over the same period.
In an effort to further diversify our risk exposure and capitalize on new market opportunities post Covid, we launched an appetite expansion initiative in July and early indications are that the initiative is having a positive impact on new business.
More so than ever we remain confident that new business opportunities and rising payroll driven by increases in both wages and employment will bring further group growth to our top line.
While our year over year, new business premium for the first nine months of 2021 was limited by pandemic related shutdowns in January and February in total the past two quarters were up 27% relative to 2020.
Gradual improvement in wages and employment contributed to the increase.
The policy retention rate on our renewal book remains very strong at 94% year to date. Although this strength was offset to some degree by lower average policy sizes and modest rate decreases at renewal.
Overall, our year over year renewal premium was down 7% for the first nine months of 'twenty, 'twenty, one and down 1% for the third quarter.
We continue to see declines in frequency for lost time claims and have maintained our current accident year loss and LAE ratio on voluntary business at 63, 6% down from 65.5% a year ago and 64, 3% at year end.
As part of our continued technology and process improvement initiatives, we implemented a new comprehensive claims system during the quarter, which we believe will enhance and streamline our claims handling.
In connection with this implementation with this implementation we undertook several process changes and as a result, we chose not to recognize any prior year loss reserve development during the quarter.
In line with our expectations targeted expense savings and employee reductions in departures decreased third quarter expenses by a meaningful 19% year over year.
With that Mike will now provide a further discussion of our financial results and then I'll return to provide my closing remarks, Mike.
Thank you Kathy.
During the third quarter, we delivered a three 8% annualized return on adjusted equity at a combined ratio of 98, 1% within our largest operating segment employers.
For the quarter, our net premiums earned were $147 million, a 2% increase year over year, while our written premiums for the first nine months were down 2%, our third quarter premium writings were up 16%, which demonstrates that small businesses are beginning to thrive and are actively shopping for workers compensation.
<unk> coverage.
Also in recognition of the positive shift we are experiencing in our final audit process. We increased our final audit accruals by just under $5 million during the quarter.
Our losses and loss adjustment expenses were $91 million, an increase of 18%.
As Kathy previously mentioned, we did not recognize any prior year loss reserve development on voluntary business. During the current period, whereas we recognized $15 million of favorable loss reserve development a year ago.
Commission expenses were $20 million, an increase of 3%. The increase was primarily the result of increased commissions on new business writings.
Underwriting and general administrative expenses were $37 million a.
A decrease of 19% year over year.
The decrease resulted from targeted targeted expense savings and employee reductions in departures, which reduced our fixed expenses, such as compensation and professional fees as well as a reduction in bad debt expenses.
From a reporting segment perspective, our employer segment had underwriting income of $3 million for the quarter versus $7 million a year ago and its combined ratios were 98, 1% and 95, 2% respectively.
Our <unk> segment had an underwriting loss of $3 3 million for the quarter down from its underwriting loss of $3 $9 million a year ago. We are enthusiastic about 30 premium writings and have which have consistently increased over the past several months.
Turning to investments our net investment income was $18 million for the quarter consistent with that of the third quarter of last year. Our average book yield was 3% at quarter end.
At quarter end, our fixed maturities had a duration of three five and an average credit quality of a plus and our equity securities and other investments represented 13% of the total investment portfolio.
Our net income this quarter was favorably impacted by a $1 million of net after tax unrealized gains from equity securities and other investments, which are reflected on the income statement and our stockholders equity and book value per share. This quarter were each unfavorably impacted by $9 million of after tax unrealized losses from <unk>.
Maturity Securities, which are reflected on our balance sheet.
And finally during the quarter, we repurchased $13 $2 million of our common stock at an average price of $40 54 per share and our remaining share repurchase authority currently stands at $36 $7 million and with that I'll turn the call back to Kathy.
Thanks, Mike.
Leveraging our deep expertise in workers' compensation, we built and launched our own cold stack direct to consumer ensure tack known as CRT. We continue to view Saturday as a unique asset for employers one that is positioned as an enabler to provide new and exciting solutions and experiences to our industry.
Right.
We believe that saturday's technological and intellectual capabilities will support and enhance our future growth initiatives, while providing direct access to workers' compensation insurance for businesses seeking an online experience.
For the remainder of the year will be diligently focused on further improving our economies of scale by capitalizing on emerging labor market improvements, while continuing to maintain underwriting discipline and actively managing our expenses.
Our balance sheet and capital position are very strong and are highly supportive of these key initiatives.
As a specialist in small business workers' compensation, we are well positioned to react to the favorable trends, we're seeing and remain confident in our continued success.
And with that operator, we will now take questions.
As a reminder to ask a question you will need to press star one on your telephone to be dry question pressed Apache Anthony standby, while we compile the Q&A roster.
Your first question is from Mark Hughes of <unk> Securities. Your line is open.
Yeah. Thanks, good morning.
Good morning, Mark.
How much did the.
The expanded appetite contribute to the premium growth in the quarter.
And can you talk about what youre doing to make sure that those are.
The new class codes that you've got a good line of sight on loss trends.
Yeah, So and thanks Mark for the question. We it's it's we're ramping it up slowly for exactly the reason that that you just mentioned.
As I've said before and in other calls my focus for 2021 has has been to position the company to capture the post Covid economic lift.
Including some offer new opportunistic expansion in our appetite and to areas that we feel like have some significant potential for growth in the post Covid world.
So for example, I'm speaking to areas like landscaping and janitorial.
The small business landscaping market for work comp and when I say small business I'm talking about companies that have less than 500 employees is about $1 billion and we're seeing that payroll is projected to grow more than 20%.
The next four years.
We feel like there's.
A big opportunity there for us to enter the market.
But as as I mentioned, we're doing it carefully and diligently on the underwriting side.
It wasn't a huge part of our third quarter.
Increase, but we do expect it to continue to increase as we go into 2021, and we will continue to look at other opportunities, where we can grow profitably.
Understood.
Michael on the expense side, you've done very well.
Bringing those down when we think about the fourth quarter expense level relative to the third quarter I'm, just thinking kind of the sequential progression on expenses.
Looking back historically, sometimes they go up sometimes they go down sequentially just house.
Should we think about for Q in them.
Next year.
<unk> expense level.
The.
Anything you can share about how that might play out in 2022.
Sure Mark So the thing I want to be careful about is some of our expenses are variable and that's going to vary with the with our level of premium and then others are fixed I think from a fixed standpoint, you'll see a consistent number from what you've seen in the last two quarters, which again Arthur I'm down sharply from.
A year ago and down sharply from that of the first quarter in terms of expenses for next year, we'll have a better sense very soon we're in the process of planning right now and we are looking everywhere to try to be as nimble as efficient as possible.
And we are extensively going through everybody's planned for next year to make sure that we have expenses in check but again, we just have to be careful that some of our expenses vary with premiums such as premium taxes assessments.
Policyholder dividends. So so just be mindful of that in terms of your projections, but we expect that consistent fourth quarter absent that and we'll get back to you as soon as to what our outlook is for 2022.
And then refresh me on the underwriting and other operating costs, how much of that is fixed versus variable.
On average about five points of the underwriting.
Underwriting and general and administrative expenses are variable so.
Not 5% of that number but five points of that ratio.
Yes, okay.
And then from a competitive standpoint I wonder.
There's been a lot of talk on pricing, maybe flattening maybe going up.
Gallagher had some notable comments about workers' comp.
More constructive around pricing and competition on their call last night I'm.
Sort of curious whether you feel like there's any difference here.
But your topline is looking better and how much of that might be competitive issues.
Yeah, Mark so I'll take that.
We would continue to characterize the environment is as competitive.
Even with some I would say irrational competitive behavior from a few actors.
I've seen the same reports that you have and some of the market survey that came out a reporting that that Q2 had very modest pricing increases emerge and workers comp and when when I say very modest and saying like less than 1%.
But our average pricing across our renewal book.
Has showed an overall rate decrease of somewhere between four and 5% for the three months ended September 30 of it and that's versus the rate level that was in effect on on the same business as a year early earlier.
It is a favorable.
Favorable trend, even though it's a decrease and just to give you some context I would say a year ago.
Third quarter rates have decreased five 8% and then two years ago. It was 8.5% so less of a decrease the rate is slowing and that's a good sign but I don't think I would characterize workers' compensation as being a hard market yet.
And then I'll flip it for one more if I can.
The new system implementation.
As a result of that took new development in the quarter did you notice any difference in the.
Clean.
Yes.
Emerging through loss emergence.
Anything you might say about frequency or severity either.
Either in the back book or currently would be helpful as well.
Yeah, so yeah.
We chose we chose not to recognize any development this quarter for a couple of reasons. The first is because we don't do a full analysis.
Either at the end of the first quarter or the third quarter for reserves.
And the second was because as we mentioned earlier, we implemented a new claim system in the third quarter and that brought with it a lot of new processes that we think are going to improve our claims handling, but we want to appropriately contemplate those in our reserves selection. So we thought it would be prudent.
Two.
To do that at our next full analysis, which will be our year end analysis.
We do think our reserves are solid but were carefully watching for any late in claims activity that might arise in the prior accident years as a result of the recession you know similar to what we saw after the great recession.
Haven't seen any increase in cumulative trauma are our post term claims so that's a good sign.
We are still holding on to some reserves to cover any post recessionary impacts should does occur, but rather than getting into any specifics.
I'd say the indications for this quarter were consistent with the trends that we've seen in prior quarters.
In regards to frequency and.
Severity frequency.
Relative to both payroll and premium has.
Has decreased in accident year 2021 relative to the same period in 2019, we've started not looking at frequency and severity relative to 2020, because 2020 was such an anomaly. So we are still seeing decreases in frequency and last time severity.
It's up I would just say moderately over the same period, so nothing nothing really new on the frequency or the severity side.
Thank you for all that I appreciate it.
Once again to ask a question. Please press star one on your telephone.
Your next question is from Sam Hoffman of Lincoln Square. Your line is now open.
Good morning, Thanks for taking my question can you give us a bit more detail on what's what.
This technology process improvement initiative is intended to accomplish in terms of.
Yeah.
Claims expense ratios for operating expenses going forward.
Yeah sure good morning, Sam.
So the new claim system that we implemented really focuses on taking a lot of the administrative.
Tasks out of the the claims adjusters hands and automating a lot of those.
So those are the types of process improvements that that where we're talking about is the automation of a lot of the work that.
<unk> has been done manually in the past there are a lot of forms.
Need to be completed and so forth with workers compensation claims handling and.
That are regulatory in nature. So a lot a lot of that is now automated.
So more automated workflows and so forth and we think that will have an impact on our efficiency and expenses.
<unk> expenses going forward.
Okay.
It's more of an <unk> type of expense.
Hum.
Okay. So the next question is.
Given the improvement in written premiums in the quarter.
What is your outlook in terms of you.
You had talked about an objective for 2022 to at least get back to the gross written premium writings that you have in 2019 do you think that's still feasible.
Kevin.
Obviously, you're entering some new classes, but pricing continues to be negative.
Yeah, I would say the trends that we're seeing are very favorable as Mike mentioned earlier, we are in the process of trying to put our projections together for 2022, we have not completed.
That analysis yet.
But you know I would say quarter quarter, two we started to see improvement quarter three was even better.
And we've started quarter four.
Things are looking very favorable so while.
While we don't have that analysis complete right now I would say the environment is certainly a lot better than what we were saying seeing a year ago.
Okay and last question is.
I notice that your expenses for cerave have declined significantly from a $16 million.
Last year to this quarter.
12 million in terms of the loss so.
What are your objectives for Saturday over the next year.
Terms of revenue and expense management.
Yeah. So.
Sam from an expense management standpoint, we have been doing the same thing at Saturday that we're that we've been looking at and employers switches. Okay. What how can we streamline our effort what can we combine across the companies to try to reduce our expenses.
So we've.
<unk> taken a hard look at that this year and we are picking up some of the the work at employers that that was previously done at CRT and that is bringing a lot of efficiency in that area and helping to reduce to reduce the cost there.
Trends for Saturday premium are are very good and.
Just like employers, we're putting our projections together for those right now and we'll have more on that in the next quarter.
Thank you.
Once again to ask a question. Please press star one on your telephone.
Yeah.
Yeah.
No questions at this time and I would like to turn back the conference to Kathy.
Comments.
Okay, well. Thank you all for joining us this morning.
Enjoy your weekend and I look forward to meeting with you again next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Good day, Thank you for standing by welcome to the Q3 2021 employers Holdings incorporated earnings conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
I ask a question during the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Ms. Lori Brown. Thank you. Please go ahead.
Thank you Brian Good morning, and welcome everyone to the third quarter 2021 earnings call for employers today's call is being recorded and webcast from the Investor section of our website, where a replay will be available following the call presenting today on the call will be cafe Antonello, our chief executive.
Officer, and Mike Paquette, our Chief Financial Officer.
Statements made during this conference call that are not based on historical facts are considered forward looking statements. These statements are made in reliance on the safe Harbor provision of the private Securities Litigation Reform Act of 1995, although we believe the expectations expressed in our forward looking statements are reasonable risks.
And uncertainties could cause actual results to be materially different from our expectations.
The risks set forth in our filings with the Securities and Exchange Commission all remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments.
The company also uses its website as a means of disclosing material nonpublic information for complying with disclosure obligations under SEC's regulation FD such disclosures will be included in the investors section of the company's website accordingly investors should monitor that portion of the company's website in.
In addition to following the Companys press releases SEC filings public conference call and webcast.
In our earnings press release, and in our remarks or responses to questions. We may use non-GAAP financial metrics reconciliations of these non-GAAP metrics to our GAAP results are included in our financial supplement as an attachment to our earnings press release, our investor presentation, and any other materials available in the investor.
Section on our website now I will turn the call over to Kathy.
Thank you Laurie and thanks to everyone for joining us today.
On today's call, Mike and I will outline our financial results for the third quarter of 2021 and discuss our observations of the current workers' compensation market.
Despite the economic challenges presented by the pandemic employers continues to perform well and we are encouraged by the rebound we've experienced since may of 2021.
As businesses have reopened and restrictions have been lifted and our appetite has expanded we've seen year over year increases in new business submissions quotes and buying and we once again closed the period with a record number of policies in force.
During the quarter net written premiums increased 16% year over year, and our new business average policy size was up 15% over the same period.
In an effort to further diversify our risk exposure and capitalize on new market opportunities post Covid, we launched an appetite expansion initiatives in July and early indications are that the initiative is having a positive impact on new business.
More so than ever we remain confident that new business opportunities and rising payroll driven by increases in both wages and employment will bring further growth growth to our top line.
While our year over year, new business premium for the first nine months of 2021 was limited by pandemic related shutdowns in January and February in total the past two quarters were up 27% relative to 2020.
Gradual improvement in wages and employment contributed to the increase the.
Policy retention rate on our renewal book remains very strong at 94% year to date.
This strength was offset to some degree by lower average policy sizes and modest rate decreases at renewal.
Overall, our year over year renewal premium was down 7% for the first nine months of 'twenty, 'twenty, one and down 1% for the third quarter.
We continue to see declines in frequency for lost time claims and have maintained our current accident year loss and LAE ratio on voluntary business at 63, 6% down from 65, 5% a year ago and 64, 3% at year end.
As part of our continued technology and process improvement initiatives, we implemented a new comprehensive claims system during the quarter, which we believe will enhance and streamline our claims handling.
In connection with this implementation with this implementation we undertook several process changes and as a result, we chose not to recognize any prior year loss reserve development during the quarter.
In line with our expectations targeted expense savings and employee reductions in departures decreased third quarter expenses by a meaningful 19% year over year.
With that Mike will now provide a further discussion of our financial results and then I'll return to provide my closing remarks, Mike.
Thank you Kathy.
During the third quarter, we delivered a three 8% annualized return on adjusted equity at a combined ratio of 98, 1% within our largest operating segment employers.
For the quarter, our net premiums earned were $147 million.
A 2% increase year over year, while our written premiums for the first nine months were down 2%, our third quarter premium writings were up 16%, which demonstrates that small businesses are beginning to thrive and are actively shopping for workers' compensation coverage.
Also in recognition of the positive shift we are experiencing in our final audit process. We increased our final audit accruals by just under $5 million during the quarter.
Our losses and loss adjustment expenses were $91 million.
An increase of 18%.
As Kathy previously mentioned, we did not recognize any prior year loss reserve development on voluntary business. During the current period, whereas we recognized $15 million of favorable loss reserve development a year ago.
Commission expenses were $20 million, an increase of 3%. The increase was primarily the result of increased commissions on new business writings.
Underwriting and general administrative expenses were $37 million.
A decrease of 19% year over year.
The decrease resulted from targeted targeted expense savings and employee reductions in departures, which reduced our fixed expenses such as compensation and professional fees.
As well as a reduction in bad debt expenses.
From a reporting segment perspective, our employer segment had underwriting income of $3 million for the quarter versus $7 million a year ago and its combined ratios were 98, 1% and 95, 2% respectively.
Our surety segment had an underwriting loss of $3 3 million for the quarter down from its underwriting loss of $3 9 million a year ago. We are enthusiastic about <unk> premium writings and have which have consistently increased over the past several months.
Turning to investments our net investment income was $18 million for the quarter consistent with that of the third quarter of last year. Our average book yield was 3% at quarter end.
At quarter end, our fixed maturities had a duration of three five and an average credit quality of a plus and our equity securities and other investments represented 13% of the total investment portfolio.
Our net income this quarter was favorably impacted by $1 million of net after tax unrealized gains from equity securities and other investments, which are reflected on the income statement.
Our stockholders equity and book value per share this quarter were each unfavorably impacted by $9 million of after tax unrealized losses from fixed maturity securities, which are reflected on our balance sheet.
And finally during the quarter, we repurchased $13 $2 million of our common stock at an average price of $40 54 per share and our remaining share repurchase authority currently stands at $36 $7 million.
And with that I'll turn the call back to Kathy.
Thanks, Mike.
Leveraging our deep expertise in workers' compensation, we built and launched our own full stack direct to consumer insurer tax known as CRT, we continue to view <unk> as a unique asset for employers.
One that is positioned as an enabler to provide new and exciting solutions and experiences to our industry.
We believe that <unk> technological and intellectual capabilities will support and enhance our future growth initiatives, while providing direct access to workers' compensation insurance for businesses seeking an online experience.
For the remainder of the year will be diligently focused on further improving our economies of scale by capitalizing on emerging labor market improvements, while continuing to maintain underwriting discipline and actively managing our expenses our.
Our balance sheet and capital position are very strong and are highly supportive of these key initiatives.
As a specialist in small business workers' compensation, we are well positioned to react to the favorable trends, we're seeing and remain confident in our continued success.
And with that operator, we will now take questions.
As a reminder to ask a question you will need to press far one I'll go telephone COVID-19.
Hi, a question press the patchy.
Please standby, while we compile the Q&A roster.
Your first question is from Mark Hughes of COO Institute.
Your line is open.
Yeah. Thanks, good morning.
Good morning, Mark.
How much did the.
<unk> expanded appetite contribute to the premium growth in the quarter.
Can you talk about what youre doing to make sure that the.
New class codes that you've got a good line of sight on loss trends.
Yes so.
Thanks, Marc for the question, we were ramping it up slowly for exactly the reason that that you just mentioned.
I've said before and in other calls my focus for 2021 has been to position the company to capture the post Covid economic lift.
Including some opportunity opportunistic expansion in our appetite and to areas that we feel like have some significant potential for growth in the post Covid world.
So for example speaking to areas like landscaping and janitorial.
The small business landscaping market for work comp.
When I say small business I'm talking about companies that have less than 500 employees is about $1 billion and we're seeing that payroll is projected to grow more than 20% over the next four years. So we feel like bears.
Big opportunity there for us to enter the market.
But as as I mentioned, we're doing it carefully and diligently on the underwriting side.
It wasn't a huge part of our third quarter.
The increase but.
We do expect it to continue to increase as we go into 2021, and we'll continue to look at other opportunities, where we can grow profitably.
Yeah.
Understood.
Mike on the expense side, you've done very well.
Bringing those down when we think about the fourth quarter expense level relative to the third quarter I'm, just thinking kind of the sequential progression on expenses and.
And looking back historically, sometimes they go up sometimes they go down sequentially, just how should we think about <unk> in them.
Next year.
Expense level.
And if you can share about how that might play out in 2022.
Sure Mark So the thing I want to be careful about is some of our expenses are variable and thats going to vary with the.
With our level of premium and then others are fixed I think from a fixed standpoint, youll see a consistent number from what you've seen in the last two quarters, which again are darn down sharply from a year ago and down sharply from that of the first quarter.
In terms of expenses for next year, we'll have a better sense very soon we're in the process of planning right now and we are looking everywhere to try to be as nimble as efficient as possible and we are extensively going through everybody's plan for next year to make sure that we have expenses in check, but again, we just have to be careful that.
Some of our expenses vary with premiums such as premium taxes assessments.
Policyholder dividends, so just be mindful of that in terms of your projections, but we expect that consistent fourth quarter absent that and we'll get back to you as soon as to what our outlook is for 2022.
And then refresh me on of the underwriting and other operating costs, how much of that is fixed versus variable.
On average about five points of the.
Underwriting and general and administrative expenses are variable so.
Not 5% of that number but five points of that ratio.
Yes, okay.
And then from a competitive standpoint I wonder.
There has been lot of talk on pricing, maybe flattening maybe going up.
Gallagher notable comments about workers' comp.
More constructive around pricing and competition on their call.
Sort of curious whether you feel like there's any difference here clearly your topline is looking better and how much of that might be a competitive issues.
Yes, Mark so I'll take that.
We would continue to characterize the environment is as competitive.
With some I would say irrational competitive behavior from a few actors.
I've seen the same reports that you have and some of the market survey that came out a reporting that that Q2 had very modest pricing increases emerge in workers' comp and when when I say very modest and saying like less than 1%.
But our average pricing across our renewal book has showed an overall rate decrease of somewhere between four and 5% for the three months ended September 30 of <unk>.
And thats versus the rate level that was in effect on on the same business as a year early earlier.
It is a favorable trend even though it's a decrease and just to give you some context I would say a year ago.
Third quarter rates have decreased five 8% and then two years ago. It was eight 5% so less of a decrease the rate is slowing and thats a good sign but I don't think I would characterize workers' compensation as being a hard market yet.
And then I'll flip it for one more if I can.
The new system implementation.
As a result of that took new development in the quarter did you notice any different than the clean.
Yes.
Emerging through loss emergence.
Anything you might say about frequency or severity.
Either in the back book or currently would be helpful as well.
Yeah, so yes.
Yes, we chose we chose not to recognize any development this quarter for a couple of reasons. The first is because we don't do a full analysis.
Either at the end of the first quarter or the third quarter for reserves.
And the second was because as we mentioned earlier, we implemented a new claims system in the third quarter and that brought with it a lot of new processes that we think are going to improve our claims handling, but we want to appropriately contemplate those in our reserve selections. So we thought it would be prudent.
Too soon.
To do that at our next full analysis, which will be our year end analysis.
We do think our reserves are solid but were carefully watching for any late in claims activity that might arise in the prior accident years as a result of the recession you know similar to what we saw after the great recession.
Haven't seen any increase in cumulative trauma are our posts term claims so that's a good sign.
We are still holding on to some reserves to cover any post recessionary impacts.
It does occur, but rather than getting into any specifics.
I'd say the indications for this quarter were consistent with the trends that we've seen in prior quarters.
In regards to frequency and.
Severity frequency.
Relative to both payroll and premium has.
Has decreased in accident year 2021 relative to the same period in 2019, we've started not looking at frequency and severity relative to 2020, because 2020 was such an anomaly. So we are still seeing decreases in frequency and lost time severity.
Is up I would just say moderately over the same period, so nothing nothing really new on the frequency or the severity side.
Thank you for all that I appreciate it.
Once again to ask a question. Please press star one on your telephone.
Your next question is from Sam Hoffman of Lincoln Square. Your line is now open.
Good morning, Thanks for taking my question can you give us a bit more detail on what the.
The claims technology process improvement initiative is intended to accomplish in terms of.
You, either improving claims expense ratios or our operating expenses going forward.
Yeah sure good morning, Sam.
So the new claim system that we implemented really focuses on taking a lot of the administrative tab.
Tasks out of the claims adjusters hands and automating a lot of those.
So those are the types of process improvements that that where we're talking about it's the automation of a lot of the work that.
<unk> has been done manually in the past there are a lot of forms that needed to be completed and so forth with workers compensation claims handling and.
That are regulatory in nature. So a lot a lot of that is now automated.
So more automated workflows and so forth and we think that will have an impact on our efficiency.
<unk> expense.
<unk> expenses going forward.
Okay.
It's more of an <unk> type of expense.
Management.
Okay. So the next question is.
Given the improvement in written premiums in the quarter.
What is your outlook in terms of you.
You had talked about an objective for 2022 to at least get back to the gross written premium ratings that you have in 2019 do you think that's still feasible.
Given.
Obviously, you're entering some new classes, but pricing continues to be negative.
Yeah, I would say the trends that we're seeing are very favorable as Mike mentioned earlier, we are in the process of trying to put our projections together for 2022, we have not completed.
That analysis yet.
But you know I would say quarter quarter, two we started to see improvement quarter three was even better.
And we've started quarter four.
Things are looking very favorable so.
While we don't have that analysis complete right now I would say the environment is certainly a lot better than what we were saying seeing a year ago.
Okay and last question is.
I notice that your expenses for cerave has declined significantly from $16 million.
Run rate.
Your attempt to this quarter.
Below 12 million in terms of the loss. So what are your objectives over the next year in terms of revenue and expense management.
Yeah, So Sam from an expense management standpoint, we have been doing the same thing at Saturday that we're that we've been looking at and employers switches. Okay. What how can we streamline our effort what can we combine across the companies to try to reduce our expenses.
So we've we've taken a hard look at that this year and we are picking up some of the the work at employers.
It was previously done at CRT and that is bringing a lot of efficiency in that area and helping to reduce to reduce the cost there.
The trends for surety premium are are very good and just.
Just like employers, we're putting our projections together for those right now and we will have more on that.
In the next quarter.
Thank you.
Once again to ask a question. Please press star one on your telephone.
No questions at this time and I would like to turn back the conference to Kathy for.
I heard your comments.
Okay, well. Thank you all for joining us this morning.
Enjoy your weekend and I look forward to meeting with you again next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.