Q2 2022 ProAssurance Corp Earnings Call
Its operations Ned will you start us off please.
Thank you, Jason and good morning.
Positive momentum continues at <unk>.
As we completed our first full year since the acquisition of Norcal.
The people and process side of our integration is largely completed.
And we are extremely pleased with all that we've accomplished.
The solid operating results for this quarter are a testament to the success of our largest acquisition to date.
<unk> of what we can expect to see in the future.
Our efforts across the organization, specifically in the underwriting and claims areas.
Our our already leading to improvements in the acquired standard and custom physician business.
And are an important driver of our results this quarter.
Dana will walk through the results companywide and Mike will cover the trends, we're seeing in the specialty property and casualty segment.
The workers' compensation insurance segment again posted a profit in a tough marketplace and competitive line of business.
While both the macroeconomic conditions and more specifically the environment in this line of business remained challenging we.
We have begun to see signs of positivity that Kevin will remark on as he discusses the segment results in detail.
Regarding broader economic conditions, we are mindful of the level of general inflation and consider how this may affect our business overall, both the positive including higher investment rates in our bond portfolio and rising payrolls that helped drive premium growth in our workers compensation business and the negative of expense pressures that rising cost create.
I'd like to note that medical professional liability loss cost trends are not strictly linked to headline inflation figures such as the consumer price index.
There are many other factors within each market.
Making up our professional liability business that we feel today influence loss cost trends considerably more than the general level of inflation.
While inflationary trends certainly have the ability to become a factor as.
As we see the market today, Jerry behavior, and social inflation have a greater impact on our view of ultimate claim costs.
Now I'll ask Dana to share the results for the quarter Dana.
Thanks, Dan and good morning, everyone.
For the second quarter, we reported a net loss of $1 7 million or.
Our <unk> per share and operating income of $16 3 million or <unk> 30 per share.
Operating ROE was five 3% up about three points from the first quarter.
Consistent with the first quarter the impact of the current investment environment drove the difference between net loss and operating income in the quarter, which I'll discuss further after touching on our core operating results.
Our operating income in the quarter, reflecting continued improvement in underwriting results.
Benefit of expense synergies from the Norcal acquisition and growth in net investment income.
Gross premiums written increased almost 13% driven by an additional length of nor Cal premium in the current quarter given the timing of the close of the acquisition last year and continued renewal pricing gains on the legacy book in our specialty P&C segment.
Additionally, higher audit premium drove an increase in our workers' compensation insurance premiums.
These increases were partially offset by a decline in premium at Lloyds as a result of our participation in syndicate $61 31 for the 2022 underwriting year.
Our consolidated combined ratio excluding transaction related costs improved two five points from the first quarter of 2022, driven by higher favorable development in our specialty P&C business.
Despite the improvement as compared to last quarter, our combined ratio increased by three point as compared to the second quarter of 2021, reflecting the expected buildup of Norcal Deepak amortization post acquisition. Following the application of GAAP purchase accounting rules in 2021.
Before discussing the components of the combined ratio I want to remind you that our net loss and expense ratios for 2022.
As compared to prior periods are impacted by offsetting amounts due to our change in process of allocating UL AE in our specialty P&C segment.
For the current quarter that change resulted in a decrease in our consolidated net loss ratio of two six points.
With an equal and offsetting increase to our consolidated expense ratio.
Note the change had no impact to our total expenses combined ratio or operating results.
Excluding the change in UAE, our consolidated current accident year net loss ratio was essentially unchanged as compared to the second quarter of 2021.
While we reduced norcal loss ratios in certain loss ratios in our legacy standard physician book during the second half of 2021 to reflect improvements in the business. This beneficial impact was muted by prior year ceded premium adjustment in the current quarter as well as the impact of changes in the mix of business Prime.
Merrily driven by a large nonrecurring tailed premium in the prior year quarter.
We recognized $19 million of favorable development in the quarter, the majority of which came from our specialty P&C segment.
However, all operating segments, excluding the Lloyds contributed favorably.
Our consolidated expense ratio, excluding the change in UAE and transaction related costs in each period was $4 six higher than the prior year quarter, driven by the buildup of Norcal Deepak amortization as mentioned earlier and the impact of the nonrecurring tail policy premium in the prior.
Year periods.
Also contributing to the increase in expense ratio was a larger accrual for performance related incentive plans, reflecting our improved operating performance and an increase in other compensation related expenses.
Net investment income grew 26% to $22 million in the quarter driven by the addition of norcal the investment portfolio.
And the positive effect of rising interest rates as our average book yields begin to increase due to reinvesting at higher rates as our portfolio matures.
Although lower than the prior year quarter, our LP, an LLC portfolio produced $7 million in the quarter.
The investment markets remained a challenge for fixed income investors this quarter as interest rates continued to rise on fears of general inflation and actions by the fed to Tainment.
These interest rate increases contributed to net investment losses of $24 million recognized through earnings leading to the net loss in the quarter.
Net investment losses were primarily related to changes in the fair value of our convertible securities in our bond funds, which are classified as equities.
A portion was also related to net realized losses on the sale of some holding holding's classified as equity.
Rising interest rates also led to an additional $109 million of after tax unrealized holding losses on our fixed income portfolio.
These unrealized losses flow through our other comprehensive loss directly to equity accounting for most of the decline in book value.
As emphasized in my remarks last quarter, we have an investment approach that holds the vast majority of securities until maturity.
Therefore, we considered the changes in fair value driven by these rising interest rates to be temporary.
Continuing to reinvest at higher rates is beginning to increase our average book yield and should have a meaningful impact on our future earnings we.
We are content to take this result is of tradeoffs for temporary fixed income price decline.
I'll note that current bond reinvestment rates are approximately 125 million to 200 basis points higher than our reported average book yield for the current quarter.
Overall, our quarterly operating earnings continued to show improvement.
Evidence that the strategies we've employed are working.
With that I'll turn it back over to Jason.
Thanks, Dana now, we're going to pivot to Mike Bogusky for commentary on the specialty property and casualty segment Mike.
So Jason the specialty P&C segment produced positive results in the second quarter.
Driven by top line premium growth related to the norcal acquisition and improved accident and calendar year loss ratios in.
In addition, the quarter included the benefits of continued re underwriting and prudent expense management across the segment.
We continue to be pleased with the strategic value provided by the norcal transaction.
And our integration progress to date.
Gross written premium increased by 18% to $168 million, primarily as a result of the Norcal acquisition and also included solid renewal price increases and consistent new business results. Despite the continued competitive marketplace.
Overall premium retention was 84%, including 86% retention in the standard physician business reduced by 72% retention in the specialty healthcare book as a result of re underwriting efforts and continued focus on the bottom line.
Our specialty healthcare retention results reflected the loss of three large accounts representing $5 million of premium writings.
We delivered strong premium retention of 95% and 92% and our medical technology and small business units respectively.
The current accident year net loss ratio for the second quarter improved year over year.
Direct comparisons to the prior periods in 2021 are influenced by purchase accounting and <unk> assumptions, resulting from the norcal transaction as noted by Dana.
Current accident year loss ratio improved five three percentage points driven by a two four point improvement in the Norcal book.
Primarily as a result of the focused underwriting efforts on the norcal business, which currently runs at higher average loss ratios.
We are pleased with the norcal re underwriting efforts as we continue to focus on bringing the loss ratios in line with the legacy approach of Orange book.
In addition, we continue to be encouraged by lower than historical frequency in our healthcare professional liability business.
Which we attribute to a combination of our continued underwriting efforts and the COVID-19 pandemic.
We remain cautious and recognizing the full impact of this trend in our current accident year loss ratio estimate due to the long tailed nature of our health care liability claims and the <unk>.
Uncertainty of the pandemic impact.
We recognized net favorable prior accident year reserve development of $17 million in the second quarter compared to $11 million in the same period of 2021.
<unk> development in the quarter included $3 million related to the beneficial amortization of the purchase accounting adjustments on north sales reserves compared with $2 million in the same period of 2021.
Excluding the prior year impact of purchase accounting related to Norcal Deepak <unk>.
The change in estimate of utility and year over year changes until premium.
The expense ratio increased one one percentage point as compared to the same period of 2021.
The increase in the ratio was related to a higher volume of premium subject to broker commissions and the norcal book.
This was partially offset by the impact of our continued focus on operational excellence disciplined integration into norcal transaction and the benefit of higher earned premium levels.
In summary.
This segment continues to move forward in a positive direction with respect to our competitive position improved underwriting results the integration of norcal and overall performance the.
The integrations with integration efforts with norcal in 2022.
We're focused on information technology system and back office consolidation.
Which continue to remain on target.
Thank you Jason.
Thanks, Mike.
Kevin will you bring us up to date on the workers' compensation insurance and segregated portfolio cell reinsurance segments.
Thank you, Jason I will the workers' compensation insurance segment second quarter 2022 underwriting results and combined ratio were relatively flat compared to 2021.
Our reported combined ratio of 99, 8% reflects a decrease in the net loss ratio offset by an increase in the expense ratio the combined ratio, excluding intangible asset amortization and the corporate management fee was 96, 7% an indicator of the results of our ongoing business.
Performance.
Gross written premium increased for the second quarter, driven by payroll audits and related premium adjustments, partially offset by lower new business and renewal rate decreases audit premium in our traditional book of business increased $3 million quarter over quarter indicative of the payroll rebound.
After the lifting of pandemic restrictions in our underwriting territories.
Consistent with the first quarter of 2022, we did not adjust our earned but unbilled audit premium asset with a recorded audit premium in the second quarter, representing actual processed audits.
We will continue to monitor process audit activity and the impact of wage inflation on the <unk> asset in future quarters.
Premium renewal retention was 88% for the second quarter compared to 85% for the same period last year.
Renewal price decreases in our traditional book of business were 5% in 2022 compared to 3% in 2021, and new business decreased $2 $5 million quarter over quarter.
It's indicative of the continued highly competitive pressures and the workers' compensation marketplace.
We remain focused on retaining profitable accounts and maintaining our underwriting standards to secure new business.
Calendar year net loss ratio decreased to 67% in 2022, reflecting a lower current accident year loss ratio.
The current accident year loss ratio decreased one point to 72% compared to the second quarter, a year ago, reflecting an improvement in loss trends as we reported in the second quarter of last year. The 2021 accident year loss ratio reflected increased claim activity as workers return to.
Full employment with a lifting of pandemic related restrictions and our underwriting footprint.
<unk> development was $2 million in both 2022 and 2021 during.
During the first six months of 2022, the claims operation closed 38% of 2021 and prior claims representing one of the best claim closing percentages in the last 10 years.
Our expense ratio increase during the second quarter compared to the same period last year, largely due to higher general expenses from team member compensation and an increase in business related travel with the full return to normal business activities and events this year.
I'll finish with the segregated portfolio cell reinsurance segment. This segment reported a loss of $352000 for the quarter, which included underwriting income of $580000 that was more than offset by unrealized investment losses.
We renewed all the captive programs that were available for renewal during the quarter.
Jason.
Thank you Kevin now I will turn it back to Ned for a review of the results from Lloyd's net.
Thanks, Jason.
The Lloyd's segment reported a profit in the second quarter on just under half the level of premium written in 2021.
For the 2022 underwriting year, we're continuing participation of 5% and syndicate $17 29.
Syndicate 61, 31 ceased underwriting on a quota share business with syndicate $17 29.
And it's applicable business will be retained within the syndicate.
The Lloyd's investment as a reduced portion of our business compared to earlier years. We were pleased to see continued profitability from this segment.
You heard us say when the norcal transaction was announced but it was not yet time for congratulations rather congratulations should come after the companies has been successfully integrated and we are beginning to perform as one.
While we still have some work to do I believe it is now appropriate with the success. We've had in our integration efforts to congratulate everyone on the pro assurance team, who has worked so hard over the last 12 months to bring these two terrific organizations together.
That wraps up our review of the consolidated by segment results for the quarter and our team would be pleased to answer questions.
Thank you Ned Matt that concludes our prepared remarks, and we're ready for questions.
Certainly if you'd like to ask a question. Please press star followed by one on your telephone keypad.
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The first question is from the line of.
Matt <unk>.
With JMP your line is now open.
Hey, Thanks, good morning.
Good morning, Matt.
Ned.
Turn it off your opening comments with some comments on inflation.
Around how some of the broader footprint metrics might not be as applicable to your business and how things like juror behavior and social inflation might be more permanent I was hoping you might be able to dig into each of those items over more than just update us kind of how your view of the world as it relates to those.
Yes.
It's a great question, Matt and one that we.
As you might imagine spend a considerable amount of time on.
I think there has always been a disconnect between the broader base CPI and medical inflation and for a long period of time medical inflation actually.
Ran well above CPI, but what we've seen over the last.
Couple of years is that the medical inflation kind of has come down.
More in line with CPI and that is CPI has risen medical inflation has not now that's likely to change over time, especially as some of the increased cost of staffing.
Within medical organizations continues to go up.
Likely to see CPI on the medical side begin to catch up to.
CPI on the general side.
And while we often use that medical CPI as a proxy.
For severity trends, it's not a perfect measure and I think not a perfect measure for a number of reasons.
As we mentioned in the call Jerry behavior, and social inflation, and we talk about social inflation thats really inflation beyond CPI.
Four.
Four driven by broader societal trends, we see jewelry behaviors in particular willing to award larger and larger verdicts.
Have a more influential impact.
On the on the medical professional line of business.
That's always been the case.
And I think you've heard us talk about our concerns about social inflation for a number of years now and that certainly hasnt changed and is certainly.
Those concerns have been built into the reserving process for quite a while.
Another thing that does impact I think ultimate resolution of claims is policy limits.
And those policy limits, often will act as a limiter or a dampener on what gets awarded ultimately where claims ultimately settle.
As an industry, we've been writing largely 1 million policies since $19 75 and so.
As inflation kind of drives up the value of the dollar.
That million dollar limit on the policies has had more I think have an impact on on moderating some of the trend.
As as time has passed so I hope that's.
Answers your question Matt.
It does very helpful. Thank you.
And then if I can just a couple of numbers questions for Dana.
On you talked a bit about kind of the pluses and minuses on the expense ratio within specialty P&C.
Any help you can give us with now with norcal kind of behind us.
Can you kind of Anniversarying the close how should we think about you kind of run rate expense ratio is it feels like maybe Q2 had a couple of things and I've been a little bit hot, but but that directionally is probably the right direction, if I think about that right.
Yeah, Matt I think as you think about our our expense ratio inside the specialty P&C segment.
The buildup of that Deepak amortization over the course of the past year, we've talked about how that has been favorable to the expense ratio quarter. After quarter. It continues to build with the second quarter.
The acquisition.
A nation is at a what we view to be a normalized run rate. So you can expect other than that in terms of the expense ratio.
<unk>.
There may be minor fluctuations, but not.
Not expecting significant fluctuations and we've certainly normalized or what has been the most meaningful.
<unk> ball over the course of the past year.
Okay, Great and then the other question just if I could on investments as we think about.
Both the investment income line as well as the.
Equity and earnings of <unk>.
Consolidated subsidiaries, so the Lps and some of the tax credit partnerships is there anything we should I mean, I'm trying to get a refresher on if theres anything thats kind of a direct kind of one quarter lag reporting that we should think about as we look to Q3 in terms of what might have already happened in Q2.
Yeah. So in terms of what's occurring on a lag our Lps and LLC that portion of our investment portfolio does in fact report on a one quarter lag.
No.
As you're thinking about that portion of our portfolio and income that might be generated from that looking forward you don't need to consider that lag.
In terms of our net investment income and.
What you might expect there I would just encourage you to sort of take a look at our investment portfolio as we have it outlined on.
On our Investor website, so that you can get a sense of.
The portion of the.
Portfolio Thats maturing.
The coming quarters, and then consider the reinvestment rate that we're looking at now to sort of determine what yields you might want to <unk>.
Project going forward.
Great very helpful. Thank you and congrats on the Norcal integration.
Thank you Matt.
Thank you for your question.
The next question is from the line of Paul Newsome with Piper Sandler Your line is now open.
Good morning, Thanks for the call.
I was wondering maybe if we could step back and now that <unk> finished and revisit.
Kind of the long term.
Neil.
Ernie what you hope to make.
To an underwriting profit in our specialty commercial business.
How do you see that working out over the next several years.
The.
Things that you need to accomplish whether it would be great for re underwriting or.
Whatever.
To get there.
Yeah, So maybe I'll start and then yes, that's great question, Paul I'll start and then let Mike.
Come in.
You said.
Congratulation norcal being finished.
We still had a lot of work to do I don't want to understate that we have a lot of the front office sort of stuff the client facing thanks, Dana and we go to market as one company and I think that's incredibly important.
But theres still a lot of opportunities and the integration of the back office and it systems of the new companies that will.
Further drive benefits for the organization into the future as those are accomplished so a lot of a lot of work has been done and we're really excited about the work that's been done a lot of work still to do.
And a part of that that gets to the answer to your question, which is we really.
We need to continue to drive and Mike and his team have done a masterful job of this.
Our specialty P&C business, and our healthcare professional liability business in particular to be the most efficient effective organization that it can be and drive that expense ratio down.
There is certainly not as much opportunity on the expense ratio side as there is on the loss ratio side and so a lot of the efforts have been on the loss ratio side and re underwriting the book repricing the book.
But we also recognize that we're in a long tail line of business.
And it takes time to determine whether or not.
The efforts that you've undertaken are bearing fruit.
We believe they will and to the extent that we have some indications that they are were certainly recognizing them.
With with the pandemic and some of the fog of war.
Pandemic has created I think it just slows down.
A lot of that ability to recognize what you've done, but with that I'm going to I'm going to hand things over to Mike.
Yes. Thank you.
Just to add a little bit more color.
The the underwriting side has gone very very well.
The rates terms conditions on the on the on the Norcal book over this past year have.
We have improved the accident year loss ratios come down if you really look at it over the past year at around seven to eight points.
We're trying to.
Kind of repeat that over the next 18 to 24 months. So I would describe where we're at is ahead of plan on the re underwriting side of that book.
The other piece to that is.
As you are aware we.
Had really worked on our <unk>.
<unk> book over the 19, 2021 period and really got to the targets that we're looking for there were a year later on that Norcal book. So we expect that to play out in the next kind of 12 to 18 months due to the additional proved improvements.
So any other thing that I think is really important as we have experienced some some significant <unk>.
Decrease in the frequency of the Norcal book as a result of the underwriting efforts and to some degree.
The pandemic, which we were being cautious about as we've said in our in our statements. So we'll evaluate that impact in the third and the third and fourth quarter.
Pleased with the progress there and I think just one final item is.
Systems consolidation and innovation.
<unk> tremendous opportunity over the next 18 to 24 months as well and I think as we get into our our final systems.
And as well as consolidation of statutory entities there are some other.
<unk>, we can drive.
You won't see in the short term, but youll see in the longer term and that's really where we're at with <unk>.
Shouldn't be more delighted.
With our team.
The norcal team, the culture, and where we're going.
Okay.
Great.
Just to head realize you didn't notice.
<unk>.
Yes.
Sure good accounts in the workers comp business, how closely are the integrated today, how much do the work.
With each other.
As opposed to being separate operations.
Make sure I understand the question.
Okay.
Go ahead Kevin.
Hey, Kevin.
Yes, so they are separate sales and autonomous from each other in terms of of of their books of business, but from our side. The claims underwriting risk management is all of the same as it is in our workers' compensation insurance segment to <unk> point if I'm.
Understanding your question correctly.
Yes that was my question, whether or not there was integration as well.
Well.
I'm curious disintermediation of claims operations, whether or not the matter for each of the scale, but but also whether or not there is a <unk>.
Distribution.
Overlap as well.
Alright.
And there is a little bit of distribution overlap, but again operationally, it's all within workers' comp or specialty P&C in the case of the NPL, but the cells themselves operate autonomously.
Well I think I think yes, I think a good way to think about the way that segregated portfolio cell business works is more of a fee for service model, where we're able to leverage.
The depot and the expertise within <unk>.
<unk> specialty P&C business and within our workers compensation business.
To provide those services to clients that want a self insurer retained risk, but it very much uses the same resources. The same people and allows us to drive some efficiency.
Some expense efficiencies through the phase that we're able to charge for the services we provide.
That makes sense. Thank you for your help as always.
Thanks, Paul.
Thank you for your question.
The next question is from the line of Mark Hughes with Truth. Your line is now open.
Mark please check to see if you're on mute.
Oh.
Yes, yes, I was on mute sorry.
Good morning.
Good morning, guys.
I gave you a nice nice hallow and I didn't hear anything back in place.
Earlier this morning.
Yes.
Mike you talked about seven to eight points.
Improvement I think.
Youre kind of the goal would be to repeat what you've done.
And the specialty P&C business.
Good.
Added 12 months to 18 months 18 to 24 months, what would you say in terms of timing and did I hear that formulation correctly.
Yes.
Mark Yes, we've been at it for 12 months and I think.
In a long tail line of business.
Can look at.
Another 12 to 18 months as premiums earned through.
The book of business.
And all of the underwriting actions that we've taken.
Come through fruition.
Yes.
Sure.
Okay.
You issued social inflation I know <unk> been wrestling with this issue.
Whether or not youre really seeing inflation loss costs in the book there are some indications but listen.
Necessarily manifesting itself in your experience.
Where do you stand on that and how much.
<unk> for losses to improve to the extent that you just get more data and it's clear.
About what's happening within the book of business.
It's a good group of questions there Mark.
So maybe to expand on some of the things I was saying earlier.
When you think about the social inflation.
A lot of that manifests itself in very large jury awards and I mentioned earlier that the typical policy rewrite has a $1 million.
Cover on it so.
The <unk>.
Impact that social inflation has is it kind of continues to heightened expectations.
And even if a claim resolved kind of within that million dollars policy limit.
Drives up where the where the ultimate resolution.
And that becomes harder to trend and quantified, but when we look at that and kind of our historic data.
We've not seen a net increase in the severity trend.
That lines up with with broader inflation I think.
Various jurisdiction by jurisdiction and probably run somewhere between 3% and 8% depending on the jurisdiction.
But overall closer to that 3% is what we are seeing severity trend in that first $1 million layer and obviously, we write policies with with limits in excess of that million dollars, we reinsure most of that business.
We do but it has an impact even if its reinsured and kind of what your reinsurance costs are into the future. So that is something that we continue to be very mindful of as we think about the other piece I think to your question about kind of what about declines that have come in the door and what are you thinking about those.
<unk> mentioned, a couple of occasions of the decline in frequency and claims.
We have seen on both on the Norcal book in the legacy <unk> broken the legacy for our assurance pack related decline in frequency of our over almost a three year period now.
Because of the uncertainty that's created by the pandemic the slower CT systems that.
Slowdown the resolution of claims which kind of leads to a lack of clarity about.
Where claims are headed we've been reluctant.
Two to kind of.
Give full credit to that and what we've assumed largely is that that decline in the frequency of clients will be offset by an increase in the severity of claims.
And so that's kind of what where we are on the wait and see approach with that.
But to date I don't think we've seen anything that.
That says we see severity going down this trend as I mentioned.
And what sort of I.
I think you are putting in them a higher severity assumption.
On your reserves is that not right below 3%.
Aren't you Hi, Dana.
Well again, it depends kind of.
Jurisdiction by jurisdiction kind of the severity trend as I mentioned somewhere between 3% and 8% depending on the jurisdiction now.
It's hard to.
Perfectly quantify that because we've not taken credit for a lot of the decline in frequency.
Which probably would say that that trend thats baked in is higher.
Because we have not we've not taken into the effect of the decline in frequency.
Thank you for that and then did you give a specific number for gross premiums written by norcal during the quarter.
I don't know if we did we certainly can get that for you.
We'll try we'll try and get it here while were on the call and circle back on it.
Okay.
And then just final question around the social inflation issue are you getting enough data points.
The core it's up and running I mean are you seeing where the verdicts are coming out are still too early days to get good line of sight on that.
Yes, it's a good question market, yes. The court systems are definitely have a backup and we are seeing for the industry.
A number of <unk>.
James in the $10 million to $30 million or verdicts in the $10 million to $30 million range and some even larger.
So it's very much dependent on that.
Kind of if you think about some of the data that we share and then I think actually it's translated it poses data together very well about verdicts in the space.
And they were doing that up through $2019 20 early 2020 in the pandemic. It feels like it's kind of normalized back to those same increased levels that we were seeing.
Great. Thank you very much.
Yes, absolutely Mark and gross written premium for norcal.
Toward all of 'twenty two for the quarter for Q2, 'twenty two is $52 $7 million.
$52 seven and then do I have it right that Q1 was $129 million.
Yes, yes.
Okay great.
Great. Thank you I appreciate that.
Thanks Mark.
Thank you for your question. There are currently no further questions registered so as a reminder, it is star one on your telephone keypad.
Okay.
The next matter.
Right.
Thank you. Thank you Matt go ahead.
The next question is from the line of Gary Ransom with Dowling and partners. Your line is now open.
Yes.
Question on the the $1 billion limits that you mentioned and thinking about if I'm a doctor how that seems inadequate so that most of.
That would be.
Looking for more pressuring for more maybe im wrong on that but.
Is there is there any market pressure for you to start offering higher than $1 million limits more broadly.
Gary its a really.
Very good question and I think we see pockets of it but we don't see it.
Broadly I think I think it will come I think it has to come at some point for the industry I mean when you.
You inflation adjust the $1 million number from the mid 19 seventies. It ends up in excess of $5 million today.
And so I would agree with you the sense that those limits are probably becoming inadequate.
Out there, but as I mentioned, they also act as a bit of a limiter today.
But that won't always be the case.
I think the pressure does build.
And over time, what that time horizon, it looks like I don't know, but certainly we would fully expect.
There could be a push for higher limits and a push is how often the limits that doctors carrier determined by the requirements of the hospitals they practice.
And so if it very well may be driven by the hospital systems and we have seen that in some instances where hospital systems are again, beginning to require that physicians carry higher limits.
Got it.
And remind me is your do you reinsure most.
Claims over $1 million or yes, yes.
We retained yes, so on the for the health care professional liability business, we retain the first $2 million of exposure and then reenter above that.
Got it.
Hum.
And then one other long term question on.
Returns on equity I Didnt I Couldnt remember if you had said that there is any particular goals that youre trying to get to but.
Do you have any goals that you're trying to get to over time.
Dana you want to take that.
Yes.
What we're shooting for Gary is 700 basis points above the risk free rate.
And Thats Thats, what our stated long term objective has been for for some time and continues to be that's what we're working towards.
And as it is risk free rates go up that number is getting closer to 10 I guess at this point right right.
That's right maybe not quite bespoke.
Okay Alright.
Alright, that's it thank you very much.
Thanks, Gary.
Thank you for your question.
There are no additional questions waiting at this time, so I'll pass the conference over to the management team for any closing remarks.
Thank you, Matt and thank you for everyone that joined US today, we look forward to speaking with you again in 2022.
That concludes the conference call. Thank you for your participation you may now disconnect your lines.