Q3 2022 American Financial Group Inc Earnings Call
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The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Yeah.
Yeah.
Thank you for standing by and welcome to the American Financial Group, 2023rd quarter Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation.
For this session.
That's a question at that time, Please press star one one when you touch tone telephone.
As a reminder, today's conference call is being recorded I would now like turn the conference Diane Weidner, Vice President of Investor Relations. Please go ahead.
Good morning, and welcome to American Financial group's third quarter 2022 earnings result Conference call. We released our 2022 third quarter results yesterday afternoon, Our press release Investor supplement and webcast presentation are posted on Afg's website under the Investor Relations section.
These materials will be referenced during portions of today's call I'm.
I'm joined this morning by Carl Lindner, The authority and Craig Lindner Co Ceos of American Financial Group, and Brian Huntsman Afg's CFO .
Before I turn the discussion over to Carl I would like to draw your attention to the notes on slide two of our webcast. Some of the matters to be discussed today are forward looking these forward looking statements involve certain risks and uncertainties that could cause actual results and our financial condition to differ materially from these statements a detailed description of these risks and uncertain.
These can be found in Afg's filings with the Securities and Exchange Commission, which are also available on our website. We may include references to core net operating earnings a non-GAAP financial measure in our remarks or responses to questions a.
A reconciliation of net earnings attributable to shareholders to core net operating earnings is included in our earnings release.
If you are reading a transcript of this call.
Please note that it may not be authorized or reviewed for accuracy and as a result, it may contain factual or transcription errors that could materially alter the intent or meaning of our statements.
Now I'm pleased to turn the call over to Carl Lindner as a third to discuss our results.
Good morning.
We used to share highlights of Afg's 2022, third quarter results, after which Craig and Brian and I'll be glad to respond to any questions.
We're very pleased with Afg's performance during the third quarter.
We achieved an annualized core operating return of over 17% in the quarter with strong underwriting results despite elevated industry catastrophe losses.
Strategic positioning of our investment portfolio has continued to enable us to invest opportunistically and the returns in our alternative investment portfolio again exceeded our expectations Greg.
Craig and I, Thank God, our talented management team.
And all of our employees for helping us to achieve these exceptionally strong results.
Returning capital to our shareholders is an important component of our capital management strategy and reflects our strong financial position and our confidence in Afg's financial future with our third quarter earnings release, we announced the special cash dividend of $2 per share payable on November 22.
<unk> thousand 22 to shareholders of record on November 15th 2022.
The special dividend is in addition to the company's regular quarterly cash dividend of <unk> 63 per share. Most recently paid on October 25th.
Of this year.
With the special dividend the company has declared $12 per share in special dividends in 2022.
In the aftermath of Hurricane Ian we're reminded of the critical role that insurance plays in the wake of catastrophes such as this.
Claims teams continue to work with our agents and policyholders to identify and process covered claims quickly and efficiently to help our customers restore their businesses and rebuild their communities our thoughts and prayers remain with those who have been affected by the devastation caused by hurricane Ian.
I'll now turn the discussion over to Craig to walk us through Afg's third quarter results investment performance and our overall financial position at September 30.
Thanks Carl.
Please turn to slides three and four for summary earnings information for the quarter.
AFG reported core net operating earnings of $2 24 per share compared to $2 71 per share in the third quarter of 2021.
The year over year decrease was primarily the result of lower year over year returns in Afg's alternative investment portfolio as.
This compared to the very strong performance of this portfolio in the prior year period.
On slide four Youll see that net earnings included after tax non core net realized losses on securities of $28 million were <unk> 32 per share in the quarter.
<unk> and this number is $21 million.
24 cents per share.
After tax net losses from the Mark to market of equity Securities that we continued to one at September 30.
Now I'd like to discuss the performance of Afg's investment portfolio financial position and share a few comments about afg's capital and liquidity.
The details surrounding our $14 $3 billion investment portfolio are presented on slides five and six.
Pretax unrealized losses on Afg's fixed maturity portfolio were $701 million at the end of the third quarter, reflecting the increase in market interest rates and widening credit spreads compared to year end 2021.
During the first nine months of 2022, we acted on opportunities presented by the increasing interest rate environment and lengthen the duration of our P&C fixed maturity portfolio, including cash and cash equivalents from approximately two years at December 31 2021 to.
<unk> two seven years at September 32022.
And the current interest rate environment, we're able to invest in high quality medium duration fixed maturity securities at yields of around 6%.
Which compare favorably to the 373% yield earned on fixed maturities in the third quarter of 2022.
311% earned in the third quarter of 2021.
In addition to the favorable impact of higher reinvestment rates as we look forward, we expect our portfolio of floating rate securities most of which are tied to one month or three month indices to benefit from additional increases in short term interest rates.
Altogether, assuming that future interest rates follow current market expectations. We expect the yield earned on our fixed maturity portfolio to increase by as much as 70 basis points by the fourth quarter of 2023 compared to 373% earned in the third.
Quarter of 2022.
Looking at results for the quarter for the three months ended September 32022 property and casualty net investment income was 12% lower than the comparable 2021 period.
The annualized return on alternative investments in the third quarter of 2022 was approximately seven 1% compared to 23% for the 2021 quarter.
Excluding the impact of alternative investments net investment income in our property and casualty insurance operations for the three months ended September 32022 increased by 35% year over year as a result.
Of the impact of rising interest rates and higher balances of invested assets.
Our 2022 earnings guidance assumes an overall annual yield of 12% on alternative investments for the full year based on the strong performance of these investments in the first time first nine months of the year.
Including $79 million in earnings related to the opportunistic sales of multifamily properties. During the first six months of 2022.
Our guidance continues to reflect minimal income from alternative investments in the fourth quarter of 2022.
We assume that continued strong performance of our multifamily housing investments will offset weaker performance of traditional private equity investments.
Valuations of our traditional private equity investments are generally reported on a quarter lag and a poor performance of public equity markets in the third quarter is expected to impact the fourth quarter performance of our private equity investments.
Our disciplined yet opportunistic investment approach has served us well, we believe we're well positioned in this current market environment.
As you can see on slide six our investment portfolio continues to be high quality with 91% of our fixed maturity portfolio rated investment grade and 97% of our P&C group fixed maturities portfolio within NTIC designation of one or two its highest two categories.
<unk>.
Please turn to slide seven where you will find a summary of Afg's financial position at September 32022.
Our excess capital was approximately $1 3 billion at September 32022.
This number included parent company cash and investments of approximately $760 million.
During the quarter, we returned $48 million to our shareholders through the payment of our regular <unk> 56 per share quarterly dividend.
Following the $2 special dividend declared yesterday, we project at less than $100 million of our remaining excess capital is available for share repurchases or additional additional special dividends through the end of the year 2022.
As you may recall, the portion of our excess capital that we view as available for special dividends and share repurchases is limited by our total debt to cap target of 30% and that capital number is impacted by unrealized gains and losses on fixed maturities.
However, it is important to note that each dollar of debt repurchased frees up approximately $2 of excess capital for distribution to shareholders and in today's market, we can repurchase our debt below par value.
Afg's book value per share plus dividends declined by approximately 2% in both the third quarter and nine month periods ended September 32022, reflecting unrealized losses on fixed maturities due to rising interest rates and widening credit spreads.
Excluding unrealized losses related to fixed maturities, we achieved growth in adjusted book value per share plus dividends of three 7% during the third quarter and 12, 7% year to date.
The short duration of our fixed maturity portfolio and somewhat limited exposure to publicly traded common stocks when compared to some peers helped our performance in 2022.
With the $2 per share special dividend declared yesterday AFG has declared $12 per share in special dividends in 2022, while continuing to be in a strong excess capital position.
I will now turn the call back over to Carl to discuss the results of our P&C operations and our expectations for 2022.
Thank you Craig.
Now if you'd please turn to slides eight and nine of the webcast, which include an overview of third quarter results.
Operating earnings in our property and casualty business continued to be excellent and I'm pleased to report exceptionally strong growth in gross and net written premiums during the quarter.
Catastrophe losses were manageable and we're continuing to achieve renewal pricing in excess of prospective loss ratio trends and the vast majority of our businesses. So that nearly all of our businesses are meeting or exceeding return on equity targets.
As Youll see on slide eight the specialty P&C insurance operations generated an underwriting profit of $158 million compared to $169 million in the third quarter of 2021, 7% decrease higher year over year underwriting profit in our specialty casualty group was more than offset by.
Lower underwriting profit in our property and transportation and specialty financial groups.
Third quarter 2022, combined ratio was a strong 91, 1%.
Two one points higher than the 89 reported in the comparable prior year period.
Results for the 22.
Third quarter include two five points in catastrophe losses, and three one points of favorable prior year Reserve development.
Catastrophes, primarily due to hurricane in impacted Afg's underwriting results for the third quarter of 2022 by $39 million <unk>.
Including the impact of reinstatement premiums and the favorable impact of the reduction in certain profitability based commissions due to agents, which related to the catastrophe losses.
Gross and net written premiums increased 19% and 15% respectively. In the 2022 third quarter compared to the prior year quarter year over year growth was reported within each of the specialty P&C groups. As a result of a combination of new business opportunities increased exposures and are good.
Our renewal rate environment.
The drivers of growth vary considerably across our portfolio of specialty P&C businesses in the aggregate year over year year over year growth in gross written premium for the first nine months of 'twenty two excluding crop is about 60% attributable to new business opportunities and change in exposures.
And about 40% attributable to rate increases.
Average renewal pricing across our P&C group, excluding workers' comp was up about 6% for the quarter and up approximately 5% overall in line with and slightly higher respectively compared to renewal increases reported in the prior quarter.
Renewal rate increases in the majority of our businesses continue to be at or in excess of estimated perspective loss ratio trends.
<unk> had been approximately 5% for our specialty property and casualty business, excluding workers' comp and approximately 3% overall throughout this year.
We've been focused on achieving adequate pricing for some time and have achieved overall rate increases across our entire specialty book for 25 straight quarters.
We feel very good about the level of rate increases that we continue to achieve and the impact of cumulative rate increases over time, which has enabled us to stay ahead of perspective loss ratio trends and help us to feel even more confident in the adequacy of our reserves.
Now I'd like to turn to slide nine to review a few highlights from each of our specialty property and casualty groups.
The property and transportation group reported an underwriting profit of $39 million in the third quarter of 2022 compared to $45 million in the third quarter of 'twenty one.
Primarily as a result of lower year over year crop profitability when compared to a very strong 2021 crop year.
Catastrophe losses in this group net of reinsurance and inclusive of reinstatement premiums were $13 million in the third quarter of this year compared to $14 million in the comparable 2021 period.
The businesses in the property and transportation group achieved <unk> 95 for calendar year combined ratio overall in the third quarter, one nine points higher than the comparable period in 2021.
When you look at our own.
Underwriting results from quarter to quarter, it's important to remember that we earned the largest portion of our crop premiums in the third quarter, each year and generate booked at business at a combined ratio in the high <unk> until the fourth quarter when the harvest process.
Is substantially complete and the level of underwriting profit can be better estimated accordingly, the combined ratio for the property transportation group is elevated in the third quarter because crop has been booked in the high nineties.
Said another way earned premiums in the crop business were 40% higher year on year in the 2022 third quarter. So the crop business had a larger impact on third quarter results than in the prior period.
Excluding crop from both periods the calendar year combined ratio for property for the property and transportation group is generate consistent with the 2021 period, which was a strong quarter for this group.
Sure.
The month of October serves as a discovery period for the majority of our corn and all of our soybean business harvest pricing for corn settled 16% higher than spring discovery prices, while soybean pricing was 4% lower both within desired ranges of volatility.
The corn and soybean harvest is running well ahead of averages with approximately 76% and 88% of these crops harvested respectively.
Despite the USDA has reduced yield estimates and widespread Florida citrus losses due to hurricane and we continue to expect to have an average crop year from a profitability standpoint.
Third quarter 2022, gross and net written premiums in this group were 30% and 24% higher respectively, when compared to the 2021 third quarter.
While nearly all businesses in this group reported higher year over year premiums in the quarter the growth was driven.
Higher commodity futures pricing in our crop insurance business, excluding the impact of crop insurance third quarter 2022, gross and net written premiums increased 14% and 10% respectively when compared to the 2021 third quarter.
Overall renewal rates in this group increased 5% on average for the third quarter of this year consistent with renewal rates achieved in the second quarter of this year.
Now the specialty casualty group reported an underwriting profit of $118 million in the 2022 third quarter compared to $110 million in the comparable 2021 period.
Primarily the result of higher year year over year profitability in our executive liability social services, and mergers and acquisitions liability business, which was partially offset by an overall decrease in favorable prior year Reserve development.
Underwriting profitability in our in our workers comp businesses overall continues to be excellent.
Catastrophe losses in this group.
Net of reinsurance and inclusive of reinstatement premiums were $3 million in both the third quarters of this year and last year.
The businesses in our specialty casualty group achieved an exceptionally strong 82, 6% calendar year combined ratio overall in the third quarter <unk>.
Six points higher than the excellent results achieved in the comparable prior year period.
Third quarter 2022, gross and net written premiums both increased 6% when compared to the same prior year period with nearly all the businesses in this group reporting growth during the quarter.
Factors contributing to year over year premium growth included increased exposures, resulting from payroll growth.
Our workers compensation businesses.
And the impact of the economic recovery on our social services business. This growth was partially offset by lower premiums in our mergers and acquisition liability business.
Majority of the businesses in this group achieved strong renewal pricing during the third quarter renewal pricing for this group excluding workers' comp businesses was up 7% in the third quarter consistent with the prior quarter renewal rates in this group overall were up 6% an improvement over there.
<unk> pricing increases of 4% in the previous quarter.
Specialty financial group reported an underwriting profit of $15 million in the third quarter.
This year compared to an underwriting profit of $26 million in the third quarter of 2021.
The year over year decrease was primarily the result of catastrophe losses from hurricane in that affected our financial institutions business catastrophe losses for this group net of reinsurance and inclusive of reinstatement premiums were $34 million in the third quarter quarter of 2022 compared to $14 million in the <unk>.
Prior year quarter.
This group reported a 91 three combined ratio for the third quarter of 2022, an increase of seven one.
One points over the prior year period.
Third quarter gross.
2022, gross and net written premiums were up 15% and 7% respectively when compared to the prior year period higher premiums in our financial institutions business related to lender placed mortgage protection insurance contributed to the increase in the quarter.
Renewal pricing in the specialty financial group was up approximately 4% for the quarter a point higher than the renewal pricing achieved in the previous quarter.
Now during the third quarter of 2022, we completed our annual ground up review of our asbestos and environmental exposures relating to the run off operations within the P&C group.
This review was undertaken internally and examined all open accounts and considered any trends observed no new trends were identified in claims activity was generally consistent with the expectations, resulting from our 2021 in depth review and our 2020 external study.
As a result, the review resulted in no net change to the P&C groups A&D reserves, we continue to enjoy robust survival ratios, which are well above the industry averages, which are one measure of the strength of our A&E reserves.
We've also assess the adequacy of our asbestos and environmental reserves for our historic railroad and manufacturing operations.
<unk> liabilities continue to be adequate and we made a small adjustment to our environmental liabilities based on slightly revised projections at three environmental sites.
This minor adjustment is included in Afg's core operating earnings for the third quarter.
Although we most recently engaged special specialty outside actuarial and engineering firms and outside counsel to help assess our reserves for both insurance and legacy railroad in manufacturing liabilities in 2020 in 2017.
Based on the moderation of claim emergence in payments, we're continuing to assess the merit and frequency of such engagements.
Now if you'd please turn to slide 10, where you see a full page summary of our 2022 outlook.
Overall, we continue to expect an ongoing favorable property and casualty market with opportunities for growth arising from both continued rate increases and exposure growth.
We now expect Afg's core net operating earnings in 2022 to be in the range of $11 to $11 75 per share narrowed favorably from our previous guidance range of $10 75.
To $11 75 per share.
Our guidance reflects an average crop year.
And the expectations and assumptions regarding full year investment income that Craig shared earlier.
We're pleased that our very strong results through the first nine months of 'twenty to have allowed us to increase the midpoint of our guidance by more than a dollar per share from our initial guidance provided back in February notwithstanding the payment of more than $1 billion of special dividends.
We now expect the 2022 combined ratio for the specialty property and casualty group overall between 86%, 87% narrowed slightly from the range of $85 to 87% shared previously.
Net written premiums are now expected to be 10% to 12% higher than the $5 6 billion reported in 2021 with the 11% midpoint consistent with our previous guidance range.
Now looking at each sub segment.
Based on our results for the first nine months of the year, we now estimate a combined ratio in the range of 90% to 92% and our property and transportation group. This guidance continues to assume average crop earnings for the year and reflects the impact of Hurricane Ian We now expect growth in net written premiums for this group to be in the range of <unk>.
1% to 17% an increase from the range of 13% to 17% provided previously.
We now expect our specialty casualty group to produce a combined ratio in the range of 80% to 82% narrowed from our previous range of 79% to 83%.
Our guidance assumes continued strong results across all businesses in the group, including continued calendar year profitability in our workers comp businesses overall.
We expect net written premiums to be 7% to 9% higher than 2021 results with the range narrowed from our initial guidance.
Premium growth will be tempered by rate decreases in our workers' comp book, which are the result of favorable loss experience in this line exclude.
Excluding workers' comp, we now expect 2022 premiums in this group to be 8% to 10% higher.
In 2021.
We now estimate the specialty financial groups combined ratio to be in a range of 83% to 85% up one point at the midpoint from our previous range of 81 to 85 and.
And reflecting the expected losses from hurricane in <unk>.
Growth in net written premiums for this group is expected to be in a range of 46% down one point from our midpoint of our previous range of 48%.
Based upon the results for the first nine months, we continue to expect renewal rates to increase approximately 5% in our specialty property and casualty operations overall and excluding comp we expect renewal rate increases to be in the range of 6% to 7%.
Craig and I are very pleased to report these exceptionally strong results for the quarter and we're proud of our proven record of long term value creation, we believe that our entrepreneurial opportunistic culture combined with our strong balance sheet and financial flexibility stability position us very well in the remaining months of 2022 and in <unk>.
We're very excited about 2023 now we will open the lines for the Q&A portion of today's call, Craig and Brian I would be happy to respond to your questions.
Thank you.
Again, ladies and gentlemen, I'd like to ask a question. Please press star one on your Touchtone telephone again to ask a question. Please press star one way. Our first question comes from the line of Michael Phillips from Morgan Stanley . Your line is open.
Thanks, Good morning, everybody.
Curious your thoughts.
Hell of a question either your own book of business or the industry. You guys are pretty unique book of business, obviously, but we're here to kind of a mixed bag and P&C pricing so far this quarter.
Obviously lots of moving parts here because of reinsurance.
Relation in property.
But I guess, where do you see pricing again, either for yourself or the industry next year.
To be more conservative on the casualty, where you see casualty yet for next year.
I think yes.
When you look at the macro environment that we're operating in today with a higher level of catastrophes than expected and the impact it's having.
Increased reinsurance pricing on both the property and casualty side.
Social inflation.
Kind of bumps that.
Every company is having.
Some of the casualty exposed lines.
And.
The other the other thing that's kind of interesting is I think which folks havent picked up as the size of the unrealized losses in our fixed income portfolios that.
We do have some impact on rating rating agencies' calculations of debt to capital or are capital required.
No.
Very interesting environment My bet is that.
There's going to be continued opportunities.
And to take price increases going into 2023.
The few areas that we see.
More competition than there should be and.
Pricing that's too soft.
Probably.
<unk> thousand excess liability arena.
And I think thats, because there has been quite a quite a few new entrants new competitors in that space.
And I think everybody thinks that playing in the and the higher excess layers protects them but.
I think that.
There will be.
Thanks will come home to roost for those to some new competitors that have been too aggressive.
I think the other side is.
In a DNO the public D&O marketplace.
We saw our rates decline.
And that public D&O.
Only 22% of our business and we think we're making underwriting profit there but.
I noticed a few competitors had fairly large reserve adjustments in the quarter.
In the.
Public D&O professional lines area.
Doesn't surprise me.
I think.
Even there I think that there may be some adjustment and what's going on in an overly competitive market. There going forward. Those are kind of the areas, California workers comp also I think seems to be more competitive than what it should be when you look at the.
The rate decreases over time in that.
Bottom line as you can tell I'm very bullish for that for the.
The reasons that I've mentioned about.
The ability to get continued.
Price going forward or frankly.
In commercial auto liability and.
The casualty lines and that going to be need it going to be a need to continue to stay up with the <unk>.
Higher and higher inflation.
Loss cost.
Great. Thank you that's really appreciate it you mentioned excess layers.
Kind of coming to come here.
More competitive there you do a good bit of that as well I mean, there is some leverage effect obviously of inflation in those layers. So I guess on your own book.
Any concerns that you have.
<unk> inflation might impact.
Specialty casualty business in the excess layers there.
Well sure and I think that.
We are using on.
More of the Fortune 500000.
That part of our business, we are using higher perspective loss ratio trends as we price our business and and we're trying to continue to get.
Double digit increases on that so I think we're trying to adjust and how we project loss costs.
<unk>.
And the prices that.
That we're getting and the primary primary D&O seems to be.
Not as impacted because I think everybody recognizes the first hour.
Being lowered down the first dollar exposures that are there.
I feel real blessed with with our excess.
And our umbrella and excess liability business in that.
We're working off of.
Substantial are excellent underwriting profitability base on that that book of business. So.
Outside of a bump that we had in the habitation all.
Umbrella and excess.
Business.
<unk> of years ago were.
Our program that we're out of.
I think we are blessed with a good foundational.
Profitability to begin with so I think we're trying to adjust towards.
The higher perspective loss ratio trends.
And that.
Sure.
So continue to feel real good about.
Our umbrella and excess liability businesses and the opportunities there.
Okay, great. Thank you I guess, just finally could you also mentioned social inflation that comes up all the time of course.
Yes.
Any involvement in social inflation kind of go hand in hand, I think any things youre seeing in your long haul trucking business that.
Mike.
Hello flags to it over the next year.
I think we've been seeing lots of things that concern us.
<unk> auto liability part of our business over the past eight years and I think that's one reason why.
We've been taking rate in commercial auto liability and commercial auto for 11, almost 10 11 years now so.
When we take a look at our commercial auto liability perspective loss ratio trend, we're using about 7% today and we're continuing to try to get that.
Close to that in right.
<unk>.
Our overall commercial auto our overall.
<unk> auto business.
Is meeting our targeted returns and.
And combined ratio targets, but the commercial auto liability part of our of our commercial auto business is.
<unk> is more.
Having a small underwriting profit or even breakeven results.
As generally.
Try to.
To be conservative in our projections with.
With the rate and the inflection that we're seeing so.
As I've mentioned before I think we're going to I think we need to continue to.
Take rate, particularly in the commercial auto liability part of our business and.
<unk>.
Okay. Thank you for your thoughts.
Thank you.
One moment please.
Our next question comes from the line of Paul Newsome with PSC. Your line is open.
Alrighty, Paul Newsome your line is open.
Sorry about that I didn't hear anything.
I was hoping you could talk a little bit about the outlook for the workers comp business.
And.
We've had this amazing general downtrend in frequency for years and years.
<unk> had huge reserve releases.
That business.
Are you thinking that.
The hope is that margin sort of hold it.
Frequency trend continues or.
Do you expect to essentially some level of margin expansion.
Obviously.
Good range of profitability today, but.
Just maybe some thoughts and so what you think is going to happen Big picture.
Profit perspective changed.
We have not we are just working on our 2023 budget and projections in that and we try to generally we give more detail and tried to do good job on that.
No.
We're early on in that process.
My perspective about the comp part of our business today is it makes up about 15% of our gross written premium last year.
Our overall calendar year results in the third quarter and nine months.
Our excellent and expect it to be for this year.
Good overall, even on an accident year underwriting profit basis, a good overall accident year underwriting profit in the third quarter and nine months and expected for all of this year.
Our.
Summit or southeastern business and strategic comp National Interstate's business, all are performing well on a both a calendar year in an accident year underwriting profitability basis.
Our California subsidiary Republic has a small underwriting.
Calendar year underwriting profit, but we are projecting an accident year underwriting loss for that business and.
And that.
I think the.
We've seen significant payroll increases.
Which have turned.
The premium.
Picture around <unk>.
Actually we actually had mid single digit growth in the third quarter and nine months and expected for this year pretty much in all the all of our businesses.
And that's despite a price.
Approximate price decline through nine months of about 3%.
We feel our reserve position is still very strong.
Our loss our perspective loss ratio trends.
<unk> are down 2% to 3% across all of our workers' comp business. So.
I think that that bodes well medic medical severity seems to be.
Better than <unk>.
But a lot of the indices would.
Wood.
Would present so.
<unk>.
I continue to be.
<unk>.
Excited by and confident.
And the ability of our workers' comp business too.
Be profitable and grow some going forward.
Will it be at the same accident year margins as what it has been historically, that's a harder thing to call in.
<unk>.
I think part of that May have to do with what goes on with the economy.
Going forward into next year.
So I hope that gives you some color again, we're kind of early on in our.
23 planning and perspectives.
Yes.
That's great.
Im asking is because.
And other companies have been talking about how.
New book sort of excluding workers' comp.
Great.
More or less kind of matching.
With the underlying claims inflation appears to be at and obviously, it's up to the analysts to have a view as to whether or not that gets worse prospectively.
But if we're sort of at a steady state profitability.
Look ex workers' comp.
Would it be the workers comp business that ends up.
Winning factor.
Debt.
Drives an improvement in the underwriting prospectively.
And the next year or so.
I guess my question is.
Is there something wrong with that.
The thought pattern.
Missing something.
Respectively.
The moving pieces.
I'm not quite clear on the question are you asking me again, if I think.
While workers' comp results improve is that what youre asking.
Not really.
He will make a projection of what I'm asking is whether or not.
It's appropriate to think about sort of how the book is.
<unk> prospectively to think about.
So non workers comp book is fairly stable from a profitability perspective.
That would be what changes prospectively would be driven by the workers comp.
I think it's too early for me to give you an answer on that until we've kind of worked through our own our own planning and when.
When we get the guidance I can probably for next year comprise talk a little bit more about that.
You know.
As I mentioned earlier I'm very bullish about.
How we're how we're situated how we're postured with our house in order with almost all of our businesses and with the.
The macro trends.
Going on out there.
Social inflation reinsurance cost going up for everybody.
Capital charge.
And.
Rating agency hits for unrealized and.
All of those.
High level of catastrophes and tightening in the <unk>.
We're excited about the opportunities for next year.
The results have been really quick wonderful. Thank you Pierre helped us so much.
Got it.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press star one on your Touchstone telephone again to ask a question. Please press star 111.
One moment please.
Our next question comes from the line of Meyer Shields with <unk>. Your line is open.
Great. Thank you.
I have a couple of small questions.
Thank you very much for the detail on the impact of crop.
On the underwriting ratios in property and transportation could that impact on the way.
The increase in the quarter.
No no not really.
Don't really we don't include crop really in the pricing index for that segment, just because of the uniqueness of it.
Okay.
<unk>.
Also with regard to the debt you mentioned you can buyback below par that makes sense are there any penalties associated with.
The current debt repurchases.
So.
In our debt.
We could buyback debt in the open markets.
A discount in most of our debt.
But it would be a make whole call provision, but and then make whole calls with where interest rates are today that sort of capped at par. So we could buyback that that even in a large larger transaction at par or better.
Okay Fantastic and then.
With regard to the <unk>.
<unk> portfolio is hoping you could talk about.
You're thinking about that.
<unk>.
Phase of against the interest rate trajectory.
Yes. This is this is Craig may or so.
We think that inflation is probably peaked.
Clearly the fed is going to continue to.
Put increases.
Through and in our opinion, probably leave rates up longer than.
Some others might be expecting.
We are comfortable buying intermediate term.
Five to seven year type high grade paper.
Investing a small amount of money I think year to date, we have invested.
New investments I think a little less than 4% was invested in.
Non investment grade.
Fixed maturity.
Investments.
Chip typically double B type, yeah, we're not really reaching for yield work.
Small amount of high yield paper that we purchased.
Sticking with.
Some of the better names and as I said double B type type ratings.
I think you should expect us to continue to extend duration to the portfolio we were.
We were extremely pleased with the we are extremely pleased with the positioning that short duration of the portfolio very pleased with the.
Large amount of floating rate securities, which were benefiting on it had a major way today, but we are comfortable now.
Investing money at.
At a little longer duration than that we have been the last couple of years.
Alright, Thats perfect Thats I was looking for thank you very much.
Thank you.
Showing no further questions at this time I'd like to turn the call back over to Diane Weidner for any closing remarks.
Thank you all for joining us this morning, as we discussed our third quarter results and we look forward to talking with you all again as we share fourth quarter and full year results later on.
<unk>.
Thank you for your time.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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