Q4 2022 Rli Corp Earnings Call
Okay.
Good morning, and welcome to the RLI Corp, fourth quarter, adding catacombs right.
After managements prepared remarks, we will be opening the comes up for a question and answer session.
Before we get started let me remind everyone that through the course of the teleconference. RLI management may make comments that reflect their intentions beliefs and expectations for the future.
As always these forward looking statements are subject to certain factors and uncertainties, which could cause actual results to differ materially. Please refer to the risk factors described in the company's various SEC filings, including including in the annual report on Form 10-K as supplemented in forms 10-Q, all of which should be reviewed carefully.
The company has filed a form 8-K with the Securities and Exchange Commission that contains the press release announcing third quarter results.
The cool alright, allowing management may refer to all pricing earnings and operating earnings.
Earnings per share from operations, which are non-GAAP measures of financial results.
I realize operating earnings and earnings per share from all three operations consist of net earnings after the elimination of after tax realized gains or losses, and after tax unrealized gains or losses on equity securities.
Additionally, operating earnings and operating EPS exclude equity and earnings of Maui, Jim I'm related taxes due to the sale of our allies investment.
Alright life management believes these measures are useful in gauging core operating performance across reporting periods, but may not be comparable to other companies' definitions of operating earnings. The form 8-K contains a reconciliation between operating earnings and adding the form 8-K and press release are available at the company's website.
At Www Dot alright, like polka Dot com.
I'll now turn the conference over to our Allies, Chief investment Officer, and Treasurer, Mr. IRA Defense a lot. Please go ahead.
Thank you drew good morning, everyone.
Thanks for joining us to close out 2022, with Rois fourth quarter earnings call.
Participating with me are Craig Kliethermes, President and CEO , John <unk>, Chief operating officer.
Brian Chief Financial Officer, Todd will kick things off with our financial results for the quarter fragrance.
Greg and John will offer some commentary on current market conditions, our product portfolio and possibly reinsurance just to get there.
After our prepared remarks, we will take your questions I will close with some final thoughts.
Thanks, Eric Good morning, everyone.
Yesterday, we reported fourth quarter operating earnings of $1 53 per share.
With underwriting and investments contributed.
Overall, we posted a combined ratio of $82 one for the quarter and experienced continued topline growth, which was up 14% in the quarter.
On a full year basis gross premiums written increased 16% and we posted an 84 four combined ratio, marking our 27th consecutive year of underwriting profitability.
Investment income, that's nearly 60% in the quarter and closed the year up 25%.
The investment rates move higher as did our invested asset base driven largely by funds received from the sale of Maui Jim.
Operating cash flow was negative for the quarter.
We paid 160 billion in taxes on the gain from the sale of Maui Jim.
This amount is included as a reduction to operating cash flow.
The cash proceeds received from the sale are reflected as cash flow from investing in the third quarter.
Apart from this nuance operating cash flow was very similar to last year on both a quarter and year to date basis.
Realized losses of 3 million in the quarter were the result of adjustments to Maui, Jim's Creek close financials, which increased our equity earnings and correspondingly decreased our realized gains recorded on the sale.
Adjustments had no impact on net earnings.
Our equity securities changes unrealized gains and losses reflects a $34 million during the quarter as the market rallied close to a year.
As mentioned on prior calls large movements in equity prices between periods can have a significant impact on net earnings.
But you can see in the comparative quarterly and year to date.
Results.
Jim will talk more about the market and premium in a minute.
High level, all three segments experienced growth as we continued to benefit from favorable market conditions in most areas of our business.
From an underwriting income perspective, the quarters combined ratio was $82, one compared to $80 seven a year ago.
Loss ratio increased two six points.
Due to higher weather related losses and.
In the quarter, we incurred $8 million and storm losses.
$7 million in property and $1 million in casualty from a number of named storms.
The same time, we reduced our estimate of net losses from hurricane eaten by $2 million.
Which is now at the bottom of our initial range estimate.
Claim volume and severity has come in below initial expectations for the storm, which occurred very late in the third quarter.
From a prior year's perspective, we continue to benefit from favorable reserve development.
Casualty posted 14 million of favorable loss emergence with contributions from a number of product lines.
Property posted 4 million in favorable emergence due largely to reductions in reserves for prior year's storms.
In addition, we experienced improvements in the current year's underlying loss ratios for both property and casualty.
Year to date.
<unk> underlying loss ratio declined four points compared to last year due to lower attritional losses in both inland marine and commercial fire.
Casualties declined one point, maybe by a shift in mix of business mix and overall maintenance of persons.
<unk> expenses compared to last year, our quarterly expense ratio decreased 1.2 points to 43.
On a full year basis, our expense ratio declined 0.8 points to 39 five.
Well if results are reflective of improved leverage on our expense base.
Net premiums earned continued to grow.
Turning to investments total return performance improved and came in at two 3% during the fourth quarter.
Mine is 11, 5% for the year.
Without question it was a difficult year for the markets.
As a long term investor we are encouraged by stabilizing equities and higher bond yields which are accruing to investment income.
In the quarter, we continued to invest in high quality bonds with incremental cash flow and net and have yet to pivot toward riskier assets.
Apart from a short lived short term portfolio associated with the Maui Jim proceeds.
Yields continue to exceed 4%.
Moving to other investments, we recorded $7 million and invest the earnings in the quarter, Maui, Jim contributing $3 million and prime posting format.
The result for Maui was due to the true up of pre close financials as mentioned previously.
This adjustment had no impact on net earnings for the quarter as realized gains were reduced by an equal amount.
As noted in the press release, we've excluded earnings from Maui, Jim from operating earnings as such this adjustment did not affect those earnings either.
On a year to date basis invested earnings are down significantly.
Largely to transaction related expenses incurred by Maui, Jim from the company's sale.
As a reminder, we received $687 million in exchange for our shares in Maui, Jim in the third quarter.
Final proceeds remains subject to customary post closing working capital and other adjustments. We expect most of that adjustment process to conclude include during the first half of 2023.
Could modestly increase that somehow.
For 2022, our networks with realized gains.
The earnings taxes, and other sale related amounts reflect $434 million or $9 49 per share from the sale of our minority investments.
The combination of solid underwriting and investment results.
Book value per share to $25 89.
Up 25% from year end 2021 inclusive of dividends.
This growth benefited from a game or social gain associated with the sale of Maui, Jim a portion of which was returned to shareholders via a $7 per share special dividend in December .
All in all a very good quarter and strong finish to the year and with that I'll turn the call over to Craig.
Right.
Well, thank you, Eric and Todd Good morning, everyone.
As Todd mentioned, we finished the year with continued momentum reporting excellent underwriting results and double digit growth for the quarter.
2022 marks our 27th consecutive year of underwriting profit from both a net and gross basis.
Now benefited from back to back years of top line growth in excess of 15%.
And another year of rate increases in excess of underlying loss trends across the property and casualty segments.
So if the result of the very good returns that we were pleased to report to our shareholders.
A hard reboot in the reinsurance market continued multifaceted inflation and we can balance sheets should provide a stronger backbone to the industry's underwriting discipline and be supportive of more firming.
Assuming the competitive environment responds rationally, we anticipate rate increases and disruption that should create new opportunities for profitable growth.
We've already seen additional improvement in price terms and conditions in the property market at the end of 2022.
Over the last decade, we've been able to access low attaching earnings protection from high quality reinsurers at favorable prices.
At each reinsurance renewal, we evaluate the risk reward equation carefully.
Using our actuarial team and reinsurance brokers to inform decision making.
Given our conservative balance sheet diversified portfolio of specialty products and underlying profitability. We have always retain the optionality to take more net where the expected reinsurance ceded margins exceed a fair return.
We believe the cost of property reinsurance increased beyond that point at one one.
As a result, we adjusted our Retentions are co participations, accordingly, and are comfortable with our new reinsurance structure.
We remain optimistic about the expected underlying profitability of our portfolio we.
We believe we are in strong position to capitalize on the disruption that we expect to ensue.
I will turn it over to Jen, who will provide more detail on our quarter results and the reinsurance placements made on one more.
Thank you Craig from a product portfolio standpoint, the property segment led our top and bottom line for the quarter.
<unk> grew by 40%, while underwriting profit increased 61% with all major sub products contributing.
Premium in our E&S property book grew by 54%, including material rate increases for all coverages.
Hurricane rate increase was 29% for the quarter and has been accelerating throughout 2022.
We believe this trend will continue given the disorderly market conditions and are further supported by increased reinsurance costs.
More detail on our reinsurance renewals towards the end of Mcdonald's.
It's worth noting that our E&S property division achieved both a gross and net underwriting profit for the year, notwithstanding our second largest natural catastrophe loss in our history.
Our marine product group also exhibited strong growth with premium up 17%, including a 6% rate change for the quarter.
Marine is now a consistent contributor to our bottom line and this quarter was no exception.
They experienced very little loss activity in the quarter and their growth over time has helped to rightsize their expense ratio.
Finally, our Hawaii homeowners product grew premium by 17% due to a local underwriters efforts.
While the team is committed to providing responsive certain which has helped us win new accounts.
Overall, we are very pleased with the property segment 62 combined ratio for the quarter.
Turning to the surety segment premium was up 5% in the quarter, which was split between contract and commercial surety.
Contract surety premium continues to experience a lift from inflation and the cost of construction projects and increased public spending on infrastructure projects.
Also won some new accounts through our active marketing efforts.
Commercial surety experienced growth by expanding both existing and new account relationships.
Sure. They produced an underwriting profit with very little loss activity in the quarter.
We continue to carefully pursue growth opportunities.
Turning to the financial results of our principles closely given the evolving economic environment.
The casualty segments premium grew by 4% in the quarter. Despite some headwinds.
The public D&O market is under pressure.
Accident accounts with unreasonable changes in terms and conditions and provided the 9% rate decrease on a renewal.
The exit from cyber liability in reps and warranties business also affected the quarter over quarter premium comparison.
Excluding this premium reductions impacting our executive products group the casualty segment would have grown 10%.
Energy casualty is another area in which we are retrenching, specifically in excess layers.
We wrote almost $14 million of excess energy liability business in the 2022 calendar year that will be run off throughout 2023.
Our transportation business unit grew 13% in the fourth quarter, although we are seeing a lot of competition in the truck market.
Rates increased 8% in the quarter, driven by public and specialty commercial auto which are experiencing more stable market conditions.
Personal umbrella was up 16% as we continue to collaborate with our production partners to improve our processes and better meet customer needs.
Personal umbrella market continues to be disrupted as many of our competitors for standalone umbrella or significantly reduced their appetite or left the space altogether.
D&S casualty grew premium by 7% with more opportunities available outside of the competitive New York City construction market.
Rate increases in excess liability business were 8% for the quarter.
When looking at Bottomline results I also have to mention our professional services and small commercial group.
This product group is in a fairly stable environment and has been quietly growing.
Premium increased 9% for the quarter and they achieved a very good combined ratio.
The expertise we've developed in underwriting and claim handling over time continues to meet the needs of our customers.
Now I'll turn your attention to our reinsurance purchased on January 1st.
We ran at about two thirds of our reinsurance coverage this bump.
The reinsurance market changed or properly in the fourth quarter.
Casualty Treaty coverage renewed is expiring with rate change estimated at flat to up 15% on a risk adjusted basis, depending on the line of business.
We increased co participations marginally to balance the increase retention that I'll talk about in our property business.
I would describe the casualty reinsurance market as orderly compared to the property and catastrophe.
As our property per risk Treaty has been loss impacted over the last few years, we renewed it with an estimated 40% risk adjusted rate increase and increase the first dollar retention to $2 million.
We renewed our catastrophe treaty with a roughly 45% risk adjusted rate increase and an increase in first dollar retention of 25 to 50 on that.
It's similar to expiring, including renewing our expiring reinsurance treaty limits for wind coverage and adjusting our limit for earthquake to match our exposure.
We have the advantage of writing almost all critical cat risk on E&S paper, which means we can adjust rates and terms and conditions very quickly.
Throughout the latter half of 2022, we had already been tightening terms and conditions, we do think commission and increasing hard benchmark pricing on property cat business anticipating the increase in reinsurance costs.
We have been writing catastrophe insurance for about 40 years.
The last time, you meet materially increased our catastrophe retention was in 2000 and stuff.
Since that time, our property segments premium has grown over 140%.
Consolidated premium has more than doubled.
And shareholders' equity has grown over 50%.
Well, we maintained our retention because the economics made sense.
Our reinsurance strategy going forward will primarily focus on buying traditional reinsurance from financially secure partners instead.
Fort concurrent terms and have a high regard for our business model and disciplined underwriting.
We will supplement the support with additional capital sources to replace the reinsurers have become less relevant and commoditize their role.
We will continue to assess our reinsurance purchases to maintain a balanced and the risk reward economics.
Given the increase in cost of January one we anticipate further rate increases on our primary business and believe the E&S property market remains attractive.
With that I will turn the call back over to Craig.
Thank you, Jeff a great quarter and another year of differentiating underwriting results.
We believe we are adept risk managers the proof is ultimately determined by our results.
Each day, we seek better ways to be the most profitable diversified portfolio of specialized products and our industry, while meeting the risk transfer needs of our customers.
We do this by adapting and re optimizing our portfolio and weighing opportunities subject to the constraints, we control and those we operate within.
We will continue to serve our customers' needs with a focus on stability and consistency.
We'll work to grow our businesses that are profitable invest in new and existing businesses that provide opportunity and from time to time rehabilitate or exit the two products that maybe required.
Our ability to be agile and adapt to the market environment is reflected in the 27 consecutive years of underwriting profit we have delivered to shareholders.
The engine of our success is founded in the 1000 associate owners, who show up every day focused on the long term success of their company with a vested interest in delivering the best outcomes for our customers and our shareholders.
I wouldn't say all RLI associate owners for another tremendous effort in 2022 and.
And for taking care of our customers with their specialized knowledge and expertise.
Outstanding service stable appetite for risk transfer and deep relationships that are forged and reinforced over a long period of time.
Now I'll turn it back to the operator to open it up for questions.
Thank you the question and answer session will begin at this time, if youre using a speakerphone. Please pick up the handset before pressing any numbers did you have a question. Please press star one on your telephone keypad. If you wish to withdraw your question. Please press star two.
Question will be taken in the order that is received please standby for your first question.
Our first question today comes from Greg Peters from Raymond James Your line is my life.
Yes.
Well good morning, everyone. Thanks for the comments can.
Can we go back to the discussion on the reinsurance renewal for one 123.
Believe I'm the retention has moved up to $50 million can you give us a sense.
I know things have changed but how how that would have affected with the higher retention to reported cat loss on a net basis for 'twenty, two and 'twenty. One have you had that higher retention.
Okay.
I Havent looked after 'twenty. One this is Jeff by the way, but I can tell you for Ian.
We've tended to 25 million of additional net loss depending on.
Which underlying treaties refrigerated and so that's a rough estimate.
The other thing Greg to note there and I think you would think we could just put it put a square number to it but as Jim mentioned, we range. It because you don't know how some of those property per risk Treaty will play in.
The other thing to really think about from a rate increase that we have gotten and are continuing to get theres a lot more dollars in that in that property bucket.
But that play well as far as the total total underwriting results there from from this segment.
Okay.
I understand that makes sense.
Can we pivot just.
Given given the reserve development I know you commented about prior development.
Hum.
Your view on accident year loss ratio, so I'm just curious.
Some of the numbers you reported sort of counterintuitive just because of all the inflationary pressures we've heard about what's your when you think about you know.
Pacifically the casualty and property segment, what's your view on sort of lap loss pick accident loss pick assumptions and 123 versus where they were in 'twenty two et cetera.
As Todd Greg I think.
The items, you mentioned weather, whether we want to call it inflation or social inflation, what you've read about out there.
That certainly influences our actuarial view I think you'll see it really in 'twenty, two and normally that youre going to see it in any year I think we've talked about that Craig mentioned too from a loss cost trend standpoint, we do believe it is.
Adequate in total and it really in most areas.
I know, we've talked before as well that.
Our actuaries are going to weigh all of that and they're gonna typically take the longer term trends, but they are influenced in periods shorter periods of uncertainty or inflation. Other factors over short term trends are a bit higher that's going to influence the initial booking ratio.
It'll it could also influence how long we hold on to those initial picks.
And potentially extend loss reporting periods. So all of those things factor into to.
To the actuarial view, whether it be on on casualty.
All of our other segments. So it isn't influenced that.
Okay. Thanks for that color I guess.
And just as a follow up my last my another question that would be my last question would just.
Now that your property Cat program has renewed.
Is it changing sort of your strategy as it relates to growing your property business or does it reinforce the strategy you have in place or.
How does this how does the reinsurance brokerage increased retentions change sort of the matrix of ROI as we think about 'twenty three 'twenty four that's my last question.
Sure. Thanks, Greg This is Jim I would say that our catastrophe strategy is constantly evolving. So yeah things are in that space are happening all the time, whether there are events or no events can impact how you're approaching that segment and the various costs.
That business is going to change over time as well. So this latest chapter.
We are revisiting and every visit and throughout 2022 as we anticipated some change in the reinsurance market and you know Ian of course provided something to talk about and so you know that also has us looking at what we need to do.
Throughout 2022 we have been increasing rates throughout the year and we anticipate that that trend is likely to continue.
He founded on terms and conditions watching deductible.
Coinsurance things of that nature to make sure that we are properly covering exposure, but also sharing the loss with our insurers where that makes sense, depending on all of the factors that drive the outcome. So you know part of it is premium but part of it is coverage as well. So you have to see how all that kind of comes together.
So going forward, it's going to be similar to before where we're going to be very active if an event happens.
Helping our insurers during that time the boots on the ground, which is what we've emphasized a lot in 2022 that gives us really the best sense of you know what's needed in that market and how we need to continue to evolve that's really the best input is from our insurers and I'll start producers to some extent as well so I would say, we're where we're not intending to.
Gross exposure significantly in 2023, we're looking more to optimize what we have on the books.
And so that's reflected in the fact that we did not buy additional reinsurance limit.
On January 1st.
So we'll work within the capacity we have at this point in time and continue.
Continue to have really attractive returns hopefully on that portfolio.
And so it makes sense. Thank you.
Our next question today comes from Casey Alexander from Compass Point. Your line is now open.
Hi, Good morning, and thank you for taking my questions I have two questions regarding the property one is.
With the increased rates, but also the increased retention is it reasonable to think of more.
Seasonal volatility of your earnings stream with higher margins and non cat quarters, and obviously, a little more impact in cat quarters, and then as a follow up to that question, but.
But we've heard.
Hell of potentially more capital coming back to the market in the June reinsurance renewal period.
If some of that seems reasonable does that provide you an opportunity at the June renewal period to add on some additional coverage that might cover some of the increased retention that you've taken down at this point in time.
So it takes it's Greg I'm going to jump in here.
I think jen fully capable to answer the question but.
I mean, certainly there'll be a little more volatility I mean, although I would argue there's a lot more premium that's going to be that's going to offset some of that volatility. So we have a lot more premium in the pool.
So from a ratio standpoint, I'm not sure that you're going to create a lot more volatility from seasonal standpoint, but certainly there will be more by raising your retention.
To answer your second question absolutely Arena.
Would we be open to.
Adapting our strategy as Jim says it changes every day the depth to the constraints that we have if there's opportunity.
For capital to reenter the market or to come back to the market and realize that the rates were a little bit above what we believe were fair certainly we would take advantage of opportunity. We think there's going to be plenty of opportunity out there. So as Jen mentioned, we optimize their portfolio and we're going to have I mean, we're gonna have a lot of options in regards to what we wanted to.
I don't want to right now we've already seen that by the way.
Last couple of months.
2022, we expect to continue to see that.
And if you recall last year you know.
To your point I mean, we added capacity during the year as we saw there was opportunity if we continue to see the opportunity.
And acquire that capital at a reasonable price, we would certainly take advantage of it.
Yeah, I'll just add if I can if you.
Think about volatility and we did retain a little bit more on the casualty side too and we'll continue to evaluate that through the year as we renew other reinsurance coverage.
Point being we have a very diverse product portfolio.
And while a lot of our products behave very well on a consistent basis. You know there are some that they'll have on this one quarter or another and the diversity of our portfolio steps in.
It is very good result, overall, so if you look at our results over the 27 years and there are segments that have had an underwriting loss of one of those years, but the other segments stepped up and provided us a nice underwriting profit on a gross basis, even before the spin. So I think you know that diverse portfolio is really a big plus for us.
I would point to that a little bit to answer your question.
Mhm.
Alright, Thank you secondly.
A fairly large increase in your NII and I heard your comment that some of that may have come from.
Is that thing short term proceeds from Maui Jim.
Do you do you have a number that is more of a reflective of a recurring NII right. I mean, how much should we strip out of that 28 million that was sort of bonus money that came before you paid out the dividend and the taxes.
Yeah, Hey, Hey, Casey, it's Aaron I'll take that one yeah.
Yeah, we Fortunately short term rates were higher than they've been in a long period over a long period of time and.
Cash it actually has a return on it these days.
Which did help us in the quarter.
He represents about $4 million of kind of bonus.
Investment income in the quarter.
From from those short term proceeds that were invested very quickly after we receive them.
930.
Okay, great. Thank you very much I appreciate your help.
Thanks Kristen.
Our next question today comes from May of shows from K P. W. Your line is now open.
Great. Thanks, Good morning, one quick question and one maybe bigger picture.
On the quick side, Todd if I didn't mishear, you talked about adjusting your accident your extra casualty and property, but not sturdy which had a phenomenal underlying loss ratio did I just miss here or is there something else going on in charity.
There's nothing else going on there I mean, I think we're being cautious there certainly.
Given the economy and that type of thing I mentioned, specifically property.
Does it was larger on the current accident year, if you will the four points and casually just because it is a much bigger book and certainly certainly ways weighs in on things, but nothing unique.
On the surety side now.
Okay fair enough.
And then I'm thinking about Jane's comments about that.
Adding sort of the overall exposure base and property and I'm wondering.
Whether or when you look back the.
A portion of excess capital that you retained from the Maui, Jim proceeds looking back because that seemed like it was the right about now the theater clarity on reinsurance.
Okay.
Yeah.
Sorry. This is John again, with our diverse portfolio to kind of look at the entire portfolio as we evaluate our capital adequacy and I would say given the growth of our portfolio over the last few years in particular.
About what drives the need for capital that additional capital really does support the current and some some near term growth that we think could happen in the teachers.
And maybe I'll just add.
Okay.
Retained out of balance sheet capital gave us the flexibility.
And the options that we've talked about is increasing co participations and retentions.
You gave us some <unk>.
<unk> ability in regards to what we wanted to do I think we didn't want to be totally at the mercy of.
The reinsurance market.
Kevin.
The abrupt change net appetite Brazil.
So I don't know I don't know, what we have to use all that but it gave us the flexibility so.
Yeah.
No that's perfect. Thank you so much really appreciate it.
Our next question comes from Mark Dwelle from RBC capital markets. Your line is open.
Yes, good morning.
I guess continuing on the reinsurance theme as you correctly per grenache indicated.
When you think about trying to pass along to your 40% rate increase to customers on on renewal business on property in cat exposed business.
What does that amount to sort of a 20 or 25% rate increase that your customers would need to take in order to match the increase that you've paid.
Yeah.
Oh. So this is Jim I would say we've already built in some rate increase throughout 2022, anticipating this costume and I'd like to take a moment to talk about.
Our customers. So as we look at you know our renewal process yeah, we can.
Call. It 30 to 60 days out so that we can help our insurance to manage their business. So they've got a lot of interest costs already begun increased employee costs. They have.
Some cases increased gas and transportation costs and all kinds of costs that are going out. We're one component of their business and we try to help manage you know their ability to stay in business by not taking too drastic of action.
In contrast, I would say you know the reinsurance market after the little more quickly on there.
Angel, both you know attempt to change in coverage as well as cost and so it is difficult to turn on a dime and pass that along nor is it really something you wanted to do when you're trying to be very consistent in the primary market.
We will continue to push on each renewal what makes sense I mean, we are individually underwriting this business but.
And particularly in the state of Florida. For example, so as the business comes in you know we're looking at all the details of that exposure and then location and the various dynamics in that area to understand you know what what has changed from the prior year and yes, our costs have gone up so yes, you will increase costs to some extent.
Well, we're going to try to manage it over time.
So that our insurers and continues to be an issue and that's you know the danger of this abrupt change is that the insurance marketplace actually decreases because now people attempt to buy less coverage or less limit and once they started doing that that's never going to come back and that's a shame for the industry. Because then you have the opportunity.
The decrease in so far.
Partnership with our brokers, who are accepting a little bit less commission.
Able to provide that kind of change in your coverage in terms, a little more gracefully orange theory.
I mean, I would just add to that that that was actually going to be adjustments to it.
Well I was just going to add more.
They just.
In addition, we did up after updating our benchmark pricing.
For the additional reinsurance costs.
I mean, we still believe that our business is priced above our benchmark pricing.
At a targeted return doesn't mean, we're not going to try to get more rate and pass them along but we also want people to be comfortable that we believe current market pricing is still in excess of what we think.
You know what what what a benchmark pricing is so.
A lot more of the market and they go out.
Definitely helpful.
So.
Okay.
I mean, that's that's helpful and I at the Jim's comment I mean, it was actually going to sort of be my next question was are you seeing any evidence that customers are basically doing what you did in raising retentions and lowering changing their limits strategy.
Such that I mean, I know from your perspective, you might be getting whatever 20% rate increase but in fact, the actual amount of premium growth would be considerably smaller than that.
Are you seeing that behavior, yet or that's something that we would anticipate over 23.
Yeah, Mark we are seeing that particularly in Florida, where we're insurers are buying a full coverage for their fire exposure, but not for the wind exposure them and they have to work with their banks or their mortgage providers to make sure that that all passes muster, but that is something that we're witnessing starting to creep into this environment.
Yeah.
It's definitely consistent with some comments about one of the insurance brokers made earlier this week.
Okay.
Some of you were adding Craig I'm sorry.
Obviously as deductibles are certainly increasing percentage basis or something I mean, the minimum deductibles are increasing pretty much across the market.
And stuff.
Okay.
Thanks for all that.
You had mentioned in the comments.
That you were pulling back from some of the cyber liability business.
Business.
Is that something you can quantify in terms of how many dollars of annual premium run rate that had been.
Just really two run rate what the outlook would be for the upcoming year.
Sure, but we actually exited that business in the during the fourth quarter last year. So this was the year of one offs, which we've just completed I'm sorry large account side.
Yeah no problem.
[laughter] I had that confused no my mistake.
And then changing gears over on the investment side.
Right.
I almost feel obliged to ask Craig what he's going to do with the Maui, Jim proceeds, even though what I already know the answer because I have been asking for a year now but.
Yes, that's what I am going to ask is are you still considering or evaluating other equity investees opportunities.
Net.
Youre content with just the prime business and it's an opportunity falls into your lap you'll look at it but youre not really seeking anything there.
Right.
I'll say something maybe.
And enjoying it.
I mean, certainly we're always looking for opportunities.
Everyday we look for opportunities so we find a good opportunity for an investment.
You know, we would we would take advantage of that so.
I'll only add mark old habits die hard I guess and asking those questions around margin proceed.
You know we are investing every day.
General kind of assets.
Of the company and the Maui Jim.
Situation going all the way back to the mid nineties with it very unique.
The situation for us it's definitely so.
We tend to look a lot more things as Craig mentioned, a little closer to home I'll call them in terms of in our space are around our space.
But we do look a lot.
Okay. Thank.
Okay.
Our next question comes from that much policy from JMP. Your line is now open.
Hey, Thanks, good morning.
Apologies in advance for another reinsurance question, but can you help us.
Yeah.
Can you help us just with maybe the question is kind of how does the dollar spend change on the property side and I know rates went up 40% to 45% across the two treaties, but obviously that you are retaining a lot more of the most expensive layers. So as we think about kind of gross net retention like what sort of order of magnitude of dollars. If you can buy the <unk>.
Dollar cent change there.
Okay.
Yes.
Well, let's see this is Jim I would say are you know you know it depends of course ultimately on what our rate changes for 2023.
So we're not anticipating a material change given we expect to see the rate increases will continue to some extent, but there is some additional cost obviously, so yeah. It might be a point or two of retention, that's lower but it's not going to be significant.
Yeah.
Okay, Great very helpful and Craig Best of luck to you Chase this weekend.
Yes.
Well. Thank you we'll take all the help we can get he hasn't chiefs desk all in right now because all the help I can get.
Okay.
Thanks.
Yeah.
There are no further questions at this time, so I would turn the conference back over to Mr. Craig Kliethermes for some closing remarks.
Sure. Thank you all for joining us.
Again, we think it was a good quarter good year.
We're just gonna get back to work and talk to you next quarter, we're just going to keep doing what we do.
Thank you.
Okay.
Ladies and gentlemen, if you wish to access the replay for this call you may need do say by dialing 18668139403 with a 90 627187. This concludes our conference for today. Thank you all for participating and have a nice day all parties may now disk.
Connect.