Q2 2023 Selective Insurance Group Inc Earnings Call
Senior Vice President Investor Relations and Treasurer, Brad Wilson, you may begin.
Yeah.
Thanks, and good morning, where simulcast on this call on our website selective dot com and a replay will be available until September 1st we.
We used three measures to discuss our results and business operations.
First we use GAAP financial measures reported in our annual quarterly and current reports filed with the SEC.
Second we use non-GAAP operating measures, which we believe make it easier for investors to evaluate our insurance business.
non-GAAP operating income is net income available to common stockholders, excluding the after tax impact of net realized gains or losses on investments and unrealized gains or losses on equity securities.
non-GAAP operating return on common equity is non-GAAP operating income divided by non divided by average common stockholders' equity.
Adjusted book value for common share differs from book value per common share by the exclusion of total after tax unrealized gains and losses on investments included in accumulated other comprehensive loss or income.
GAAP reconciliations to any referenced non-GAAP financial measures are in our supplemental investor package found on the investors page of our website.
Third we make statements and projections about our future performance. These are forward looking statements under the private Securities Litigation Reform Act of $19 95.
They're not guarantees of future performance and are subject to risks and uncertainties.
We discuss these risks and uncertainties in detail in our annual quarterly and current reports filed with the SEC.
We undertake no obligation to update or revise any forward looking statement.
Now I will turn the call over to John marshy owning our chairman of the board President and Chief Executive Officer, who will be followed by Mark followed by Mark Wilcox, Our executive Vice President Chief Financial Officer.
Thank you Brad good morning, and thank you for joining us in the second quarter property and casualty industry results were impacted by elevated catastrophe losses.
We were no exception and these losses affect that all three of our underwriting segments, driven mainly by storms at our Midwest and East coast footprint States.
However, with our strong balance sheet sophisticated underwriting capabilities and robust risk management selective is well positioned to navigate the industry is elevated and uncertain loss trends.
In the first half of the year, despite catastrophe losses being about three points above expected levels. Our operating ROE was 12, 2% slightly above our 12% target.
In the quarter net premiums written growth was an excellent 17%.
Our distribution relationships and unique field based model allowed us to deliver strong new business production, while effectively managing our renewal book.
Our consistent approach to underwriting and pricing throughout market cycles as one of the primary reasons, our distribution partners make us our carrier of choice.
Our strong written premium growth was attributable to new business premiums, which were up 33% and renewal premium is driven by an overall renewal pure price change of six 4%.
Strong exposure growth and generally stable retentions and.
In commercial lines, our flagship segment, new business was up 23%.
Renewal rate was six 7% and exposure growth was four 6%.
Across new and renewal commercialize exposure counts were up a manageable, 3% highlighting the impact of rate and exposure.
Personalized and E&S also turned in excellent growth of 32% and 20% respectively.
Our proven disciplined execution has positioned us well and our underlying combined ratio was 90% in a quarter and 95% year to date.
There are three main reasons for the improved underlying combined ratio.
Lower non catastrophe property losses year to date.
<unk> benefit from renewal pure rate.
And a lower expense ratio due to expense discipline and top line growth.
Most importantly, our strong investment income and underlying profitability allowed us to generate an operating ROE in line with our target for the first half of the year and maintain our full year combined ratio guidance, despite increasing our catastrophe loss assumption the six points from four five points.
Whether it's inherently volatile, but we have robust risk management, including a prudent reinsurance program strong aggregation management and a predominant underwriting focus on low to medium hazard risks are.
Our long term combined ratio target of 95 is embedded in our pricing plans. Consequently, we should be able to generate roes at or above our 12% target given elevated interest rates and a significant ROE contribution from investments assuming catastrophe losses are at a normalized level.
With our strong capital position and underlying profitability, we continue to pursue attractive growth opportunities, including increasing agency market share and share of wallet in existing states <unk>.
Expansion of excess and surplus lines capabilities.
Transitioning to our mass affluent portfolio in personal lines and targeted geographic expansion.
Geographic expansion is a lower risk way for us to deploy capital.
We have a repeatable process and successful approach that is allowing us to accelerate this critical organic growth opportunity.
Since 2017, we've added eight states to our standard commercial lines footprint.
These states contributed two points of premium growth in the first half of 'twenty three.
We plan to introduce five new states to our standard commercial lines footprint over the next two to three years.
West Virginia in May and are on track for early 2024, followed by targeted state expansion in the western half of the country. Ultimately we plan to raise standard commercial lines and most of the contiguous United States. This.
This expansion should continue to drive topline growth and further diversify our property book.
Our ability to underwrite at a granular level enabled by sophisticated tools best in class talent strong distribution partner relationships and our customer experience focus differentiate selective.
Throughout pricing cycles over the past dozen years, we consistently achieved renewal pure rate equal to or exceeding expected loss trends.
At the same time, our renewal retention levels increased.
We continue to strengthen our portfolio by achieving the necessary renewal pure price and exposure changes through our standard commercial lines property and auto books.
During the quarter property renewal pure rate was up 11, 7% with increased exposure of five 8%, resulting in total renewal premium increase of 18, 2%.
In commercial auto renewal pure rate was nine 5% with increased exposure of four 3%, resulting in a total renewal premium increase of 14, 3%.
Excess and surplus lines continued to perform well with 20% premium growth in the quarter and an excellent underlying combined ratio.
<unk> was negatively impacted by elevated catastrophe losses in the quarter, which we view as normal quarterly variability, resulting in breakeven underwriting results.
However, our strong new and renewal rates and recent underwriting improvements position us well to take advantage of opportunities in the E&S market and continue our profitable growth strategy in this segment.
It was a difficult personal lines quarter with an elevated combined ratio driven by catastrophe losses and pressure on personal auto margins.
Personal lines net premiums written grew 32% off a small base.
Profitability in this segment is not where it needs to be we are executing a detailed plan as we repositioned the book, taking the necessary steps to improve profitability.
That said it will take time to reach targeted levels of profitability.
As we've discussed in recent quarters, we are transitioning to a mass affluent customer base we.
We see positive early signs that our product and service are hitting the mark as our distribution partners are giving us positive feedback and growing their book with us in home our target customer base represents approximately half of our in force premium.
We believe that focusing on are less price sensitive customer.
<unk> coverage and service better aligns our organizational capabilities with a market, where we believe we can succeed over the long term.
We are focused on increasing rate to address profitability challenges within this segment.
New business rate, which is more responsive to file changes increased 8% in the quarter compared to 5% in the first quarter.
Directionally, we expect a greater number of rate filings with more meaningful increases in the third and fourth quarters.
Further accelerating new and renewal pricing.
At the same time, we're taking underwriting actions to improve terms and conditions and restrict new business in areas outside our target market.
Overall selective is operating from a position of strength.
We have the capital to support growth well established and differentiated relationships with our distribution partners and the organizational capability to drive disciplined execution to enhance profitability.
And our market disrupted by underwriting appetite changes and increased frequency and severity of weather related and liability losses, we continue to be a stable carrier for our distribution partners.
In early July we published our third sustainability report.
As the industry experiences heightened frequency and severity trends the report highlights our robust risk management processes and enhance our organization sustainability.
Our strategy includes bringing value to our employees customers and distribution partners, which drives returns for our shareholders.
Intimately our people and the relationships they foster our most enduring competitive advantage and drive the superior financial performance, we've generated in recent years.
I am confident we have the strategy and execution oriented culture to continue delivering profitable growth.
With that I will turn the call over to Mark to review, our financial performance in more detail.
Thank you John and good morning, I will focus my comments on providing some more detail on our underwriting and investment performance capital position and our full year guidance before doing so I'd like to reiterate John's opening point, despite elevated catastrophe losses in the first half of 2023, we have delivered a 12, 2% non-GAAP out.
Operating Roe.
And we are on track to exceed 12% ROE target this year.
While the second quarter underwriting result was not where we want it to be a strong premium growth underlying underwriting profitability and higher net investment income.
<unk> us well to achieve our full year targets as we move into the second half of the year.
As pre announced on July 24th we reported 92 of fully diluted EPS in the second quarter and 99 of non-GAAP operating EPS.
Year to date fully diluted EPS was $2 41.
Up 61% compared to the prior year period, our non-GAAP operating EPS was $2 44 down 5%.
Our performance this quarter was driven by significant growth in after tax net investment income we have been actively managing our fixed income portfolio.
And this higher interest rate environment, putting cash flow to work at higher new money rates meaningfully increasing the pretax book yield of our fixed income portfolio and as expected that stable core investment income is benefiting our results. Despite essentially breakeven underwriting results. This quarter, we delivered a nine 8% operating Roe.
Okay.
For the quarter, our consolidated combined ratio was 102% due to an active catastrophe loss quarter.
19 individual PCF events impacting our footprint, primarily in the Midwest and east coast contributing to $100 million of net catastrophe losses were 10 six points on our combined ratio.
This was almost double our expectations no single storm is large enough to attached to our catastrophe reinsurance treaty, which has a $60 million retention the largest events in the quarter resulted in $13 million of ultimate net losses. So clearly it was a frequency driven cat quarter at least for us.
Net favorable prior year Casualty reserve development was $3 5 million or 0.4 points on the combined ratio.
Favorable reserve development included $7 5 million and favorable claims emergence in workers' compensation, partially offset by $4 billion of adverse development in personal auto.
With elevated inflation in the economy and higher loss cost for the industry. We continue our practice of full reserve reviews, each quarter to stay on top of emerging trends as a reminder, from our February call. We have assumed loss cost of six 5% for 2023, which includes approximately 7% and property and approximately 6% in <unk>.
Casualty.
The underlying combined ratio was a profitable 90% for the quarter and was one four points lower than the prior year period.
One point of this improvement came from the expense ratio, which is benefiting from a strong premium growth as well as saw continued expense discipline over the medium and longer term, we remain focused on lowering our expense ratio, while ensuring we invest appropriately to support our strategic objectives.
The remaining improvement in the underlying combined ratio came from the current accident year loss ratio included within that a non cap property losses of 16 seven points in line with $16 six points in the second quarter of 2022.
Year to date, the underlying combined ratio was a solid 95% one seven points lower than we reported in the first half of 2022.
Three points of the improvement came from the expense ratio, which was 32% year to date compared to 32, 3% in the same period last year the.
The remaining one four points as from an improved underlying loss ratio driven in part by non cat property losses, which decreased <unk> nine points on.
Underlying casualty loss ratios remain on the plan for the year with.
With the exception of post, Florida, which we have increased.
We expect the personal auto loss ratio to remain elevated for the remainder of the year.
Our updated ex cat combined ratio guidance of 95% for the year implies on an underlying combined ratio of approximately 91% for 2023.
Compared to our original expectations of 92%. This improved outlook is primarily due to lower than expected non cat property losses, and the better than expected expense ratio. We have delivered for the first half of the year.
As it relates to our insurance segments I'd like to highlight the solid underwriting performance in standard commercial lines with a 97, 1% combined ratio. Despite eight two points of cat losses, and an underlying combined ratio of 89, 9% one seven points improved from the prior year period.
Our E&S segment experienced a 107 combined ratio two to 17 17 six points of cat losses. The underlying combined ratio of 83, 1% was strong and almost 10 full percentage points better than the prior year period.
It was clearly a disappointing quarter in personal lines, but underwriting profitability perspective, with a $126 five combined ratio driven.
Driven by 24, three points of cat losses, non cat property losses, running six two points higher than last year.
<unk> six points of prior year Reserve development and continued pressure on the current accident year and put a slowdown.
Returning to investments our portfolio remains very well positioned as of June 30th 93% of the portfolio was in fixed income and short term investments with an average credit rating of double a minus and an effective duration of four years risk assets were approximately nine 8% of our portfolio as of June 30 in line with.
Last quarter.
We have taken advantage of high yields and finding opportunities to improve the credit quality and liquidity of the portfolio, while remaining underweight risk assets.
We have also been decreasing our allocation to floating rate securities, which now represent approximately eight 2% of our fixed income portfolio.
Down from 10% at year end and 17% at the peak as.
As we have pared back floaters, we have locked in higher new money rates for longer while managing our overall duration and credit quality targets. This will provide more stability in our forward investment ROE contribution over the next few years.
We put $537 million of new money to work in the quarter.
At an average pretax yield of five 9% improving our book yield by 13 basis points to 446%. This adds to the approximately 20 basis point increase in the first quarter and 115 basis points last year.
At this point, unless we see a move higher in interest rates or widening of credit spreads.
We expect the quarterly increases in book yield we've enjoyed over the last six quarters to start tapering off a bit although at a strong level relative to recent years.
After tax net investment income for the quarter was $77 8 million up 37% from a year ago, driven by core fixed income.
Alternative investments, which are reported on a one quarter lag generated $9 million of after tax income up from $7 3 million from a year ago.
After tax yield on the total portfolio was three 9% for the second quarter translating to a healthy 12 six points of investment our contribution.
Our capital position remains extremely strong with $2 7 billion of GAAP equity and $2 5 billion of statutory capital and surplus as of quarter end book value per share is up five 8%. This year, a seven 4% adjusted for dividends operating cash flow remained strong through June 30th improving to 21.
Turning to $294 million compared to the first six months of 2022.
Our parent company's cash and investment position totaled $480 million at June 30th above our long term target of $180 million net premiums written to surplus increased to 152 times.
Due to our strong premium growth.
The capital was stable at 15, 9%, we have significant financial flexibility to support our strong growth and execute on our strategic initiatives we.
We did not repurchase any shares during the quarter and we have $84 2 million of remaining capacity under our share repurchase authorization.
We expect to take an opportunistic approach to share repurchases, given our strong growth and attractive options to deploy capital towards additional organic growth within our core insurance operations.
We successfully completed the renewals of our July one 2023 excess of loss treaties, which kind of a standard commercial lines standard personal lines and E&S.
Casualty excess of loss treaty with substantially the same renewed with substantially the same structure as the expiring treaty, providing $88 million of protection above a $2 million retention for all of our casualty business deposit premium increased $28 3 million or 33%.
Reflecting the strong growth in our business driven by pure renewal rate increases exposure growth that new business, coupled with a very modest reinsurance rate increase on subject premium and additional reinstatement premium coverage in the first three layers.
For our property excess of loss Treaty, we increase the retention on the first layer from $3 million to $5 million due to strong growth in our property portfolio and the cost of keeping the retention the same.
Thirdly, the portfolio resulted in the strong expected economic benefit from increasing the retention.
Although it will resolve and marginally more quarterly volatility in our property results the attachment points that limits for the subsequent lines remain the same with $65 million of coverage overall deposit premium on the trading decreased $5 6 million or 11%, reflecting the increased first layer retention, partially offset by risk.
Adjusted rate increase and grow and exposure.
I'll conclude with an update on our guidance for 2023, we increased our expectations for net catastrophe losses, while maintaining other full year expectations as follows a GAAP combined ratio of 96, 5%, including six points of catastrophe losses up from four five points previously.
<unk> assumes no additional prior accident year reserve development after tax net investment income of 300 million, including $30 million in after tax gains from alternative investments and.
And overall effective tax rate of approximately 21%, which includes an effective tax rate of 20% for net investment income and 21% for all other items and weighted average shares of $61 million on a diluted basis.
It does not reflect any share repurchases, we may make under our authorization.
With that I'll ask the operator to open the call for questions.
Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star and then the number one <unk>.
Record your name and your company named Windstorm called to cancel you May Press Star and then get them routine.
Our first question comes from the line of Paul Newsome from Piper Sandler Your line is now open.
Good morning, Thanks for the call just maybe a little bit more thoughts on the proper.
Property.
Underlying demand as well as.
Is it seems to be going a little bit different direction there are folks.
Eight.
And I would've thought they would be fairly significant clean cost inflation.
On an underlying basis in those current businesses, maybe there's a business mix difference from others or something along those lines, where you've done something different to them.
To give you those.
Good results.
Yeah Hello. Good morning. This is John I'll start and end market certainly add some additional commentary. So I think if we're focused on non cap property and the contribution to better than expected underlying results I think thats youre picking picking it up correctly and it's really commercial property standard commercial property.
E&S property that we're seeing run better than expected on both a frequency and severity basis, whereas with regard to auto physical damage commercials I would call. It generally in line with expected.
Whereas personal auto Phys dam at home are running a little above expected or in the case of home more than a little bit above expected now I remember last year. When we responded to what we saw as higher than expected non cat property losses, we had essentially incorporated that.
22 run rate into our expectation for 2023 number one number two is that was the point at which especially with regard to the to the commercial property lines and the auto physical damage line, we really started to move rates meaningfully higher. So if you look at what we've been achieving in terms of commercial property and E&S property.
Over the last several quarters plus the exposure increases so just and I think this was in the prepared commentary and commercial property last year all in rate and exposure was about 12% for the full year. This year. It was 17, 5% in Q1 18, 2% in Q2, So I think that's it.
Combination of planning based on a run rate we saw in 2022, and then that combination of rate plus exposure and I would say the settling out of some of the economic inflationary pressures all combining to produce a better than expected result, but that's primarily driven by the property lines in commercial and E&S.
<unk>.
And I guess, the other piece would be the expense ratio.
<unk> two.
To be managed well.
Any thoughts on sort of Directionally is that just holding it where it is today or are there other pieces that are changing there that we can think about.
Yes, so I think clearly part of the expense ratio improvement that Youre seeing is a combination of discipline on managing fixed expenses, but really seeing really strong topline growth and to the extend we continue to see strong opportunities for growth, especially in our in our profitable segue.
<unk> of standard commercial and E&S that continues to give us the potential for some additional gains of economies of scale moving forward now that said, we continue to make investments not just in technology, but also an ongoing geographic expansion that we think will give us future growth potentials. So we're not we're not just going to squeeze.
<unk>.
That would not benefit us long term, but that the benefit of growth that we're seeing.
The more controlled approach to fixed expenses as a big part of the driver.
Fantastic I appreciate I appreciate the help thank you very much.
Paul.
Thank you. Our next question comes from the line of James Lee from <unk>. Your line is now open.
Hi, Good morning, guys. Thank you for taking my question.
Just wondering if you can provide any details or data.
Turning to civic before the poverty coverage as small competitors pull back.
Directionally it seems like a great opportunity to enhance.
Distribution relationships.
Ed.
Damian.
Is there any way to quantify that.
Yes, so I think from our perspective and this is this is a long part of our history.
We value ourselves as a and our agents value us as a consistent partner consistent underwriting partner, we write business on a package basis and that includes a certain portion of that being property.
And when we think about growing we're not just looking to chase dislocated markets. We're looking to maximize growth in segments of the market that we have a lot of experience and a proven track record and we.
We continue to see opportunities to acquire high quality accounts and thats driving our new business, but from a mix perspective that mix by line in that mixed by industry classification continues to be relatively consistent but what you are seeing is youre seeing a little bit more growth in the property line.
That same exposure change and price change that.
When you on the renewal portfolio is also impacting the average property line size on the new business that we're writing so I guess, a long way of saying, we're a consistent underwriter, we underwrite and our growth is coming from segments of the market that we're comfortable and have a long history in and that will continue to be our philosophy and with the growth were.
Seeing in our existing footprint with our existing agency partners and the ongoing benefit of geographic expansion, which will continue over the next several years. There are really strong growth opportunities ahead for us and we're going to stick to our knitting from an underwriting perspective.
Got it. Thank you my second question is on.
Al will cause conversation.
Our reported loss ratio for <unk>.
Comp is.
<unk> bye.
Around 40 basis points.
Is any of that.
True up of the <unk>.
Q1 results.
Can't provide any more details on the drivers behind that.
On an underlying basis for workers comp.
The quarter over quarter is its pretty flat you know you had a little bit more favorable emergence on AR in the first quarter and on a full year basis than you had in Q2, but if you think about that on a I'll call. It an accident year basis, just strip out the favorable development, it's running in the mid 94 kind of range.
And as we've talked about the pricing in that line has been relatively flattish slightly down it's actually down about 1% through.
Through the first six months of the year, but we continue to see.
Reasonably favorable loss trends.
I would say frequencies have been have kind of leveled out now, but medical inflation. When you look at the component parts of the CPI that impact workers' comp continue to be in the mid 3% range and again its hospital services physician services are the two primary drivers of workers' comp medical costs, and then a little bit of pharma.
<unk> quite if you blend those together that medical inflationary rate is still running below wage inflation, which is driving the year over year premium changed from an exposure basis.
Okay got it. Thank you so much for the color.
Thank you for the questions.
Thank you. Our next question comes from the line of Greg Carter from Bank of America. Your line is now open.
Hi, everyone. Good morning, good morning, good morning, good morning.
I guess looking at the.
Pure renewal rate and in standard commercial.
Just a little bit quarter over quarter.
Seen across the industry. Some peers have reported some pretty sharp acceleration. So I was just curious if that.
A matter of getting ahead of the rate environment or sorry, the lost cost environment ahead of peers or if that's more of a mix impact given maybe at higher skewed towards casualty versus property lines.
And Joseph we should except if we should expect that to them to accelerate for the rest of the year.
So I would say.
Point out I'll call it relatively flattish.
Not necessarily call it decelerating in any way, but I would I would suggest that we saw the acceleration from Q4 2020 to Q1 from.
From going from the mid fives to 7% on a pure renewal rate basis, and I think that's really the point, we would make in that startup corresponds with our updated view of loss trends, which we took the six 5% embedded in our in our 'twenty three.
Loss ratios.
That's been a consistent story of if I were to look line by line.
From Q1 to Q2, there is no meaningful movement in either direction, it's tenths of a point here and there.
Get us to that six seven we think overall looking forward the pricing environment in standard commercial remains constructive and I know a lot of companies like to report the rate excluding workers' comp. So I'll do it was seven 9% on a year to date basis seven seven in the quarter and that compares to our <unk>.
Loss trends on casualty, excluding comp of about six eight so there is a favorable gap there we continue to monitor loss trends like we always do from both an economic and a social inflationary perspective, both frequency and severity and react accordingly, and adjust our pricing plan accordingly, but I would say overall the market remains constructive.
Our rate remains consistently strong and our retentions continue to hold up very well.
Thank you and I guess looking at rate and pricing and standard personal lines. I think you. All had previously mentioned that switching to the mass affluent market last year, maybe getting along a little bit behind relative to the industry on pricing and maybe at <unk>.
And catch up this year I was just curious I mean, obviously the entire industry is going to need significantly more pricing than expected.
The end of last year, but do you feel like you've caught up to where the industry is on pricing for personal lines or is there still maybe a little bit more of the catch up to go there for the rest of the <unk> I appreciate the question.
We don't really think about in terms of catching up to where the industry is we really think about catching up to where we think rate needs to be and that continues to be our focus.
We have we were a little bit slower to react as you point out and it was largely driven by the middle of that transition and transformation, we were going through a focus on the affluent market. We highlight new business rate because that's that's extremely responsive to the impact of filed and approved rates and that was at 8% in the quarter, we expect to see that continue to.
Go higher through the balance of the year and as we look at the pricing that we have either filed or in flight or insight I would expect our new and renewal rate as we go through all of 2024 to be in the mid teens and I think the Big open question is what happens with loss trends and.
And that will that will determine whether that is an adequate rate level for all of 'twenty four or whether it needs to go higher but again. This is all based on how we think about achieving our targets I think there's a lot of parallels and where we are right now with personal lines is to worry worthy and ask a couple of years ago and I think we've got a proven ability to address.
<unk> ability in the pockets, where they exist and that's our approach with regard to personal lines.
Thank you.
Thank you Grace.
Thank you. Our next question comes from the line of Mike Zaremski from BMO capital markets. Your line is now open.
Hey, Good morning. This is Jack on for Mike, which is the morning question. Good morning, So favorable reserve development within commercial lines have been declining for many insurers.
<unk> selective does that data point correlate with rising rates of social inflation on longer tailed lines.
Any commentary on loss cost trends, our reserve development details would be helpful. Thank you.
Let me start on loss trends and then I'll have mark.
Add some commentary relative to development. If you look back for at US over the last couple of years, we've continued to move higher.
With regard to our expected loss trend and as Mark.
<unk> in his prepared comments it was at six 5% for 2023, 6% for casualty, 7% for property and that casualty.
Expected loss trend that we cite as it is in every prior year.
As fully embedded into our loss picks and I think the big question is how do companies feel about their current year loss picks and do they feel like they've.
Effectively built in their view of.
Loss trends into those casualty loss picks and I would say, we can say confidently that yes, we continue to feel good about that and we monitor that very closely the other point that we made when we laid out our loss trend expectations is that up for casualty in particular was largely severity driven.
And that's where you incorporate your views of social inflationary trends. So I would say that we have seen social inflationary trends impacting severity in our historic more recent accident year historical loss trends and naturally what drove us to continue to move higher with our forward loss trend assumptions and we will continue to evaluate those.
As we go forward as we always do.
And perhaps the only thing I'd add is from a reserve development perspective of course, each quarter. We book, our best estimate of the ultimate cost to settle the claims.
We have had 17 consecutive years of favorable reserve development going on 18 years now.
Over the last couple of years Workers' compensation has been less of a.
Growth line of business compared to some of the other line. So it's starting to represent a smaller proportion of our reserve inventory and I think when you look at the level of reserve development, which again was favorable in the quarter. The big shift that we've seen for the last couple of years as personal auto.
Come in a little bit of a drag we increased the prior year reserves by $2 million.
In the first quarter and $4 million. This quarter. If you back that out the trends are pretty consistent, albeit workers' comp is showing a little less favorable emergence than we've seen in the last couple of years, but it's still trending favorably.
And general liability has been a fairly stable line from a development perspective for the better part of the last year and a half or so and I think the other important point is social inflation, while it could impact frequencies as much more of an impact on severities and I think that's why we've always taken.
<unk> approach to allow severities to age a little bit, especially in the more recent accident years to make sure that we're we've incorporated for social inflationary considerations has time to show itself and we don't react too quickly.
What might appear to be better than expected.
Emergence.
Thank you.
Thank you.
At this time speakers there are no questions in queue. Once again to all participants if you would like to ask a question. Please press star and then the number one lease and meet your phone and you will be prompted to record your name and your company name to cancel your request. Please press star and then the number one moment please.
At this time speakers, we show no further questions in queue I will now hand, the call over back to you John Thank you.
Well. Thank you all for joining US we appreciate your participation and as always feel free to reach out to Brad with any additional questions. Thank you and have a nice day. Thank you.
Kim.
Yes.
That concludes today's conference. Thank you all for participating you may now disconnect.