Q3 2023 Travelers Companies Inc Earnings Call
Good morning, ladies and gentlemen, welcome to the third quarter results teleconference for travelers, we ask that you hold all questions until the completion of formal remarks at which time, you'll be given instructions for the question and answer session.
Speaker 1: Good morning, ladies and gentlemen. Welcome to the third quarter results teleconference for travelers.
Speaker 1: We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer session.
Speaker 1: As a reminder, this conference is being recorded on October 18, 2023.
As a reminder, this conference is being recorded on October 18th of 2023.
Speaker 1: At this time, I would like to turn the conference over to.
At this time I would like to turn the conference over to you.
Senior Vice President of Investor Relations.
Speaker 1: Senior Vice President of Investor Relations, Ms. Christine, you may begin.
You may begin.
Speaker 2: Thank you. Good morning and welcome to Travelers' Discussion of our third quarter 2023 results.
Thank you good morning, and welcome to travelers discussion of our third quarter 2023 results. We released our press release financial statement supplement sorry, and webcast presentation earlier. This morning, all of these materials can be found on our website at travelers dot com under the investors section.
Speaker 2: We released our press release, financial statement, supplement, sorry, and webcast presentation earlier this morning. All of these materials can be found on our website at Travelers.com under the Investors section.
Speaker 2: Speaking today will be Alan Schnitzer, Chairman and CEO , Dan Fry, Chief Financial Officer, and our three segment presidents, Greg Teslowski of Business Insurance, Jeff Clank of Bond and Specialty Insurance, and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take questions.
Today will be Alan Schnitzer, Chairman and CEO , Dan Frey, Chief Financial Officer, and our three segment Presidents, Greg just loves gift business insurance, just crank, a bond and specialty insurance and Michael Klein of personal insurance.
I'll discuss the financial results of our business in the current market environment.
We will refer to the webcast presentation as they go through prepared remarks, and then we will take questions.
Speaker 2: Before I turn the call over to Alan, I'd like to draw your attention to the exclamatory note included at the end of the webcast presentation.
I turn the call over to Alan I'd like to draw your attention to the explanatory note included at the end of the webcast presentation.
Speaker 2: Our presentation today includes forward-looking statements. The company cautioned investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statement due to a variety of factors. These factors are described under forward-looking statements in our earnings press release and in our most recent 10Q and 10K filed with the SEC, which not undertake any obligation to update forward-looking statements.
Our presentation today includes forward looking statements the company cautions investors that any forward looking statement involves risks and uncertainties and is not a guarantee of future performance actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are described under forward looking.
Shipments in our earnings press release and in our most recent 10-Q and 10-K filed with the SEC.
Not undertake any obligation to update forward looking statements.
Speaker 2: Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the investor section on our website. And now, I'd like to turn the call over to Alan Schmitz.
Also in our remarks or responses to questions. We may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release financial supplement and other materials available in the investors section on our website and now I'd like to turn the call over to Alan Schnitzer.
Speaker 3: Thank you, Abby. Good morning, everyone, and thank you for joining us today.
Thank you Abby good morning, everyone and thank you for joining us today.
Speaker 3: Core income of $454 million for the quarter benefited from very strong underlying underwriting results and net investment income, but was also impacted by elevated catastrophe losses and net unfavorable prior year reserve development. Mike will provide more context.
Core income of $454 million for the quarter benefited from very strong underlying underwriting results and net investment income.
Also impacted by elevated catastrophe losses, and net unfavorable prior year reserve development.
Michael will provide more context on the catastrophe losses.
Speaker 3: The unfavorable prior year reserve development was driven by the results of our annual's bestest review in our run-off flow.
The unfavorable prior year reserve development was driven by the results of our annual as best as review and a run off book.
Speaker 3: The reserves in the ongoing businesses of all three segments developed favorably. We are very pleased with the
The reserves in the ongoing businesses of all three segments developed favorably.
We are very pleased with the underlying fundamentals of our business.
Speaker 3: Underlying underwriting income of 868 million dollars pre-tax was up more than 40% over the prior quarter.
Underlying underwriting income of $868 million pretax was up more than 40% over the prior year quarter.
Speaker 3: given by record net earned premiums of $9.7 billion and a consolidated underlying combined ratio, which improved almost two points to an excellent 90.6%.
Given by record net earned premiums of $9 $7 billion and the consolidated underlying combined ratio, which improved almost two points to an excellent 96%.
Speaker 3: The underlying combined ratios in our commercial segments remained excellent.
The underlying combined ratios in our commercial segments remained excellent.
Speaker 3: Our business insurance segment once again delivered very strong results with an underlying combined ratio of 89.7%.
Our business insurance segment once again delivered very strong results with an underlying combined ratio of 89, 7%.
Speaker 3: The underlying combined ratio in our bond and specialty business was also excellent at 80.7%.
The underlying combined ratio in our bond and specialty business was also excellent at 87%.
Speaker 3: Looking at the two commercial segments together, the aggregate B.I. B.S.I. underlying combined ratio was 88.3% for the quarter, among our best ever.
Looking at the two commercial segments together the aggregate <unk> BSI underlying combined ratio was 88, 3% for the quarter.
Among our best ever.
In our personal insurance segment, the underlying combined ratio improved more than five points to 94, 2%.
Speaker 3: In our personal insurance segment, the underlying combined ratio improved more than five points to 94.2%. As a strong written rate from prior court
It's a strong written rate from prior quarters as earning in.
Speaker 3: Our underlying results in personal insurance are improving and heading in the right direction.
Our underlying results in personal insurance are improving and heading in the right direction.
Speaker 3: Turning to investments, our high-quality investment portfolio continued to perform extremely well, generating after-tax net investment income of $640 million.
Turning to investments our high quality investment portfolio continued to perform extremely well generating after tax net investment income of $640 million.
Speaker 3: reflecting strong and reliable returns from our growing fixed income portfolio and solid returns from our non-fixed income portfolio.
Reflecting strong and reliable returns from our growing fixed income portfolio and solid returns from our non fixed income portfolio.
Speaker 3: In terms of production, thanks to great execution by our colleagues in the field and the strong franchise value they have to sell, we grew net-written premiums by $1.3 billion or 14% to a record $10.5 billion.
In terms of production, thanks to great execution by our colleagues in the field and the strong franchise value. They have to sell we grew net written premiums by $1 $3 billion or 14% to a record $10 $5 billion.
Speaker 3: In business insurance, we grew net written premiums by 16% to $5.1 billion.
In business insurance, we grew net written premiums by 16% to $5 $1 billion.
Speaker 3: We know a premium change in the segment was very strong at 12.9%.
Renewal premium change in this segment was very strong at 12, 9% driven.
Speaker 3: Given by Runeville rate change, which accelerated year over year and sequentially to 7.9%.
Driven by renewal rate change, which accelerated year over year and sequentially to seven 9%.
Speaker 3: No rate change was higher sequentially in every line other than workers cost.
No rate change was higher sequentially in every line other than workers' comp.
Speaker 3: Where overall renewal premium change remains positive and appropriate given return to the lawn.
For overall renewal premium change remains positive and appropriate given returns in the line.
Speaker 3: For the segment, even with higher pricing at record levels, retention remained very strong at 87%, a reflection of a rational market.
For the segment, even with higher pricing at record levels retention remained very strong at 87%.
A reflection of a rational market.
New business was strong and higher broadly across the segment.
In bond and specialty insurance, we grew net written premiums to a record $1 billion achieved 91% retention of our high quality management liability business.
Speaker 3: In bond and specialty insurance, we grew net written premiums to a record $1 billion, achieved 91% retention of our high-quality management liability business.
Speaker 3: and grew net written premiums in our industry leading surety business by 13%.
And grew net written premiums in our industry, leading surety business by 13%.
Speaker 3: Given the attractive returns, we are very pleased with the strong production results in both of our commercial business.
Given the attractive returns we are very pleased with the strong production results in both of our commercial business segments.
Speaker 3: In personal insurance, top line growth of 14% was driven by higher prices.
In personal insurance topline growth of 14% was driven by higher pricing.
Speaker 3: When your premium change was 19.4% in our homeowners and other business, it increased to a record high 18.2% in our auto business.
Premium change was 19, 4% in our homeowners and other business and increased to a record high 18, 2% in our auto business.
Speaker 3: Another quarter of strong production across the board positions us well for the rest of the year and into 2024.
Another quarter of strong production across the board positions us well for the rest of the year and into 2024.
Speaker 3: We'll hear more shortly from Greg Jeff and Michael about our segment result.
You'll hear more shortly from Greg, Jeff and Michael about our segment results.
Speaker 3: With the end of the year in sight and 2024 on the horizon and coming into focus, we feel very well positioned for what's ahead and quite confident. In our business insurance segment,
With the end of the year and site in 2024 on the horizon coming into focus we feel very well positioned for what's ahead and quite confident.
And our business insurance segment written margins are expanding.
Speaker 3: Pricing has been strong and the components of core goods inflation that impact our loss costs are moderating. Medical inflation in
Pricing has been strong and the components of core goods inflation that impact our loss costs are moderating.
Medical inflation in particular remains benign.
Speaker 3: Nonetheless, given the duration of relevant liabilities, we continue to incorporate medical inflation and a loss cost based on a higher longer term trend.
Nonetheless, given the duration of relevant liabilities, we continue to incorporate medical inflation and our loss costs based on the higher longer term trends.
Speaker 3: In terms of the top line of business insurance, we're pleased that economic output and consumption so far remain robust.
In terms of the topline in business insurance, we're pleased that economic output in consumption so far remain robust.
Speaker 3: Given our leading workers' compensation business, we benefit in particular from the near 50-year low in unemployment, the prime-age labor participation rate, which is at its highest level since 2007, and ongoing wage inflation, which contributes to premium growth and margins.
Given our leading workers compensation business, we benefited in particular from the near 50 year low in unemployment.
The prime age labor participation rate, which is at its highest level since 2007.
And ongoing wage inflation, which contributes to premium growth and margins.
Speaker 3: As a result of strong pricing in recent years and higher fixed income NII, returns in the segment are currently attracted.
As a result of strong pricing in recent years and higher fixed income NII returns in this segment are currently attractive.
Speaker 3: Nonetheless, given the uncertainty generally in terms of weather volatility, economic and social inflation.
Nonetheless, given the uncertainty generally in terms of weather volatility economic and social inflation.
Speaker 3: hardening reinsurance market and the geopolitical landscape.
Reinsurance market and the geopolitical landscape.
Speaker 3: We plan to continue pursuing strong price increases in both the property and casualty lines to achieve our.
We plan to continue pursuing strong price increases in both the property and casualty lines.
To achieve our overtime return objectives.
Speaker 3: Turning to our industry-leading bond and specialty business, we just reached a milestone $1 billion in net written premiums. The returns are terrific.
Turning to our industry, leading bond <unk> specialty business. We just reached a milestone $1 billion net written premiums and returns are terrific.
Speaker 3: And as you've heard, results in our personal insurance business are headed in the right direction.
And as you've heard results in our personal insurance business are headed in the right direction.
Speaker 3: Earned margins are improving, and additional price increases will earn in from here. We're very pleased with our targeted marketplace execution.
Our margins are improving and additional price increases will earn in from here.
We're very pleased with our targeted marketplace execution.
Same time inflationary pressures are moderating.
In terms of the investment portfolio with interest rates at their highest levels in recent memory and most indications, suggesting higher for longer we are extremely well positioned.
Speaker 3: In terms of the investment portfolio, with interest rates at their highest levels in recent memory, and most indications suggesting higher for longer, we are extremely well positioned.
Speaker 3: In the last five years, we've grown our very high-quality investment portfolio by nearly $19 billion, or about 25 percent, to more than $90 billion. Ninety-three percent of the portfolio is out...
And the last five years, we've grown our very high quality investment portfolio by nearly $19 billion or about 25% to more than $90 billion.
93% of the portfolio is allocated to fixed income.
Speaker 3: As we look ahead to 2024, we expect our after-tax fixed-income NII will be more than $2.6 billion.
As we look ahead to 2024, we expect our after tax fixed income NII will be more than $2 6 billion.
To ensure that our competitive advantages continue to distinguish us in fuel our performance, we will continue to invest in our ambitious and focused innovation priorities.
Speaker 3: To ensure that our competitive advantages continue to distinguish us and fuel our performance, we will continue to invest in our ambitious and focused innovation priorities.
Speaker 3: We're spending more than $1.5 billion this year on technology, inside an excellent expense ratio and with a higher proportion allocated to strategic technology investors.
We're spending more than 1 billion and a half dollars. This year on technology inside an excellent expense ratio and with a higher proportion allocated to strategic technology investments.
Speaker 3: confident that we're working on the right priorities, executing effectively, and that will see the benefits play out and grow to detractive returns going forward. Lastly, I'll share that we're recently back from one of the years largest industry conferences, where we met with many of our distribution partners.
We're confident that we're working on the right priorities executing effectively and that will see the benefits play out and growth at attractive returns going forward.
Lastly, I'll share that were recently back from one of the year's largest industry conferences, where we met with many of our distribution partners.
Speaker 3: We left confident that we have the whole position with distribution in the United States.
We left confident that we have the pole position with distribution in the United States and that we're positioned to support each other strategic and marketplace priorities.
Speaker 3: and that we're positioned to support each other's strategic and marketplace priorities.
Speaker 3: We're committed to being their best partner and to offering the products and services that best serve our mutual customer.
We're committed to being their best partner and to offering the products and services that best serve our mutual customers.
Speaker 3: To sum it up, we remain very confident in the outlook for our business. I couldn't be more grateful to my 30,000 colleagues who show up every day, committed to our culture, our standard of excellence, and to fulfilling our mission of creating shareholder value and our purpose of taking care of the people we're privileged to serve. And with that, I'm pleased to turn the call over to Dan.
To sum it up we remain very confident in the outlook for our business.
Couldn't be more grateful to my 30000 colleagues, who show up every day committed to our culture for standard of excellence and fulfilling our mission of creating shareholder value and our purpose of taking care of the people, we're privileged to serve and with that I'm pleased to turn the call over to Dan.
Thank you Alan.
Speaker 3: Our income for the third quarter was $454 million, and core return on equity was 6.9%, as heavy CAD activity impacted our results.
Our income for the third quarter was $454 million and core return on equity was six 9% as heavy cat activity impacted our results.
Speaker 3: We're pleased to have, once again, generated record levels of earned premium this quarter and an excellent underlying combined ratio of 90.6 percent, a 1.9 point improvement from last year's strong results.
We're pleased to have once again generated record levels of earned premium this quarter.
An excellent underlying combined ratio of 96%.
One nine point improvement from last year's strong results.
Speaker 3: This combination of growth and underlying margin improvement led to a very strong underlying underwriting gain of $684 million after task.
This combination of growth and underlying margin improvement led to a very strong underlying underwriting gain.
$684 million after tax up.
Speaker 3: up $206 million, or 43% from the prior year quarter.
$206 million or 43% from the prior year quarter.
Speaker 4: The expense ratio for the third quarter improved 10 basis points from last year's quarter to an excellent 28%.
The expense ratio for the third quarter improved 10 basis points from last year's quarter to an excellent 28% and continues to reflect the benefits of our focus on productivity and efficiency, coupled with strong topline growth.
Speaker 4: and continues to reflect the benefits of our focus on productivity and efficiency coupled with strong top line growth.
Unknown Executive: Good morning, ladies and gentlemen. Welcome to the third quarter results teleconference for Travelers. We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer session.
Speaker 4: Our third quarter results include $850 million of pre-tax catastrophe loss.
Our third quarter results include $850 million of pre tax catastrophe losses, resulting from another quarter of both frequency and severity of weather across North America.
Speaker 4: resulting from another quarter of both frequency and severity of weather across North America.
Abbe Goldstein: As a reminder, this conference is being recorded on October 18th, 2023. At this time, I would like to turn the conference over to you as I go see senior vice president of investor relations.
Speaker 4: Turning to prior year reserve development, we had total net unfavorable development of $154 million pre-tax.
Turning to prior year Reserve development, we had total net unfavorable development of $154 million pre tax.
Speaker 4: in business insurance, net unfavorable PYD of $263 million, was driven by charges in our runoff business.
In business insurance.
Net unfavorable <unk> of $263 million was driven by charges in our run off business.
Christine: Miss Christine, you may begin. Thank you. Good morning and welcome to Travelers discussion of our third quarter, 2023 results. We released our press release financial statement, supplement, sorry, and webcast presentation earlier this morning. All of these materials can be found on our website at travelers.com under the investor's section. We think today will be Alan Schnitzer, Chairman and CEO, Dan Frey, Chief Financial Officer, and our three segment presidents, Greg Toczydlowski of Business Insurance, Jeff Klank of Bond and Specialty Insurance, and Michael Klein of Personal Insurance.
Christine: They will discuss the financial results that were business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks and then we will take questions. Before I turn the call over to Alan, I would like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward looking statements. The company caution investors that any forward looking statement involves risks and uncertainties and is not a guarantee of future performance.
Speaker 4: including $284 million related to our annual asbestos review, as well as increased reserves for abuse and molestation resulting from the volume of claims related to the closing of the Reviver window in California.
<unk> $284 million related to our annual asbestos review.
As well as increased reserves for abuse and molestation, resulting from the volume of claims related to the closing of the revival window in California.
Speaker 4: This year's asbestos charge includes an additional increase to strengthen our carry reserve position relative to the range of optimism.
This year's asbestos charge includes an additional increase to strengthen our carried reserve position relative to the range of outcomes.
Outside of run off in our ongoing businesses business insurance had $132 million of net favorable <unk> driven.
Speaker 4: Outside of runoff and our ongoing businesses, business insurance had $132 million of net favorable PYD.
Speaker 4: driven by favorability in workers' comp that was partially offset by unfavorability in commercial auto.
Driven by favorability in workers' comp that was partially offset by unfavorable <unk> in commercial auto.
Speaker 4: In bond and specialty, net favorable PYD of $72 million was driven by another quarter of better-than-expected results in both surety and management liability.
In bond and specialty net favorable <unk> of $72 million was driven by another quarter of better than expected results in both surety and management liability.
Christine: Actual results may differ materially from those expressed or implied in the forward looking statement due to a variety of factors. These factors are described under forward looking statements in our earnings press release and in our most recent 10Q and 10K files with the SEC, which not undertake any obligation to update forward looking statements. Also, in our remarks or responses to questions, we may mention some non-gap financial measures. Reconciliation are included in our recent earnings press release, financial supplement, and other materials available in the investor section on our website.
Speaker 4: Personal insurance had $37 million of net favorable PYD driven by homeowners and others.
Personal insurance had $37 million of net favorable <unk> driven by homeowners and other.
Speaker 4: After-tax net investment income of $640 million was up 27% from the prior year quarter. Fixed maturity NII was again higher than the prior year quarter, reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets.
After tax net investment income of $640 million was up 27% from the prior year quarter.
Fixed maturity NII it was again higher than the prior year quarter, reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets.
Speaker 4: Returns in the non-fixed income portfolio were also above the prior year quarter.
It turns in the non fixed income portfolio were also above the prior year quarter.
Speaker 4: With interest rates having moved higher during the third quarter, we are again raising our outlook for fixed-income NII, including earnings from short-term securities.
With interest rates, having moved higher during the third quarter. We are again, raising our outlook for fixed income NII, including earnings from short term securities.
Speaker 4: to approximately $615 million after tax for the fourth quarter.
Alan Schnitzer: And now, I'd like to turn the call over to Alan Shatter. Thank you, Abby.
Approximately $615 million after tax for the fourth quarter.
Alan Schnitzer: Good morning, everyone, and thank you for joining us today. Core income of $454 million for the quarter benefited from very strong underlying underwriting results and net investment income. It was also impacted by elevated catastrophe losses and net unfavorable prior year reserve development. Michael will provide more context on the catastrophe losses. The unfavorable prior year reserve development was driven by the results of our annual's Best Is Review in our runoff book. The reserves and the ongoing businesses of all three segments developed favorably.
For 2024, we now expect more than $2 $6 billion after tax our highest level ever.
Speaker 4: For 2024, we now expect more than $2.6 billion after tax, our highest level ever.
Speaker 4: beginning with approximately $630 million in the first quarter of 2024, and growing to approximately $690 million for the fourth quarter.
Beginning with approximately $630 million in the first quarter of 2024 and growing to approximately $690 million for the fourth quarter.
Speaker 4: New money rates as of September 30th are about 180 basis points higher than what is embedded in the portfolio.
New money rates as of September 30th are about 180 basis points higher than what is embedded in the portfolio.
Turning to capital management operating cash flows for the quarter of more than $3 billion were an all time record.
Alan Schnitzer: We are very pleased with the underlying fundamentals of our business. Underlying underwriting income of $868 million pre-tax was up more than 40% over the prior year quarter. Given by record net earned premiums of $9.7 billion and a consolidated underlying combined ratio, which improved almost two points to an excellent 90.6%. The underlying combined ratios in our commercial segments remained excellent. Our business insurance segment once again delivered very strong results with an underlying combined ratio of 89.7%.
Speaker 4: All our capital ratios were at or better than our target levels, and we ended the quarter withholding company liquidity of approximately $1.7 billion.
All our capital ratios were at or better than our target levels and we ended the quarter with holding company liquidity of approximately $1 $7 billion.
Speaker 4: Interest rates increased and spreads widened during the quarter, and as a result, our net unrealized investment loss increased from $4.6 billion after tax at June 30th to $6.5 billion after tax at September 30th.
Interest rates increased and spreads widened during the quarter and as a result, our net unrealized investment loss increased from $4 6 billion after tax at June 30th.
The $6 $5 billion after tax at September 30th.
Speaker 4: As we've discussed previously, the changes in unrealized investment gains and losses generally did not impact how we manage our investment portfolio.
As we've discussed previously the <unk>.
<unk> and unrealized investment gains and losses generally do not impact how we manage our investment portfolio.
Alan Schnitzer: The underlying combined ratio in our bond and specialty business was also excellent at 80.7%. Looking at the two commercial segments together, the aggregate B.I. B.S.I, underlying combined ratio was 88.3% for the quarter, among our best ever. In our personal insurance segment, the underlying combined ratio improved more than five points to 94.2%. As a strong written rate from prior quarters is earning in, our underlying results in personal insurance are improving and heading in the right direction.
Speaker 4: We generally hold fixed-income investments to maturity. The quality of our fixed-income portfolio remains very high, and changes in unrealized gains and losses have little impact on our cash flows, statutory surplus, or regulatory capital requirements.
We generally hold fixed income investments to maturity.
<unk> of our fixed income portfolio remains very high and changes in unrealized gains and losses have little impact on our cash flows statutory surplus or regulatory capital requirements.
Speaker 4: Adjusted book value per share, which excludes net unrealized investment gains and losses, was $115.78 at quarter end, up 2% from year end and up 3% from a year ago.
Adjusted book value per share, which excludes net unrealized investment gains and losses was $115 78 at quarter end up 2% from year end and up 3% from a year ago.
Alan Schnitzer: Turning to investments, our high quality investment portfolio continued to perform extremely well, generating after tax net investment income was $640 million, reflecting strong and reliable returns from our growing fixed income portfolio, and solid returns from our non-fixed income portfolio. In terms of production, thanks to great execution by our colleagues in the field and the strong franchise value they have to sell, we grew net written premiums by $1.3 billion or 14% to a record $10.5 billion.
Speaker 4: We returned $333 million of capital to our shareholders this quarter, comprising share repurchases of $101 million and dividends of $232 million.
We returned $333 million of capital to our shareholders this quarter comprising share repurchases of $101 million and dividends of $232 million.
Speaker 4: We have approximately $6.1 billion of capacity remaining under the Sherry Purchase Authorization from our board of direct.
We have approximately $6 $1 billion of capacity remaining under the share repurchase authorization from our board of directors.
Speaker 4: Similar to my comments on last quarter's call, the significant level of catastrophe losses we've experienced this year resulted in lower year-to-date earnings than we expected. So share repurchases in the fourth quarter will likely be lower than the quarterly share repurchases made in the first half.
Similar to my comments on last quarter's call the significant level of catastrophe losses. We've experienced this year have resulted in lower year to date earnings than we expected so share repurchases in the fourth quarter will likely be lower than the quarterly share repurchases made in the first half of the year.
Alan Schnitzer: In business insurance, we grew net written premiums by 16% to $5.1 billion. We knew a premium chain to the segment was very strong at 12.9%, driven by renewable rate change, which accelerated year over year and sequentially to 7.9%. We knew a rate change was higher sequentially in every line other than workers' cop, where overall renewable premium chain remains positive and appropriate given returns in the line. For the segment, even with higher pricing at record levels, retention remained very strong at 87%, a reflection of a rational market.
Speaker 4: Some things up while our third quarter earnings were adversely impacted by elevated catastrophe losses were pleased to post another quarter of double digit premium growth and improved and very strong underlying combined ratio and further improvement in our outlook for fixed income and II all of which both well for our business results
To sum things up while our third quarter earnings were adversely impacted by elevated catastrophe losses were pleased to post another quarter of double digit premium growth and improved and very strong underlying combined ratio and further improvement in our outlook for fixed income NII.
All of which bodes well for our business results going forward.
Speaker 4: With that, I'll turn the call over to Greg for discussion of business.
With that I'll turn the call over to Greg for a discussion of business insurance.
Speaker 5: Thanks, Dan. Segment income for the third quarter was $468 million, with strong underlying underwriting and investment income.
Yes.
Thanks, Dan segment income for the third quarter was $468 million with strong underlying underwriting and investment income as.
Alan Schnitzer: New business was strong and higher broadly across the segment. In bond and specialty insurance, we grew net written premiums to a record $1 billion, achieved 91% retention of our high quality management liability business, and grew net written premiums in our industry leading surety business by 13%. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. In personal insurance, top line growth of 14% was driven by higher pricing.
Speaker 5: as well as favorable priori or development in our ongoing book. Offset by Reserve Charges in our runoff book, mostly related to a spes-
As well as favorable prior year development in our ongoing book offset by reserve charges and a run off book mostly related to asbestos.
Speaker 5: We're particularly pleased with our exceptional underlying combined ratio of 89.7% for the quarter.
We're particularly pleased with our exceptional underlying combined ratio of 89, 7% for the quarter.
Speaker 5: which was a 30 basis point improvement year over year and an all time best third quarter result.
Which was a 30 basis point improvement year over year, and an all time best third quarter result.
Speaker 5: The benefit of earned pricing was offset by normal variability and loss activity, all in netting to an excellent result.
The benefit of earned pricing was offset by normal variability in loss activity all in netting to an excellent result.
Alan Schnitzer: We knew a premium change was 19.4% in our homeowners and other business, and increased to a record high 18.2% in our auto business. Another quarter of strong production across the board positions us well for the rest of the year and into 2024.
Net written premiums increased 16% to a record third quarter of $5 1 billion.
By very strong renewal premium change of 12, 9% historically high retention of 87%.
Alan Schnitzer: We will hear more shortly from Greg Jeff and Michael about our segment results. With the end of the year in sight in 2024 on the horizon and coming into focus, we feel very well positioned for what's ahead and quite confident. In our business insurance segment, written margins are expanding. Pricing has been strong and the components of core goods inflation that impact our loss costs are moderating. Medical inflation in particular remains benign.
Speaker 5: a new business of $695 million.
And new business of $695 million.
Speaker 5: Underneath RPC, as you heard from Alan, renewal rate change accelerated sequentially from the second quarter to 7.9 percent with all lines other than workers comp being higher.
Underneath RPC as you heard from Alan renewal rate change accelerated sequentially from the second quarter to seven 9%.
With all lines other than workers' comp being higher.
We're thrilled with these production results in our fields continued superior execution in the marketplace.
Speaker 5: We're thrilled with these production results and our fields continued superior execution in the marketplace.
Alan Schnitzer: Nonetheless, given the duration of relevant liabilities, we continue to incorporate medical inflation and our loss costs based on higher longer term trends. In terms of the top line of business insurance, we're pleased that economic output and consumption so far remain robust. Last. Given our leading workers' compensation business, we benefit in particular from the near 50 year low unemployment, the primates labor participation rate, which is at its highest levels since 2007, and ongoing wage inflation, which contributes to premium growth and margins.
Speaker 5: and given our high quality book as well as several years of meaningful price increases, the improvements in terms and conditions were very pleased to continue to produce historically strong retention levels.
And given our high quality book as well as several years of meaningful price increases.
<unk> in terms and conditions.
We're very pleased to continue to produce historically strong retention levels.
Speaker 5: Lastly, we're encouraged that new business was hired in the prior year quarter, broadly across the segment.
Lastly, we're encouraged that new business was higher than the prior year quarter broadly across the segment.
Speaker 5: While the comparison of new business to the prior year quarter benefited from a relatively modest prior year result, as well as higher pricing on new business this year, we're also pleased with the impact that our strategic investments are having on our production results.
While the comparison of new business to the prior year quarter benefited from a relatively modest prior year result, as well as higher pricing on new business. This year. We're also pleased with the impact that our strategic investments are having on our production results.
Alan Schnitzer: As a result of strong pricing in recent years and higher fixed income NII, returns in the segment are currently attractive. Nonetheless, given the uncertainty generally in terms of weather volatility and volatility, economic and social inflation, the hardening reinsurance market and the geopolitical landscape, we plan to continue pursuing strong price increases in both the property and casualty lines to achieve our overtime return objectives.
Speaker 5: As for the individual businesses, in select, renewal premium change remains strong at 10.3 percent.
As for the individual businesses in select renewal premium change remains strong at 10, 3%.
Speaker 5: While retention of 85% was up two points from the prior year quarter.
While retention of 85% was up two points from the prior year quarter.
Speaker 5: New business was up $46 million from the prior quarter, driven in large part by the continued success of our BOP 2.0 product.
New business was up $46 million from the prior year quarter driven in large part by the continued success of our BOP to point old product.
Speaker 5: We're also encouraged with the early performance of our new state-of-the-art commercial auto product, which has been rolled out in 12 states.
We're also encouraged with the early performance of our new state of the art commercial auto product, which has been rolled out in 12 states.
Alan Schnitzer: Turning to our industry leading bond and specialty business, we just reached a milestone $1 billion net rent and premiums in returns are terrific. And as you've heard results in our personal insurance business are headed in the right direction. Earned margins are improving and additional price increases will earn in from here. We're very pleased with our targeted marketplace execution. Same time, inflationary pressures are moderating. In terms of the investment portfolio with interest rates at their highest levels in recent memory, and most indications suggesting higher for longer, we are extremely well positioned.
Speaker 5: In middle market, renewal premium chains remained very strong at 10.6% while retention remained excellent at 89%.
In middle market renewal premium change remained very strong at 10, 6%.
While retention remained excellent at 89%.
Speaker 5: New business was a strong $352 million.
New business was a strong $352 million.
Speaker 5: pleased with the quality of the submission flow from our distribution partners during the quarter and our responsiveness in quoting and closing accounts that align with our appetite.
We're pleased with the quality of the submission flow from our distribution partners during the quarter and our responsiveness in quoting and closing accounts that align with our appetite.
Alan Schnitzer: In the last five years, we've grown our very high quality investment portfolio by nearly $19 billion or about 25% to more than $90 billion. 93% of the portfolio is allocated to fixed income. As we look ahead to 2024, we expect our after tax fixed income NII will be more than $2.6 billion. To ensure that our competitive advantages continue to distinguish us and fuel our performance, we will continue to invest in our ambitious and focused innovation priorities.
Speaker 5: As always, we remain vigilant around risk collection, underwriting and pricing. To sum up, business insurance.
As always we remain vigilant around risk selection underwriting and pricing.
To sum up business insurance had another terrific quarter.
Speaker 5: pleased with our execution and driving strong financial results while continuing to invest in the business for long-term profitable growth. With that, I'll turn.
We're pleased with our execution and driving strong financial results, while continuing to invest in the business for long term profitable growth.
With that I will turn the call over to Jeff.
Speaker 6: Thanks, Greg. Founded Specialty posted terrific top and bottom line results for the quarter.
Thanks, Greg.
While in specialty posted terrific top and bottom line results for the quarter.
Alan Schnitzer: We're spending more than a billion and a half dollars this year on technology, inside an excellent expense ratio and with a higher proportion allocated to strategic technology investments. We're confident that we're working on the right priorities executing effectively and that will see the benefits play out and growth of attractive returns going forward.
Speaker 6: Segment income was a record $265 million, up 10% from the very strong prior year course.
Segment income was a record $265 million up 10% from the very strong prior year quarter.
Speaker 6: The underlying combined ratio was an outstanding 80.7%.
The underlying combined ratio was an outstanding 87%.
Speaker 6: Turning to the top line, we're pleased to have delivered record net written premiums of over $1 billion.
Turning to the top line, we're pleased to have delivered record net written premiums of over $1 billion.
Speaker 6: In domestic management liability, we again delivered record level retention of 91 percent, up to points from the third quarter of 2022, while continuing to achieve positive renewal premium change.
In domestic management liability, we again delivered record level retention of 91% up two points from the third quarter of 2022.
Alan Schnitzer: Lastly, I'll share that we're recently back from one of the years largest industry conferences where we met with many of our distribution partners. We left confident that we have the whole position with distribution in the United States and that we're positioned to support each other's strategic and marketplace priorities. We're committed to being their best partner and to offering the products and services that best serve our mutual customers.
While continuing to achieve positive renewal premium change.
Speaker 6: This result reflects the attractive returns of our high quality book of business.
This result reflects the attractive returns of our high quality book of business.
Speaker 6: Record surety net written premiums reflect strong, broad-based demand for surety bonds and higher premium from large construction projects.
Record surety net written premiums reflect strong broad based demand for surety bonds and higher premium from large construction projects.
Speaker 6: So we're pleased to have once again delivered terrific top and bottom line results this quarter, driven by our continued underwriting and risk management diligence, excellent execution by our field organization, and the benefits from our value-added approach and market-leading competitive advantages. And now I'll turn the call over to Michael.
So we're pleased to have once again delivered terrific top and bottom line results. This quarter driven by our continued underwriting and risk management diligence excellent execution by our field organization and the benefits from our value added approach and market leading competitive advantages.
Alan Schnitzer: To sum it up, we remain very confident in the outlook for our business. I couldn't be more grateful to my 30,000 colleagues who show up every day committed to our culture for a standard of excellence and fulfilling our mission of creating shareholder value and our purpose of taking care of the people we're privileged to serve.
Now I will turn the call over to Michael.
Thanks, Jeff and good morning, everyone.
Dan Frey: And with that, I'm pleased to turn the call over to Dan. Thank you, Alan. For income for the third quarter was $454 million and core return on equity was 6.9%. This heavy CAD activity impacted our results. We're pleased to have once again generated record levels of earned premium this quarter and an excellent underlying combined ratio of 90.6%. But 1.9 point improvement from last year's strong result. This combination of growth and underlying margin improvement led to a very strong underlying underwriting gain of $684 million after tasks, up $206 million or 43% from the prior year quarter.
Speaker 7: In personal insurance, the third quarter's segment loss of $193 million was significantly impacted by catastrophe loss.
Personal insurance third quarter segment loss of $193 million was significantly impacted by catastrophe losses.
Speaker 7: We experienced elevated losses from weather activity, specifically related to wind and hail events.
We experienced elevated losses from weather activity, specifically related to wind and hail events.
Speaker 7: This was another active quarter for severe convective storms across the US.
This was another active quarter for severe convective storms across the U S.
Speaker 7: The 19 designated PCS events specifically related to wind, hail, and tornado activity in the quarter.
There were 19 designated PCF events, specifically related to wind hail and tornado activity in the quarter.
Speaker 7: nearly twice the 10-year average, and the highest number for a third quarter in more than a decade.
Nearly twice the 10 year average and the highest number for a third quarter in more than a decade.
Speaker 7: On a more positive note, the underlying combined ratio of 94.2% improved 5.1 points compared to the prior year quarter reflecting an improvement in both automobile and homeowner.
On a more positive note the underlying combined ratio of 94, 2% improved five one points compared to the prior year quarter, reflecting an improvement in both automobile in homeowners.
Speaker 7: Netwritten premiums for the quarter grew 14% driven by high teens renewal premium change in both domestic automobile and homeowners and other.
Net written premiums for the quarter grew 14% driven by high teens renewal premium change in both domestic automobile and homeowners and other.
Dan Frey: The expense ratio for the third quarter improved 10 basis points from last year's quarter to an excellent 28% and continues to reflect the benefits of our focus on productivity and efficiency. Coupled with strong top line growth.
Speaker 7: In automobile, the third quarter combined ratio was 103.5 percent.
And automobile third quarter combined ratio was 103, 5%.
Speaker 7: This was 8.7 points lower than the prior year quarter, which included catastrophe losses resulting from Hurricane Ian.
This was eight seven points lower than the prior year quarter, which included catastrophe losses, resulting from hurricane here.
Dan Frey: Our third quarter results include $850 million of pre-tax catastrophe losses resulting from another quarter of both frequency and severity of weather across North America. Turning to prior year reserve development, we had total net unfavorable development of $154 million pre-tax. In business insurance, net unfavorable PYD of $263 million was driven by charges in our runoff business including $284 million related to our annual asbestos review, as well as increased reserves for abuse and molestation resulting from the volume of claims related to the closing of the revival window in California.
Speaker 7: The underlying combined ratio of 100.6, 100.6%, improved 3.3 points compared to the prior quarter, driven by the impact of earned pricing in excess of loss trends.
The underlying combined ratio of 106.
106% improved three three points compared to the prior year quarter, driven by the impact of earned pricing in excess of loss trend.
Speaker 7: The quarter over quarter improvement in our results clearly reflects the growing impact of our pricing and non-rate action.
The quarter over quarter improvement in our results clearly reflects the growing impact of our pricing and non rate actions.
Speaker 7: Underlying results in auto are headed in the right direction as the benefit of earned pricing continues to accelerate and as vehicle repair and replacement Trends are moderating
Underlying results in auto are headed in the right direction as the benefit of earned pricing continues to accelerate and as vehicle repair and replacement trends are moderating.
Speaker 7: Looking ahead to the fourth quarter of 2023, it's important to remember that the fourth quarter auto underlying loss ratio has historically been six to seven points above the average for the first three quarters because of winter weather and holiday driving.
Looking ahead to the fourth quarter of 2023. It is important to remember that the fourth quarter auto underlying loss ratio has historically been 6% to seven points above the average for the first three quarters because of winter weather and holiday driving.
Dan Frey: This year's asbestos charge includes an additional increase to strengthen our carried reserve position relative to the range of outcomes. Outside of runoff and our ongoing businesses, business insurance had $132 million of net favorable PYD driven by favorability and workers cop that was partially offset by unfavorability and commercial auto. In bond and specialty, net favorable PYD of $72 million was driven by another quarter of better than expected results in both certainty and management liability.
Speaker 7: In homeowners and other, the third quarter combined ratio of 116.2% increased 13.9 points due to the detached fee losses that I mentioned earlier.
In homeowners and other the third quarter combined ratio of 116, 2% increased 13 nine points due to the catastrophe losses that I mentioned earlier.
Speaker 7: The underlying combined ratio of 88% improved 6.9 points, primarily due to the impact of earned pricing.
The underlying combined ratio of 88% improved six nine points, primarily due to the impact of earned pricing.
Speaker 7: A benefit from the favorable re-estimation of prior quarters in the current year, and a lower expense ratio.
The benefit from the favorable re estimation of prior quarters in the current year and a lower expense ratio.
Speaker 7: Turning to production, our results continue to demonstrate our disciplined market execution in a challenging marketplace.
Turning to production our results continue to demonstrate our disciplined market execution in a challenging marketplace.
Speaker 7: Beginning with domestic homeowners and other, renewal premium change of 19.4% was very strong.
Beginning with domestic homeowners and other renewal premium change of 19, 4% was very strong.
Dan Frey: Personal insurance had $37 million of net favorable PYD driven by homeowners and other. After taxing that investment income of $640 million was up 27% from the prior year quarter. Fixed maturity NII was again higher than the prior year quarter reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets. Returns in the non-fixed income portfolio were also above the prior year quarter. With interest rates having moved higher during the third quarter, we are again raising our outlook for fixed income NII, including earnings from short-term securities to approximately $615 million after tax for the fourth quarter.
Speaker 7: The lack of growth in policies in force reflects our continued actions to further balance rate adequacy, catastrophe risk, and regulatory risk.
With the lack of growth in policies in force reflects our continued actions to further balance rate adequacy catastrophe risk and regulatory risks.
Speaker 7: We expect renewal premium change in homeowners to remain consistent through year end.
We expect renewal premium change and homeowners to remain consistent through year end.
Speaker 7: Looking ahead to 2024, we expect renewal premium change to remain elevated, but moderate into low double digits as our automatic increase in limits factors return to more normal levels in line with stabilizing industry estimates of replacement costs.
Looking ahead to 2024, we expect renewal premium change to remain elevated but moderate into low double digits as our automatic increase in limits factors returned to more normal levels in line with stabilizing industry estimates of replacement costs.
Speaker 7: In domestic automobile, renewal premium change of 18.2% increased two points compared to the second quarter of 2023.
In domestic automobile renewal premium change of 18, 2% increased two points compared to the second quarter of 2023.
Speaker 7: Auto policies in force declined slightly, reflecting our continued efforts to manage growth while improving profitability.
Auto policies in force declined slightly reflecting our continued efforts to manage growth while improving profitability.
Dan Frey: For 2024, we now expect more than $2.6 billion after tax, our highest level ever, beginning with approximately $630 million in the first quarter of 2024 and growing to approximately $690 million for the fourth quarter. New money rates as of September 30th are about 180 basis points higher than what is embedded in the portfolio.
Going forward, we expect renewal premium change in auto to remain very strong.
Speaker 7: Going forward, we expect renewal premium change in auto to remain very strong, but begin to move down from here as more of the book reaches rate adequacy on a written basis.
We begin to move down from here as more of the book reaches rate adequacy on a written basis.
Speaker 7: I'm proud of the way our team continues to respond to the dynamic environment.
I am proud of the way our team continues to respond to the dynamic environment.
Speaker 7: We are consistently evolving pricing, segmentation, underwriting, and terms and conditions while managing new business flow to ensure we deploy capacity thoughtfully in the face of market dislocation.
We are consistently evolving pricing segmentation underwriting in terms and conditions, while managing new business flow to ensure we deploy capacity thoughtfully in the face of market dislocation.
Dan Frey: Turning to capital management, operating cash flows for the quarter of more than $3 billion were an all-time record. All our capital ratios were at or better than our target levels and we ended the quarter with holding company liquidity of approximately $1.7 billion. Interest rates increased and spreads widened during the quarter, and as a result, our net unrealized investment loss increased from $4.6 billion after tax at June 30th to $6.5 billion after tax at September 30th.
Speaker 7: At the same time, we're sustaining our investments and capabilities to build our business for the future.
At the same time, we're sustaining our investments and capabilities to build our business for the future.
Speaker 7: With our leading talent, capabilities, and strong distribution relationships, we're confident in our ability to generate leading returns over time. Now I'll turn the
With our leading talent capabilities and strong distribution relationships.
Confident in our ability to generate leading returns overtime.
Now I will turn the call back over to Avi.
Speaker 2: Thanks, Michael, and operator, we're ready to start questions.
Thanks, Michael operator.
Operator, we're ready to start questions.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker 1: If you would like to ask a question, please press star followed by the number one on your telephone keypad. And we ask that you limit to one question and one follow-up.
Ask that you limit to one question and one is nonetheless.
Dan Frey: As we've discussed previously, the changes in unrealized investment gains and losses generally do not impact how we manage our investment portfolio. We generally hold fixed income investments to maturity, the quality of our fixed income portfolio remains very high, and changes in unrealized gains and losses have little impact on our cash flows, statutory surplus, or regulatory capital requirements. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $115.78 at quarter end, up 2% from year end, and up 3% from a year ago.
Speaker 1: Your first question comes from the line of Greg Peters from Raymond James, please go ahead.
Our first question comes from the line of Greg Peters from Raymond James. Please go ahead.
Speaker 8: Well, good morning, everyone. I guess my first question will focus on business insurance. I think you guys have now reported something like 14 consecutive quarters of year-over-year improvement in the underlying combined ratio.
Well good morning, everyone.
I guess my first question will focus on business insurance.
Thank you guys have now reported something like 14 consecutive quarters of year over year improvement in the underlying combined ratio.
Speaker 8: I guess what I'm, where I'm going with this is just what is your longer term target with your UCR, especially in light of, you know, what we're seeing in the accelerating renewal rate trend. And maybe if you don't want to answer it that way, maybe you can.
I guess, what I am.
Where I'm going with this is just what is your longer term target.
With your U C R.
Especially in light of what we're seeing in the accelerating renewal rate trend and.
Dan Frey: We returned $333 million of capital to our shareholders this quarter, comprising sharey purchases of $101 million and dividends of $232 million. We have approximately $6.1 billion of capacity remaining under the sharey purchase authorization from our Florida directors. Similar to my comments on last quarter's call, the significant level of catastrophe losses we've experienced this year have resulted in lower year-to-date earnings than we expected, so sharey purchases in the fourth quarter will likely be lower than the quarterly sharey purchases made in the first half of the year.
Maybe if you don't want to answer it that way maybe you can.
Speaker 8: triangulate for us just how the renewal rate change, which is accelerating matches up with your inflation expectations and your insurance to value initiatives.
Triangulate for US just how the renewal rate change, which is accelerating matches up with your <unk>.
<unk> expectations in your insurance to value initiatives.
Speaker 3: A lot in that question, Greg. Good morning. It's Alan. There's a lot in that question. I think you're right for starters. I don't think we're going to give you our targets or objectives. I think it gets too close to something that's competitively sensitive in terms of our pricing strategies, but I guess I'd point you toward where renewal premium change is.
A lot in that question, Greg Good morning, It's Alan.
A lot in that question I think you're right for starters I don't think were going to give you our targets for our objectives I think it gets too close to something that's competitively sensitive in terms of our pricing strategies, but I guess I'd point, you towards where renewal premium changes.
Speaker 3: Uh, which is, you know, at, at or at record levels. Um, and, and frankly, you know, I, I always hate to get into the commentary on loss trend because as I've shared before.
Which is.
At are at record levels.
Dan Frey: With some things up, while our third quarter earnings were adversely impacted by elevated catastrophe losses, we're pleased to post another quarter of double digit premium growth and improved and very strong underlying combined ratio and further improvement in our outlook for fixed income and II, all of which both well for our business results going forward.
And and frankly.
Always hate to get into the commentary on loss trend because as I've shared before.
Speaker 3: You know, to take a single metric that a fine was going on across billions of ours premium implies a level of precision that doesn't exist. Every line's got its own dynamics.
To take a single metric to define what's going on across billions of ours premium implies a level of precision that doesn't exist every lions got its own dynamics.
Speaker 3: So on and so forth, but there wasn't a lot of change in sort of the profile of loss activity this past quarter. So you continue to have a pretty meaningful gap between where renewable premium change is and where loss trends are. And so, you know, I think that gives you a sense. It's why we are.
So on and so forth, but but there wasn't a lot of change in in sort of the profile of loss activity. This past quarter. So we continue to have a pretty meaningful gap between where renewal premium changes and where loss trends are.
Greg Toczydlowski: With that, I'll turn the call over to Greg for discussion of business insurance. Thanks Dan. Second income for the third quarter was $468 million, with strong underlying underwriting and investment income, as well as favorable prior year development in our ongoing book, offset by reserve charges in our runoff book, mostly related to a spastic. We're particularly pleased with our exceptional underlying combined ratio of 89.7% for the quarter, which was a 30 basis point improvement year over year and an all time best third quarter result.
And so.
I think that gives you a sense, it's why we are.
Speaker 3: It's why we are, you know, it's easy enough in my paper remarks to share that written margins are expanding.
So it's why we are.
It's easy enough in my prepared remarks to share that the written margins are expanding.
Right.
Speaker 1: Your next question comes from the line of David Motamadam from Evercore ISI. Please go ahead.
Your next question comes from the line of David <unk> from Evercore ISI. Please go ahead.
Speaker 9: Hi, good morning. Just a follow up question on the BI underlying loss ratio. Greg, you had said that the benefit of earn pricing was offset by normal variability in loss activity. I was wondering if you could just size those components and it sounded like non-cat weather was, you know, maybe a little bit elevated relative to normal expectations, but I'm wondering if you could just break that down.
Greg Toczydlowski: The benefit of earned pricing was offset by normal variability and loss activity, all in netting to an excellent result. Netwritten premiums increased 16%, to a record third quarter of $5.1 billion, driven by very strong renewal premium change of 12.9%, historically high retention of 87%, and new business of $695 million. Underneath our PC, as you heard from Alan, renewal rate change accelerated sequentially from the second quarter to 7.9% with all lines other than workers comp being higher.
Hi, Good morning, just a follow up question on the underlying loss ratio.
Greg you had said that the benefit of earned pricing was offset by normal variability in loss activity.
I was wondering if you could just size those components and it sounded like non cat weather was maybe a little bit elevated relative to normal expectations, but I'm wondering if you could just break that down for us.
Hey, David It's Dan I think we're I think we're not going to go any further I think what Greg said is really the way to think about it which is.
Speaker 4: You know, as Alan just mentioned, we've been getting a good level of written price increase, that's earning its way through. So there is still definitely a benefit from.
As Alan just mentioned, we've been getting a good level of written price increase that is earning its way through.
Greg Toczydlowski: We're thrilled with these production results and our fields continued superior execution in the marketplace, and given our high quality book as well as several years of meaningful price increases, the improvements in terms and conditions were very pleased to continue to produce historically strong retention levels. Lastly, we're encouraged that new business was higher than the prior year quarter broadly across the segment. While the comparison of new business to the prior year quarter benefited from a relatively modest prior year result, as well as higher pricing on new business business this year, we're also pleased with the impact that our strategic investments are having on our production results.
So there is still definitely a benefit from <unk>.
Speaker 4: or in pricing in any given quarter you got a handful of things that are going to go one way or the other that could be small weather, that could be bassier, it could be mix changes, it could be just variability.
On pricing in any given quarter you got it.
Handful of things that are going to go one way or the other that could be small whether that could be base here it could be mix changes.
It could be just variability from one quarter to the next.
Speaker 4: There were some good guys and some bad guys, nothing particularly significant in that result. Just about offset the benefit from her price, and again, all of inside of an underlying combined ratio that we're really happy with at Sub-9.
There were some good guys and some bad guys nothing, particularly significant to net results just about offset the benefit from the earned price and again all of inside of an underlying combined ratio that we're really happy with its sub 90.
Okay.
Speaker 1: Your next question comes from the line of Elise Greenspan from Wells Fargel. Please go ahead.
Your next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead.
Greg Toczydlowski: As for the individual businesses, in select renewal premium change remains strong at 10.3% while retention of the 85% was up two points from the prior year quarter. New business was up 46 million dollars from the prior year quarter driven in large part by the continued success of our Bob 2.0 product. We're also encouraged with the early performance of our new state of the art commercial auto product which has been rolled out in 12 states.
Hi, Thanks, Good morning, I was hoping to get more color on the reserve development that you guys called out in your ongoing businesses within business insurance, you could tell us what the workers comp favorability and then I think you called out commercial auto developed adversely could we get the numbers there and then are there any other lines.
Speaker 10: Hi, thanks. Good morning. I was hoping to get more color on the reserve development you guys called out in your ongoing businesses within business insurance. You could tell us what the workers comp favorability and then I think you called out commercial auto developed adversely. Could we get the numbers there? And then are there any other lines in your ongoing business that move materially in the quarter?
And your ongoing business that moved materially in the quarter.
Yes, Lisa it's Dan So sorry, I'll disappoint you there, we're not going to we're not going to do the the line by line, but comp has been pretty strongly favorable it was pretty strongly favorable again this.
Speaker 4: Yeah, at least it stands so, sorry, I'll disappoint you. We're not gonna do the line by line, but comp has been pretty strongly favorable. It was pretty strongly favorable again, this quarter. In our remarks, we try to call out, you know, the lines that had noteworthy movement, this quarter commercial auto did have some noteworthy movement.
Greg Toczydlowski: In middle market renewal premium change remained very strong at 10.6% while retention remained excellent at 89%. New business was a strong 352 million dollars. We're pleased with the quality of the submission flow from our distribution partners during the quarter in our responsiveness and quoting and closing accounts that align with our appetite. As always, we remain vigilant around risk collection, underwriting and pricing.
This quarter in our remarks, we tried to call out the lines that had noteworthy movement.
This quarter commercial auto did have some noteworthy movement it wasn't.
Speaker 4: It wasn't dramatic particularly in the scope of, you think about the size of the reserves for the commercial auto book.
<unk>, particularly in the in the scope of you think about the size of the reserves for the commercial auto book.
Speaker 4: And what we saw in commercial out of this quarter is, you know, a little bit of a lengthening of
And what we saw in commercial auto this quarter is a little bit of a lengthening of.
Speaker 4: of the development patterns. Not a terrifically new theme, but every quarter we're looking at all the data that comes in. This gave us an indication that maybe reserves should be carried a little higher than we were, and we're just trying to react to that in real time as quickly as possible. There was some movement in the other lines, some good guys and some bad guys, nothing particularly noteworthy, but those were the two main drivers.
Of the development patterns.
Terrific lean new theme, but every quarter. We're looking at all the data that comes in this gave US an indication that maybe a reserve should be carried a little higher than we than we were and we're just trying to react to that.
Greg Toczydlowski: To sum up, business insurance had another terrific quarter. We're pleased with our execution and driving strong financial results while continuing to invest in the business for long term profitable growth.
In real time as quickly as possible those where there were some movement in the other lines. Some good guys and some bad guys nothing particularly noteworthy.
Jeffrey Klenk: With that, I'll turn the call over to Jeff. Thanks Greg. Found a specialty posted terrific top and bottom line results for the quarter. Segment income was a record 265 million dollars, up 10% from the very strong prior year quarter. The underlying combined ratio was an outstanding 80.7%. Turning to the top line, we're pleased to have delivered record net written premiums of over $1 billion. In domestic management liability, we again delivered record level retention of 91%.
Those were the two main drivers.
Yes.
Speaker 10: And then, you guys, you know, you've called out higher cats in the third quarter, you know, as well as other quarters this year. Are you guys contemplating making any changes to your reinsurance program heading into 2024 or, you know, how do you think, I guess, changes you made over the past year could have led to higher cats this year?
And then you guys you called out higher cats in the third quarter as well as other quarters. This year.
Are you guys contemplating making any changes to your reinsurance program heading into 2024, how do you think I guess changes you made over the past year could've led to higher cats this year.
Yes.
Speaker 4: So I don't think that the changes we made would have had much of a difference. Obviously, last few years we've had that underlying category get treaty.
So I don't think that the changes we made would have had much of a difference. Obviously last few years, we've had had that underlying cat aggregate treaty we.
Jeffrey Klenk: Up to points from the third quarter of 2022, while continuing to achieve positive renewal premium change. This result reflects the attractive returns of our high quality book of business. Record surety net written premiums reflect strong, broad based demand for surety bonds and higher premium from large construction projects.
Speaker 4: We didn't attach it at all in 2023. We didn't renew it in 2024.
We didn't attach it at all in 2023, we didn't renew it in 2024.
Speaker 4: We get that question a couple of times, just to remind you, in 2023 when we had that underlying CAD-AG treaty, we placed 2022, I'm a year into the future already, so 2022 we didn't attach it, we didn't renew it in 2023.
We get that question a couple of times, just just to remind you in 2023, when we had that underlying cat Agg Treaty, we placed 20, sorry 2022.
Jeffrey Klenk: So we're pleased to have once again delivered terrific top and bottom line results this quarter driven by our continued underwriting and risk management diligence, excellent execution by our field organization and that benefits from our evaluated approach and market leading competitive advantages.
A year into the future already.
So 2022, we didnt attach it we didn't renew it in 2023.
Speaker 4: Um, even when we had it last time in 22, we placed about 50% of a $500 million layer, so it couldn't have been more than $250 million of recovery. And it cost us a lot to have that policy rate online was very high for that coverage. Um, we said in July 1st, you know, that we'd enter into a new PI specific.
Even when we had it last time in 'twenty, two we placed about 50% of our $500 million layer. So it couldnt have been more than $250 million of recovery and it cost us a lot to have that policy rate online was very high for that coverage.
Michael Klein: And now I'll turn the call over to Michael. Thanks Jeff and good morning everyone.
Michael Klein: In personal insurance, the third quarter segment loss of $193 million was significantly impacted by catastrophe loss. We experienced elevated losses from weather activity, specifically related to wind and hail events. This was another active quarter for a severe convective storms across the US. This was a 5.1 point compared to the prior year quarter, reflecting an improvement in both automobile and homeowners. Netwritten premiums for the quarter grew 14% driven by high teens renewal premium change in both domestic automobile and homeowners and others.
We said in July one.
We'd entered into a new Pi specific.
Speaker 4: Coastal Reinsurance Treaty. I think we'll just continue to evaluate our position and what's available to us in the marketplace from a reinsurance perspective as we look forward to 2024. But I'd say what we sort of regularly say, which is we're really pleased with our risk selection. We think we do a great job of segmentation and pricing. We're gonna probably keep more net than many of our peers, because at the end of the day, we like our underwriters.
Coastal reinsurance Treaty I think we will just continue to evaluate our position and what's available to us in the marketplace from a reinsurance perspective, as we look forward to 2024, but I would say what we sort of regularly say, which is we're really pleased with our risk selection. We think we do a great job of segmentation in pricing.
We're going to probably keep more net than many of our than many of our peers because at the end of the day, we like our underwriting.
Okay.
Speaker 1: Your next question comes from the live Ryan Tunis from Autonomous Research. Please go ahead. Thanks.
Your next question comes from the line of Ryan Tunis from Autonomous Research. Please go ahead.
Okay.
Hey, Thanks first question just from Michael.
Speaker 11: It turns to homeowners that clearly seems like a line that probably needs more rate, not less, just given work at trends have been.
In terms of home homeowners that clearly seems like aligned with.
Michael Klein: In automobile, the third quarter combined ratio was 103.5%. This was 8.7 points lower than the prior year quarter, which included catastrophe losses resulting from Hurricane Ian. The underlying combined ratio of 100.6%, 100.6%, improved 3.3 points compared to the prior year quarter, driven by the impact of earn pricing and excess of loss trend. The quarter over quarter improvement in our results clearly reflects the growing impact of our pricing and non-rate actions. Underlying results in auto are headed in the right direction as the benefit of earn pricing continues to accelerate and as vehicle repair and replacement trends are moderating.
Probably needs more rate non less just given where cap trends than what you mentioned in your prepared remarks.
Speaker 11: that we might see some premium growth deceleration because of what you referred to as automatic increase in limits. It sounded like that might've been about half of renewal premium growth. Can you just...
That we might see some premium growth deceleration because of the right way you refrigerants automatic increases limits.
It sounded like American about housing renewal premium growth could you just.
Speaker 11: I guess mechanically help us understand a little bit more what that increases limits is tied to and in the absence of that, what are some other.
I guess mechanically helped us understand a little bit more what that.
Increase in limits is tied to.
In the absence of that what are some other.
Means by which you're going to get more pricing in that line.
Sure Ryan Thanks for the question. So just unpacking it for a second right. So inside RPC in homeowners, there's really two primary components theres rate.
Speaker 7: Sure Ryan, thanks for the question. So just unpacking it for a second, right? So inside RPC in homeowners, there's really two primary components, there's rate, and then there's exposure or other RPC, which primarily is the additional premium we collect due to the coverage A limit, the dwelling limit on the home going up.
Michael Klein: Looking ahead to the fourth quarter of 2023, it's important to remember that the fourth quarter auto underlying loss ratio has historically been 6 to 7 points above the average for the first three quarters. Because of winter weather and holiday driving.
And then there is the exposure or other RPC, which primarily is the additional premium we collect due to the coverage limit the dwelling women on the home going up.
Michael Klein: In homeowners and other, the third quarter combined ratio of 116.2% increased 13.9 points due to the catastrophe losses that I mentioned earlier. The underlying combined ratio of 88% improved 6.9 points primarily due to the impact of earn pricing, a benefit from the favorable re-estimation of prior quarters in the current year and a lower expense ratio.
Speaker 7: And over the past two years, we've increased.
And over the past two years.
Increased coverage <unk> significantly to keep up with higher replacement cost trends that have been occurring sort of across the industry.
Speaker 7: coverage A amounts significantly to keep up with higher replacement cost trends that have been occurring sort of across the industry.
Speaker 7: and given those outsized increases in coverage A amounts over the last couple of years, as we take a look at our external data and information about where replacement costs are today and where trends are, we are largely caught up with that increase. And so we don't see a need for coverage A amounts to move dramatically north from here in the near term.
And given those outsized increases in coverage amounts over the last couple of years.
As we take a look at our <unk>.
External.
Data and information about where were at replacement costs are today, and where trends are we are largely caught up with that increase and.
Michael Klein: Turning to production, our results continue to demonstrate our disciplined market execution in a challenging marketplace. Beginning with domestic homeowners and other, renewal premium change of 19.4% was very strong. The lack of growth in policies and force reflects our continued actions to further balance rate adequacy, catastrophe risk, and regulatory risk. We expect renewal premium change in homeowners to remain consistent through year end. Looking ahead to 2024, we expect renewal premium change to remain elevated but moderate into low double digits as our automatic increase in limits factors returned to more normal levels in line with stabilizing industry estimates of replacement costs.
And so we don't see a need for coverage amounts to move dramatically north from here in the near term so that premium that we would that we have been collecting because coverage as had been rising won't be nearly as big an element of renewal premium change in 'twenty four.
Speaker 7: So that premium that we would, that we have been collecting because coverage as have been rising won't be as nearly as big an element of renewal premium change in 24 as it was in 22 and 23.
As it was.
In 'twenty, two and 'twenty three.
Speaker 7: That said to your point, clearly the homeowner's line continues to need rate. It continues to need profit improvement and we will continue to seek higher rate in homeowners.
That said to your point.
Clearly the homeowners line continues to need rate it continues to need profit improvement.
And we will continue to seek higher rate in homeowners.
Speaker 7: even though the limit increases will be subsiding. The other thing I'd point to is, you know, part of the answer in HOME is pricing. Another big piece of the answer is non-rate actions. And we've been very active in the marketplace.
Even though the they'll limit increases.
Michael Klein: In domestic automobile, renewal premium change of 18.2% increased two points compared to the second quarter of 2023. Auto policies enforce decline slightly reflecting our continued efforts to manage growth while improving profitability. Going forward, we expect renewal premium change in auto to remain very strong but begin to move down from here as more of the book reaches rate adequacy on a written basis.
We'll be we'll be subsiding.
The other thing I'd point to is part of the of the answer in home is pricing. Another big piece of the answer is non rate actions and we've been very active.
In the marketplace.
Speaker 7: across risk collection, paral by paral pricing, tighter eligibility, stricter terms and conditions, to derive profit improvement in the property line as well.
Across risk selection.
Payroll by apparel pricing tighter eligibility stricter terms and conditions to drive profit improvement in the property lines as well.
Michael Klein: I'm proud of the way our team continues to respond to the dynamic environment. We are consistently evolving pricing, segmentation, underwriting, and terms and conditions, while managing new business flow to ensure we deploy capacity thoughtfully in the face of market dislocation. At the same time, we're sustaining our investments and capabilities to build our business for the future.
Got it.
Speaker 11: And then just to follow up on just a visiting assurance retention, it's interesting how robots.
Just a follow up on.
Business insurance retention.
Seeing how robust sets then.
Speaker 11: Clearly we're seeing impersonal lines retention come off and I would think you'd expect when you're taking a race.
Clearly we are seeing in personal lines retention come off I would think you would expect when youre taking rates.
Yeah.
What are you guys make of that like why.
Speaker 11: What do you guys make of that? Like why is retention been so robust?
Michael Klein: With our leading talent, capabilities, and strong distribution relationships, we're confident in our ability to generate leading returns over time.
Why is retention been so robust.
Despite so many rounds of rate increases.
Speaker 5: Good morning, Ryan, this is Greg. Yeah, I think we start every month with retaining our high quality book of business. So it's been very much an intentional strategy of ours to make sure that we're being thoughtful on our terms and conditions are pricing and
Abbe Goldstein: Now I'll turn the call back over to Abbe. Thanks, Michael.
Hey, Good morning, Ryan. This is Greg I think we start every month with retaining our high quality book of business. So it's been very much an intentional strategy of ours to make sure that we're being thoughtful on our terms and conditions or pricing and all the changes that we're making to continuously improve margins, but given the quality of that book.
Unknown Executive: Operator, we're ready to start questions. If you would like to ask a question, please press star followed by the number one on your telephone keypad, and we ask that you that you limit to one question in one final.
Speaker 5: all the changes that we're making to continuously improve margins, but given the quality of that book, it's not a surprise for us. It also is an indicator of just how rational the market place is right now and the need.
Greg Peters: Your first question comes from the line of Greg Peters from Raymond James, please go ahead.
Not a surprise for us it also is an.
An indicator of just how rational the marketplaces right now and the need.
David Motemaden: Well, good morning, everyone. I guess my first question will focus on business insurance. I think you guys have now reported something like 14 consecutive quarters of your over your improvement and the underlying bind ratio. I guess what I'm going with this is just what is your longer term target with your UCR, especially in light of what we're seeing in the accelerating renewal rate trend. And maybe if you don't want to answer it that way, maybe you can triangulate for us just how the renewal rate change, which is accelerating matches up with your inflation expectations and your insurance to value initiatives. A lot of that question, Greg.
Speaker 5: for improved margins across the entire industry based on all those headwinds that that Alan talked about. So we're not surprised by it. We're very pleased with it. We're very focused on
For for improved margins across the entire industry based on all of those headwinds that Alan talked about so we're not surprised by it we're very pleased with it and we're very focused on it.
Yeah.
Speaker 1: Your next question comes from the line of Jimmy Bueller from JP Morgan. Please go ahead.
Your next question comes from the line of Jimmy <unk> from Jpmorgan. Please go ahead.
Speaker 12: Hi, good morning. So first, I just had a question on commercial auto and if you could just give us some a little bit more insight into what's driving the adverse development there. Some of your peers have seen that as well, and I think there's some concerns that this could be sort of the beginning of a trend, given what's gone on in personal auto over the past two years or so.
Hi, Good morning, So first just had a question on <unk>.
In commercial auto and if you could just give us some a little bit more insight into what's driving the adverse development there some.
Some of your peers have seen that as well and I think there are some concerns that this could be sort of at the beginning of a trend given what's gone on in personal auto over the past.
In two years or so.
Speaker 4: Jimmy, it's Dan again. So, yeah, as we said, you know, a little while ago, commercial auto is really just.
Hey, Jamie it's Dan again.
So yes, as we said you know.
Alan Schnitzer: Good morning, it's Alan. As a lot of that question, I think you're right for starters. I don't think we're going to give you our targets or objectives. I think it gets too close to something. It's competitively sensitive in terms of our pricing strategies. But I guess I'd point you toward where renewal premium changes, which is at record levels. And frankly, I always hate to get into the commentary on lost trend, because as I've shared before, you know, to take a single metric to define what's going on across billions of hours premium applies level of precision that doesn't exist.
A little while ago commercial auto is really just.
Speaker 4: modification based on the most recent data that's come in, in terms of the development of
Modification based on the most recent data that's come in in terms of the development of.
Speaker 4: claims in commercial auto, particularly bodily injury claims. This is something that we've commented on and off probably over the last three or four quarters. Numbers have been pretty modest.
Claims in commercial auto, particularly bodily bodily injury claims. This is something that we've commented on and off probably over the last three or four quarters numbers have been pretty modest the themes are not inconsistent with what we anticipated, but you get a new set of data and the data looks.
Speaker 4: themes are not inconsistent with what we anticipated, but you get a new set of data and the data looks a little bit different than your prior estimation, and so the magnitude of some of the changes that we anticipated is a little higher. Really the focus of this most recent strengthening is the continued sort of longer development of or said inversely, the slower closing of claims.
It looks a little bit different than your prior estimation and so the magnitude of some of the changes that we anticipated.
Alan Schnitzer: Every line's got its own dynamics. So on and so forth, but there wasn't a lot of change in sort of the profile of loss activity this past quarter. So you continue to have a pretty meaningful gap between where we're no premium changes and where lost trends are. And so, you know, I think that gives you a sense. It's why we are. It's why we are, you know, it's easy enough in my prepare remarks to share that that written margins are expanding. Right.
Is is a little higher really the focus of this most recent strengthening is the continued sort of longer development of ore or inversely the slower closing of claims in commercial auto so as that continues to lag historical closure.
Speaker 4: in commercial auto. So as that continues to lag historical closure patterns, we're making an adjustment to reflect the most recent data.
Patterns, where we're making an adjustment to reflect the most recent data.
And that's just a function of Rupert is taking longer or something else.
Speaker 4: This is more in the bodily injury side of commercial auto, so it's not so much repairs themselves. Although that's benefactor in both Michaels business and a smaller degree in drags business. Body injury, it's more the settlement of the injury.
This is more in the bodily injury side of commercial auto so it's not it's not so much repairs themselves. Although that's been a factor in both Michaels business and a smaller degree in greg's business bodily injury, it's more of the settlement of the injury claim.
Dan Frey: Your next question comes from the line of David a modematum from Evercore ISI. Please go ahead. Hi, good morning. Just a follow up question on the B.I, underlying loss ratio. Greg, you had said that the benefit of earn pricing was offset by normal variability and loss activity. I was wondering if you could just size those components and it sounded like noncat weather was, you know, maybe a little bit elevated relative to normal expectations, but I'm wondering if you could just break that down, for us.
Speaker 12: And then in personal auto, where are you in terms of rate adequacy on a written base?
And then in personal auto where are you in terms of read read adequacy on a written basis.
Speaker 12: and is your PIF count has been sort of flattish. Are competitors being fairly rational and you're seeing price increases across the board or are there some companies that are not adjusting to the higher loss trend?
And is the.
Your discount has been sort of flattish our competitors being fairly rational learning you're seeing price increases across the board or are there some companies are in.
That are not adjusting to the higher loss trend.
Yes, Thanks, Jimmy it's Michael.
Speaker 7: I would say that when you look at our, taking the second part of the question first, when you look at our production statistics, you know, retention is down a bit, but it's actually been pretty resilient in the face of the rate we've been driving through the book, particularly given the magnitude of those numbers. And so I think that that's indicative of...
I would say that when you look at our taking the second part of the question first when you look at our production statistics, you know retention down a bit, but it's actually been pretty resilient in the face of the rate we've been driving through the book, particularly given the magnitude of those numbers and so I think that thats indicative of.
Dan Frey: David, it's Dan. I think we're I think we're not going to go any further. I think what Greg said is really the way to think about it, which is, you know, as Alan just mentioned, we've been getting a good level of written pricing, increased that's earning its way through. So there is still definitely a benefit from earn pricing in any given quarter you got a handful of things that are going to go one way or the other that could be small weather that could be bassier.
Speaker 7: uh... you know uh... fairly rational market and the fact that these are again industry were out industry wide pressures that most competitors are dealing with
A fairly rational market and the fact that these are again industry industry wide pressures that most competitors are dealing with.
Speaker 7: In terms of written rate adequacy, again, you know, last quarter I said we'd get there in the coming quarters.
Dan Frey: It could be mixed changes. It could be just variability from one quarter to the next. There were some good guys and some bad guys and nothing particularly significant than that result. Just about offset the benefit from her price. And again, all of inside of an underlying combined ratio that we're really happy with at sub 90.
In terms of written rate adequacy again last quarter, I said, we'd get there in the coming quarters.
Speaker 7: Relative to the comments last quarter, we feel a little bit better sitting here today than we did 90 days ago, given the record level of RPC that we achieved in the third quarter.
Relative to the comments last quarter, we feel a little bit better sitting here today than we did 90 days ago, given our record level of RPC that we achieved in the third quarter.
Speaker 7: and the fact that we're seeing lost trends stabilize and that's coming through in our underlying combined ratio.
And the fact that we're seeing loss trends.
Stabilize and Thats coming through in our underlying combined ratio.
Elyse Greenspan: Your next question comes from the line of Elise Greenspan from Wells Fargel. Please go ahead. Hi, thanks. Good morning. I was hoping to get more color on the reserve development. You guys called out in your ongoing businesses within business insurance. You could tell us what the workers comp favorability. And then I think you called out commercial auto developed adversely. Could we get the numbers there and then are there any other lines in your ongoing business that move materially in the quarter? Yeah, at least it stands so sorry. I'll disappoint you there.
<unk>.
Speaker 7: that said i would also say that you know written rate adequately still depends on the same list of things we talked about last quarter right it's the price we get um... it's it's how quickly lost trends moderate and how much they continue to moderate um... the regulatory process for getting rate approval of an actual uh... loss experience
That said I would also say that written rate adequacy is still depends on the same list of things we talked about last quarter right. It's the price we get.
It's how quickly you loss trends moderate and how much they continue to moderate.
The regulatory process for getting rate approvals than our actual.
Loss experience, but.
Speaker 7: But it is at this point very much a state-by-state conversation and we're working, you know, each state individually and adjusting our actions.
It is at this point very much a state by state conversation on <unk>.
And we're we're we're working each state individually in and adjusting our actions accordingly.
Dan Frey: We're not going to we're not going to do the line by line, but comp has been pretty strongly favorable. It was pretty strongly favorable. Again, this quarter in our remarks. We try to call out, you know, the lines that had noteworthy movement. This quarter commercial auto did have some noteworthy movement. It wasn't dramatic, particularly in the scope of you think about the size of the reserves for the commercial auto book. And what we saw in commercial auto this quarter is, you know, a little bit of a lengthening of of the development patterns, not a terrifically new theme, but every quarter we're looking at all the data that comes in.
Your next question comes from the line of Brian Meredith from UBS Financial. Please go ahead.
Speaker 8: Yeah, thanks. A couple of one here. First, Jeff answers some questions here. Jeff, on the management liability business, I think it mentioned in the quarter that there was some favorable current year development. Maybe we can quantify that and what's going on there with the management liability business that you're seeing this favorable development.
Yes, Thanks, a couple of them here first but Jeff answered some questions here.
Jeff on the management liability business I think you had mentioned in the quarter that there was some favorable current year development.
Maybe you can quantify that and you know what's going on there with the management liability business that youre seeing this favorable development.
Yes.
Hey, Brian It's Dan.
Speaker 4: So I think we're not going to put a number on it. Not a significant deal. The only point Jeff was trying to make is when you do the comparison year over year, there was some favorable CYPQ, which we called out last year in the third quarter. There was some favorable CYPQ this year as well, just not as much. So the year over year is a unfavorable given less of a good guy.
So I think we're not going to put a number is not a significant deal. The only point, Jeff was trying to make is sort of when you do the comparison year over year. There was some favorable CYP <unk>, which we called out last year in the third quarter. There was some favorable <unk> this year as well just not as much so the year over year.
Dan Frey: This gave us an indication that maybe reserves should be carried a little higher than we and we were and we're just trying to react to that in real time as quickly as possible. There were some movement in the other lines, some good guys and some bad guys, nothing particularly no worthy, but those were the two main drivers. And then you guys, you know, you called out higher cats in the third quarter, you know, as well as other quarters this year.
Unfavorable given less of a good guy.
Got you Okay. That's helpful and the next question I'm, just curious bigger picture in business insurance exposure growth continues to be pretty healthy maybe you can give us a little context around you know what kind of drives that exposure growth and I would think that you know what.
Speaker 8: Gotcha, okay, that's helpful. And the next question, I'm just curious, bigger picture in business insurance, you know, exposure growth continues to be pretty healthy. Maybe you can give us a little context around, you know, what kind of drives that exposure growth? You know, we think that, you know, with the economy moderating some here that, you know, that exposure growth will start to slow here.
Dan Frey: Are you guys contemplating maybe any changes to your insurance program heading into 2020, 2024? How do you think I guess changes you made over the past year could have led to higher cats this year? So I don't think the changes we made would have had much of a difference. Obviously last few years we've had had that underlying cat aggregate treaty. We didn't attach it at all in 2023. We didn't renew it in 2024.
The economy moderating some here.
You know that exposure with growth will start to slow here.
Speaker 5: Yeah, Brian , we watch for that all the time. And as you can see in the webcast and the blue lines, we give you, you can see it's been very stable across the select business, the middle market. And obviously those add to the...
Yes, Brian that we watch for that all the time and as you can see in the in the webcast and the Blue lines. We gave you you can see it's been very stable across the select business in the middle market and obviously those add to the total <unk> business and so it really is a function of nominal GDP economic growth in the <unk>.
Speaker 5: a total BI business. And so it really is a function of nominal GDP, you know, economic growth and the overall inflation levels. And clearly, we've seen, you know, the consumer type inflation correct somewhat from the peak of
Dan Frey: We get that question a couple times just just to remind you in 2023 when we had that underlying cat ag treaty. We placed, sorry, 2022. I'm a year into the future already. So 2022, we didn't attach it. We didn't renew it in 2023. Even when we had it last time in 22, we placed about 50% of a $500 million layer. So it couldn't have been more than $250 million of recovery and it cost us a lot to have that policy rate online was very high for that coverage.
They're all inflation levels and clearly we've seen the consumer type of inflation correct somewhat from the peak build mid 2022, where we're really encouraged when we also look at our audit premium which is more of that going backwards view in our core middle market business. We continue to have real strong audit premium also.
Speaker 5: mid 2022, where we're really encouraged when we also look at our audit premium, which is more of a going backwards view in our core middle market business, we continue to have real strong audit premium also.
Speaker 5: So, you know, both backwards and forward, we're encouraged with how exposures playing out in the business and, uh, you know, we'll continue to report out what we see with that line.
So.
Both backwards and forward, we're encouraged with how exposures playing out in the business and we'll continue to report out what we see with that line.
Speaker 1: Your next question comes from the line of Michael Zoranski from BMO Capital Markets. Please go ahead.
Your next question comes from the line of Michael Zaremski from BMO capital markets. Please go ahead.
Dan Frey: We said in July 1st that we'd enter into a new PI specific. Coastal Reinsurance Treaty. I think we'll just continue to evaluate our position and what's available to us in the marketplace from a reinsurance perspective as we look forward to 2024. But I'd say what we sort of regularly say, which is, we're really pleased with our risk selection. We think we do a great job of segmentation and pricing. We're gonna probably keep more net than many of our peers because at the end of the day we like our underwriting.
Hey, great. Good morning, first on business in our insurance segment.
Speaker 13: First, on the business insurance segment, we heard loud and clear the comments about written margins expanding. Is the definition of written margins include reserve changes? When we look at the loss ratio, maybe I guess XCAT, we clearly see that.
We heard loud and clear.
The comments about written margins expanding is the definition of written margins include.
Reserve changes because I'm just trying to when we look at the loss ratio, maybe I guess ex cat.
Clearly see that in the eye that.
Speaker 13: reserve releases or additions or whatever, right, are worse year over year. Clearly margins are good. I'm just trying to, you know, are you trying to, is this written margins?
Reserve releases are or additions or whatever right.
Ryan Tunis: Your next question comes from the line of Ryan Tunis from Economist Research. Please go ahead. Thanks. First question is just from Michael. It turns out homeowners that clearly seems like a line that probably needs more rate, not less, just given work at friends have been. But you mentioned or prepared remarks that we might see some premium growth deceleration because of what you refer to as automatic increase in limits. It's not like that might have been about half of the new premium growth, because you just, I guess mechanically help us understand a little bit more what that increase in limits is tied to.
Or worse year over year, I clearly margins are cut I'm just trying to.
He has written margins mean.
Speaker 13: Back, are you looking kind of forward looking or backward looking any color there?
Are you looking kind of forward looking backward looking any color there. Thanks.
Speaker 4: Mike, it's Dan. So just to clarify for you, so when we're talking about margin and not that context, we're talking about the underlying combined ratio. So leaving to the side catastrophe losses and leaving to the side prior year reserve development.
Yeah, Mike It's Dan So just to clarify for you. So when we're talking about margin in that context, we're talking about the underlying combined ratio, so leaving to the side catastrophe losses, and leading to the side prior year Reserve development.
Speaker 4: The only other comment I'm making that regard is when we do see changes in prior year development, we do roll forward our thinking in terms of does that impact our view of current year loss and go forward loss. But PYD itself as it's booked whether it's favorable or unfavorable is outside of that concept that we're talking about underlying.
The only other comment I'd make on that regardless when we do see.
<unk> and prior year development.
We do roll forward, our thinking in terms of does that impact our view of current year loss in go forward loss.
Ryan Tunis: And in the absence of that, what are some other means by which you can even get more pricing on that line? Sure. Ryan, thanks for the question. So just unpacking it for a second, right? So inside RPC in homeowners, there's really two primary components. There's rate. And then there's exposure or other RPC, which primarily is the additional premium we collect due to the coverage a limit, the dwelling limit on the home going up.
But <unk> itself as it's booked whether it's favorable or unfavorable is outside of that concept for what we're talking about underlying margins.
Speaker 13: Okay, understood in just a quick follow up. And if you change your view of forward looking loss after this quarter and you also called out the...
Okay understood and just a quick follow up have you changed your view of forward looking loss. After this quarter and you also called out the.
Speaker 13: topping off of the asbestos and environmental.
The topping off of the asbestos and environmental that you Didnt think you used the word topping off of your kind of call.
Speaker 13: were topping off, but you kind of called out an additional ad, and I don't know if you want to call out specifically what that dollar amount was.
Call out additional add in I don't know if you want to call out specifically what that dollar amount was.
Ryan Tunis: In over the past two years, we've increased cover J amounts significantly to keep up with higher replacement cost trends that have been occurring sort of across the industry. And given those outsized increases in cover J amounts over the last couple of years, as we take a look at our external data and information about where replacement costs are today. And where trends are, we are largely caught up with that increase. And so we don't see a need for coverage a amounts to move dramatically north from here in the near term.
Thanks.
Yes, so I don't think we will split the asbestos charge beyond that but what we wanted to get across was we did we did our sort of traditional deep dive in the third quarter that resulted in a figure for which we would have strengthened.
Speaker 4: So, I don't think we'll split the asbestos charge beyond that, but what we wanted to get across was we did our sort of traditional deep dive in the third quarter, that resulted in a figure for which we would have strengthened the asbestos reserve. We chose...
<unk> reserve.
We chose also to you could think about it in simple terms as moving higher in the range of possible outcomes for for asbestos and so we put some money on top of what the analysis otherwise would have told you for the quarter.
Speaker 4: think about it in simple terms as moving higher in the range of possible outcomes for us best distance that we put some money on top of what the analysis otherwise would have told you for the quarter.
Speaker 4: And then in terms of the first part of the question, we're looking at all the factors that go into loss trend every quarter, including favorable or unfavorable PYD. There are generally small puts and takes on a pretty regular basis, nothing terribly significant in this quarter in terms of our view of loss trend.
And then in terms of the first part of the question.
We're looking at all the factors that go into loss trend every quarter, including favorable or unfavorable BYD. There are generally small puts and takes on a pretty regular basis nothing terribly significant in this quarter in terms of our view of loss trend.
Ryan Tunis: So that premium that we would, that we have been collecting because cover J has been rising won't be as nearly as big an element of renewal premium change in 24 as it was in 22 and 23. That said to your point, clearly the homeowners line continues to need rate. It continues to need profit improvement. And we will continue to seek higher rate in homeowners, even though the limit increases will be subsiding.
Yeah.
Speaker 1: Your next question comes from the line of Yaren Kenar from Jeffrey. Please go ahead.
Your next question comes from the line of Aaron Cynara from Jefferies. Please go ahead.
Speaker 14: Thank you. And good morning. I guess my first question is on workers comp. So we saw a premium decline there year over year. Are there any one time items there? Or is it just an indication of, you know, market conditions and maybe rate compression and maybe you can tie that into how you're reviewing this line of business and your thoughts about that into 2024.
Thank you and good morning.
My first question is on Workers' comp. So we saw premium decline there year over year.
Or are there any onetime items, there or is it just an indication of market conditions and maybe rate compression.
Ryan Tunis: The other thing I'd point to is, you know, part of the answer in home is pricing. Another big piece of the answer is non-rate actions. And we've been very active in the marketplace across risk collection. Paral by parallel pricing, tighter eligibility, stricter terms and conditions to derive profit improvement in the property line as well. Got it. And then just a follow up on just a business insurance retention, you know, it's interesting, like, how robust that's been.
And maybe you can tie that into how youre viewing this line of business.
And your thoughts about that into.
In 2024.
Yes.
Speaker 5: Yeah, go on, you're in. Yeah, I think your reference in the slight down in the net written premium for the quarter, I would point you a year to date, it is just up, you know, 2%. So it wasn't a meaningful change for the particular quarter. And obviously where you're seeing.
Yes, I think you're referencing the slight down in the net written premium for the quarter I would point you to year to date. It is just up 2%. So it wasn't a meaningful change for the particular quarter and obviously, where you are seeing.
Speaker 5: not the level of net written premium growth on the other product lines that we're seeing in workers comp is clearly the rate pressure that the whole entire industry is seeing there. That rate pressure is driven based on, you know, the Bureau's lost cost recommendations that continue to put minuses across the industry and that's just an indication of the health of the line.
Not the level of net written premium growth on the other product lines that we're seeing in workers' comp is clearly the rate pressure that the entire industry is seeing there that rate pressure is driven based on the bureau's loss cost recommendations that continue.
Ryan Tunis: Clearly, we're seeing impersonal lines retention come off as I would think you'd expect when you're taking rate. Just, what do you guys make of that? Like, why, why is retention been so robust, I guess despite so many rounds of rate increases. Good morning, Ryan. This is Greg. I think we start every month with retaining our high quality book of business. So it's been very much an intentional strategy of ours to make sure that we're being thoughtful on our terms and conditions are pricing and all the changes that we're making to continuously improve margins, but given the quality of that book, not a surprise for us.
Minuses across the industry and Thats, just an indication of the health of the line, where the largest workers' comp writer in the country and on a calendar year basis, we feel terrific about the results of that and that's basically what's driving some of that net written premium change that you that you've mentioned.
Speaker 3: where the largest workers comp writer in the country and on a calendar year basis we feel terrific about the results of that and that's basically which driving some of that net written premium change that you that you mentioned you're just to be clear we feel great about the workers comp lines we feel great about our results this quarter this year and we feel great about the outlook
Just to be clear, we feel great about the workers' comp line, we feel great about our results. This quarter this year and we feel great about the outlook.
Ryan Tunis: It also is an indicator of just how rational the marketplace is right now and the need. For improved margins across the entire industry based on all those headwinds that Alan talked about. So we're not surprised by it. We're very pleased with it. We're very focused on it.
Speaker 14: Got it. Thank you. And then my second question, Austin B.I., did you have any CYPQ there? Because I did notice that the underlying loss ratio was flat year over year. Just given the rate commentary and RPC commentary, I thought maybe we'd see a little bit of improvement there.
Got it. Thank you and then my second question often buy do you have any <unk> there because I did notice that the underlying loss ratio was flat year over year, just given the rate commentary in RPC commentary, what I thought maybe we'd see a little bit of improvement there.
Greg Toczydlowski: Your next question comes from the line of Jimmy Bueller from JP Morgan. Please go ahead. Hi, good morning. So first just had a question on commercial auto and if you could just give us some a little bit more insight into what's driving the adverse development there. Some of your peers have seen that as well, and I think there's some concerns that this could be sort of the beginning of a trend given what's gone on in personal auto over the past two years or so.
Speaker 4: Yeah, you're on it, Stan. So a little earlier in the call and in Greg's comments, we called out there. We did see some benefit from earned price, but a half a dozen other things that would happen in any quarter.
Yeah, Ryan it's Dan So a little earlier on the call and in Greg's comments, we called out there. We did see some benefit from earned price, but a half a dozen other things that would happen in any quarter.
Speaker 4: Could be some good guys, could be some bad guys, could be mixed, could be base year, could be non-cat weather. There were some favorables and some unfavorables netted to a modest unfavorable to offset the pricing benefit, but nothing significant there.
Could be some good guys could be some bad guys could be mix could be <unk>. It could be non cat weather there were some favorable and some unfavorable as netted to a modest unfavorable to offset the pricing benefit but nothing significant there.
Speaker 1: Your next question comes from the line of Paul Newsome from Piper-Fanler. Please go ahead.
Your next question comes from the line of Paul Newsome from Piper Sandler. Please go ahead.
Greg Toczydlowski: Hey, Jimmy, it's Dan again. So yes, we said, you know, a little while ago commercial auto is really just modification based on the most recent data that's come in in terms of the development of claims in commercial auto, particularly bodily bodily injury claims. This is something that we've commented on and off probably over the last three or four quarters. Numbers have been pretty modest. The themes are not inconsistent with what we anticipated, but you get a new set of data and the data looks a little bit different than your prior estimation.
Hi, good morning.
Paul.
Speaker 15: I wanted to ask if you could help me think more about the catalogs.
I wanted to ask if you could help me think more about the cat load.
Respectively, and one of the things I was wondering about.
And this may go to the destination.
Thinking about cats.
Horton.
Inflation is effectively pushing.
Losses, otherwise in the past.
Cat losses.
Designation.
How much of that.
Greg Toczydlowski: And so the magnitude of some of the changes that we anticipated is is a little higher really the focus of this most recent strengthening is the continued sort of longer development of or said inversely the slower closing of claims in commercial auto. So as that continues to lag historical closure patterns were making an adjustment to reflect the most recent data. And that's just a function of repairs taking longer or something else.
Okay.
Scott.
Just any thoughts on that.
Speaker 4: Sure, Paul. It's Dan. I'll start. I think the sort of second piece of the question, the answer would be yes, to the degree that some of what we've seen in higher CAT losses is the impact of inflation over the last several years and just the value of those claims going up. So yes, over time.
Sure Paul It's Dan I'll start.
<unk>.
I think the second piece of the question the answer would be yes to the degree that some of what we've seen in higher cat losses is the impact of inflation over the last several years and just the value of.
Of those claims going up.
So yes.
Over time.
Speaker 4: more things would fall into what would get designated as quote unquote catastrophes given a threshold.
More things would would fall into what would get designated as quote unquote catastrophes, given given the threshold.
Greg Toczydlowski: This is more in the bodily injury side of commercial auto. So it's not it's not so much repairs themselves, although that's benefactor in both Michaels business and a smaller degree and drags business bodily injury. It's more of the settlement of the injury claim. And then in personal auto, where are you in terms of rate rate adequacy on a written basis and is your fifth count has been sort of flatish. Are competitors being fairly rational learning you're seeing price increases across the border are there some, that are not adjusting through the higher law strength.
Speaker 4: Other than that, thinking about cats, you know, we're looking at long-term weather trends, medium-term weather trends, near-term weather trends. We're putting more weight on nearer-term weather trends.
Other than that thinking about cats.
We're looking at long term weather trends medium term weather trends near term weather trends, we're putting more weight on nearer term weather trends.
Speaker 4: And as both Greg and Michael have talked about, trying to react with very strong pricing, changes in terms and conditions, and risk selection where we think it's appropriate.
And as both Greg and Michael have talked about trying to react with very strong pricing changes in terms and conditions and risk selection.
We think it's where we think it's appropriate.
Speaker 4: Um, there is also clearly an uptick in catastrophe.
Greg Toczydlowski: Thanks, Jimmy. It's Michael. I would say that when you look at our, taking the second part of the question first, when you look at our production statistics, you know, retention down a bit, but it's actually been pretty resilient in the face of the rate we've been driving through the book, particularly given the magnitude of those numbers. And so, I think that that's indicative of, you know, a fairly rational market and the fact that these are, again, industry-wide pressures that most competitors are dealing with.
There is also clearly an uptick in catastrophe activity.
Speaker 4: activity this year. So you know last year, I think last quarter, I think Alan maybe gave this.
Activity. This year, so last year I think last quarter I think Alan maybe gave you the statistics and the 91 days of the quarter. There were 88 days on which there was a pcs event occurring.
Speaker 4: statistics that in the 91 days of the quarter, there were 88 days in which there was a PCS event occurring.
Speaker 4: In the third quarter, there were 92 days in the quarter on 91 of those 92 days. There was a PCS event occurring.
In the third quarter, there were 92 days in the quarter on 91 of those 92 days there was a Pcs event occurring so the increase in catastrophes. As this is the combination of several factors. One is there do seem to be more storms more frequently.
Speaker 4: So the increasing catastrophes is the combination of several factors. One is they're do seem to be more storms more frequently.
Greg Toczydlowski: In terms of written rate adequacy, again, you know, last quarter, I said we'd get there in the coming quarters relative to the comments last quarter. We feel a little bit better sitting here today than we did 90 days ago, given the record level of RPC that we achieved in the third quarter and the fact that we're seeing lost trends stabilize and that's coming through in our underlying combined ratio. That said, I would also say that, you know, written rate adequacy still depends on the same list of things we talked about last quarter, right?
Speaker 4: Two, more people have moved into harm's way in terms of where the demographic spread of risk is, and three, inflation has resulted in the impact of those costs being higher.
Two more people have moved into into harm's way in terms of where the demographic spread of risk is and three inflation has has resulted in the impact of those costs being higher.
Speaker 15: Is there any way to think about whether or not that would have an impact on the underlying to vibration? It should essentially move the same plane.
Is there any way to think about whether or not that would have an impact on the underlying combined ratio.
Essentially the same claim too.
Speaker 3: cat designation from the underlying? You know, Paul, sometimes we do see that in a quarter where it's bucketing, where things will spill over into the cat number that would have otherwise been an underlying.
The cat designation from <unk>.
Greg Toczydlowski: But it's the price we get. It's how quickly lost trends moderate and how much they continue to moderate. The regulatory process for getting rate approval is in our actual loss experience. But it is at this point very much a state-by-state conversation, and we're working, you know, each state individually and adjusting our actions accordingly.
Yeah.
Sometimes we do see that in a quarter, where its buckets, where where things will spillover into the cat number that would have otherwise been an underlying.
Speaker 3: That was not a big factor this quarter. It's not like there were a bunch of close calls because of inflation spilled over into a cat designation. This was a significantly high number of severe convective storms for a third quarter that created a bunch of catastrophes. This was not a definitional bucketing close call issue. That does happen sometimes.
That was not a big factor this quarter, it's not it's not like there were a bunch of close calls because of inflation has spilled over into a cat designation. This was.
A significantly high number of severe convective storms for a third quarter that created a bunch of catastrophes. So this this was not a definitional bucket in close call issue that does happen sometimes didn't happen this quarter.
Jimmy Bueller: Your next question comes from the line of Brian Meredith from UBS Financial. Please go ahead. Yeah, thanks. A couple of one here. First, Jeff answers some questions here. Jeff, on the management liability business, I think it mentioned in the quarter that there was some favorable current year development. You know, maybe we can quantify that and, you know, what's going on there with the management liability business that you're seeing this favorable development.
Speaker 1: Your next question comes from the line of Michael Ward from City. Please go ahead.
Your next question comes from the line of Michael Ward from Citi. Please go ahead.
Speaker 11: Good morning, I was curious about personal auto. Just wondering if there was an impact from current year reserves on the underlying result and if you could maybe expand on the frequency and severity trends.
Thanks, guys. Good morning, I was curious about personal auto.
Just wondering if there was an impact from current year reserves.
Underlying result.
If you could maybe expand on the frequency and severity trends.
Yeah.
Yes.
Speaker 7: Sure, Michael. It's Michael. Um, you know, in terms of CYPQ, uh,
Jimmy Bueller: Hey Brian, it's Dan. So I think we're not going to put a number on it. Not a significant deal. The only point Jeff was trying to make is sort of when you do the comparison year over year, there was some favorable CYPQ, which we call about last year in the third quarter. There was some favorable CYPQ this year as well, just not as much. So the year over years as a unfavorable given less of a good guy.
Sure Michael It's Michael.
In terms of the CYP Q.
Speaker 7: Not a significant amount. I mean, we called out the earned impact of pricing. That really is the driver of the improvement in underlying.
Not a significant amount I mean, we called out the earned impact of pricing that really is the driver of the improvement in underlying.
Speaker 7: And then as respects frequency and severity, frequency largely coming in, you know, in line with expectation.
And then as respects frequency and severity.
Frequency largely coming in in line with expectation.
Speaker 7: You know, if you look at external indices, miles driven is up 2 to 3%. It's pretty consistent with the trend that's been on. And so not not a lot to talk about on the frequency side. And then really the.
Look at external indices miles driven is up 2% to 3%, it's pretty consistent with the trend that's been on.
Jimmy Bueller: Gotcha. Okay, that's helpful. And in the next question, I'm just curious, bigger picture and business insurance, you know, exposure growth continues to be pretty healthy. Maybe give us a little context around, you know, what kind of drives that exposure growth. You know, we think that, you know, with the economy moderating some here that exposure will growth will start to slow here. Yeah, Brian, we watch for that all the time. And as you can see in the in the webcast and the blue lines we give you, you can see it's been very stable across the select business, the middle market and obviously those add to the.
And so not not a lot to talk about on the frequency side and then really the the moderating trends that I described are really coming from severity as we continue to see in particular physical damage severity moderate quarter over quarter over quarter as we go through 2023.
Speaker 7: the moderating trends that I described are really coming from severity as we continue to see in particular physical damage severity moderate quarter over quarter over quarter as we go through 2023.
Thanks, and then on.
Speaker 14: Thanks. And then on commercial property, just wondering, you know, how should we think about the impact of the growth on the I margins? And could it, if there's more volatility and non-cat property, might back affect your growth appetite next year?
On commercial property.
Just wondering.
How should we think about the impact of the growth on the high margins and if there's more volatility in non cat property.
Jimmy Bueller: What total BI business and so it really is a function of nominal GDP, you know, economic growth and the overall inflation levels. And clearly we've seen the consumer type inflation correct somewhat from the peak of mid 2022, where we're really encouraged when we also look at our audit premium, which is more of a going backwards view in our core middle market business. We continue to have real strong audit premium also. So, you know, both backwards and forward, we're encouraged with how exposures playing out in the business. And you know, we'll continue to report out what we see with that line.
That affect your growth appetite next year.
Yes.
Okay.
Mike It's Dan.
So.
Speaker 4: I think we're very aware and cognizant of the amount of property that we're putting on the books, where we're putting it on the books and what that's doing to our total exposures. Price property, you know, with the risk load given the uncertainty and variability that can come with it in terms of...
I think we're very aware and cognizant of the amount of property that were putting on the books where were putting it on the books and what that's doing to our to our total exposures, we priced property with with the risk load given given the uncertainty and variability that can come with it.
In terms of.
Speaker 4: in terms of the margin from how much property you're writing, there can be a mix change over time if you think about the relative loss ratios of the lines and some of that's driven by the duration of the liability in the lines. Property historically tends to run a lower underlying loss ratio than for example, workers comp. So you could get a mix change over time. Tell me if that's not responsive.
In terms of the margin from a how much property you are writing there.
Michael Zaremski: Your next question comes from the line of Michael Zaremski from BMO Capital Markets. Please go ahead. Hey, great morning. First on business insurance segment, you know, we heard loud and clear the comments about written margins expanding. Is the definition of written margins include reserve changes because I'm just trying to, you know, when we look at the loss ratio. So maybe I guess ex-cat, you know, we clearly see that in the eye that reserve releases or additions or whatever, write our worse year over year. I'm clearly margins are good.
There can be a mix change over time, if you think about the.
Relative loss ratios of the lines and some of that is driven by the duration of the liability and the lines property historically tends to run a lower underlying loss ratio than for example workers comp.
Michael Zaremski: It's trying to, you know, you're trying to, is this written margins mean back, are you looking kind of forward looking or backward looking any color there? Thanks. Yeah, Mike, it stands for just to clarify for you. So when we're talking about margin and not that context, we're talking about the underlying combined ratio. So leaving to the side catastrophe losses and leaving to the side prior year reserve development. The only other comment I'm making that regard is when we do see changes in prior year development, we do roll forward our thinking in terms of does that impact our view of current year loss and go forward loss. But PYD itself as it's booked, whether it's favorable or unfavorable is is outside of that concept for what we're talking about underlying margins.
So you could get a mix change over time.
Tell me if that's not responsive to your question.
Speaker 5: But the one thing I'd add to that also is that when you look at our property growth, the thrust of that growth really is being driven based on rate and exposure change. So we're being active and very selective on the new business front, but when you look at what's driving the net written premium change, it does start with rate and exposure change. And strong retention.
The one thing I would add to that also when you look at our property growth.
Most of that growth really is being driven based on rate and exposure change clearly, we're being active and very selective on the new business front, but when you look at what's driving the net written premium change it does start with rate and exposure change and strong retention.
Yeah.
Speaker 1: Your next question comes from the line of Mayor Shields from KBW, please go ahead.
Your next question comes from the line of Mayor Shields from K B W. Please go ahead.
Speaker 16: Great, thanks. So, questions start for Jeff. We've seen GNA expenses rise.
Great. Thanks, So a question to start.
Yeah, we see G&A expenses.
Rise significantly.
Speaker 16: significantly faster than written premium every quarter this year. And I was hoping you could talk to what's going on there.
Significantly faster than written premium every quarter this year and I'm, hoping you could talk to what's going on there.
Okay.
Yes.
Speaker 6: Absolutely. This is Jeff. Thanks mayor. The question on expenses is
Absolutely. This is Jeff Thanks, Matt the question on expenses as well.
Speaker 6: We're definitely making strategic investments to support our future success. And broadly speaking, I'd give you two buckets. It's employees and it's also technology investments and think platform. But I remind you all in the context of what we're delivering is active return.
We're definitely making strategic investments to support our future success and broadly speaking I gave you two buckets its employees and its also technology investments in <unk> platform.
Michael Zaremski: Okay, understood in just a quick follow up. And if you change your view of forward looking loss after this quarter and you also called out the the topping off of the especially environmental that you've been thinking you use the word topping off. So you kind of call out additional add and I don't know if you want to call out specifically what that dollar amount was. Thanks. Yeah, so I don't think we'll split the asbestos charge beyond that, but what we wanted to get across was we did we did our sort of traditional deep dive in the third quarter.
But I remind you all in the context of while we're delivering attractive returns.
Right.
Speaker 16: Yes, that's there. No, thanks. That's very helpful. Second question, and I'm obviously shooting a little bit in the dark, but it looks like last year and...
Yeah.
That's very helpful.
Second question on them, obviously, ceding a little bit in the dark, but it looks like last year and this year the run rate of workers compensation reserve releases are a lot higher than preceding years.
Speaker 16: The run rate of worker's competition, reserve releases, is a lot higher than proceeding.
Speaker 16: And if you could talk through what that changes, is it just COVID-related frequency benefit or are there other factors?
And I'm, hoping you could talk through what that change is it just COVID-19 related frequency benefit or are there other factors.
Michael Zaremski: That result in a figure for which we would have strengthened the asbestos reserve. We chose also to you could think about it in simple terms as moving higher in the range of possible outcomes for asbestos. And so we put some money on top of what the analysis otherwise would have told you for the quarter. And then in terms of the first part of the question, you know, we're looking at all the factors that go into lost trend every quarter, including favorable or unfavorable. EYD, there are generally small puts and takes on a pretty regular basis, nothing terribly significant in this quarter in terms of our view of lost trend.
Speaker 4: You know, I understand, you know, comp has been pretty consistently for a number of years a pretty favorable development story and when it is, it's across a number of accident years. That's continued to be the case in 2022 and 2023.
Yes, I understand.
Comp has been pretty consistently for a number of years of pretty favorable development story and when it is it's across a number of accident years.
That's continued to be the case in 2022 and 2023.
Speaker 4: We're really just reacting to, you know, we've had this conversation before. You've got to be really careful with your assumption around medical cost trend given the duration of the liability.
We're really just reacting to.
<unk> had this conversation before you've got to be really careful with your assumption around medical cost trend given the duration of the liability.
Speaker 4: Quarter goes by, but she claims closed. You see what actually happened in terms of severity relative to what you had previously allowed for and you make an adjustment.
Quarter goes by bunch of claims close you'll see what actually happened in terms of severity relative to what you had previously allowed for and you make an adjustment and.
Speaker 4: where we're really just following the numbers in that regard we have we've certainly not become any more aggressive in the way we're reserving for for workers cop it's just mathematical output of the changes that we've
Where we're really just following the numbers in that regard we have we certainly not become any more aggressive in the way we're reserving for for Workers' comp. It's just a mathematical output of the changes that we've seen.
Yaron Kinar: Your next question comes from the line of yarn can are from Jeffries. Please go ahead. Thank you.
Yaron Kinar: I'm good morning. I guess my first question is on workers comp. So we saw a premium decline there. You're over a year. Are there any one time items there or is it just an indication of market conditions and maybe rate compression. And maybe you can tie that into how you're reviewing this line of business and your thoughts about that into 2024. Yeah, go on, Yaron. Yeah, I think you're referencing the slight down in the net written premium for the quarter.
Yaron Kinar: I would point you at a year to date it is just up, you know, 2%. So it wasn't a meaningful change for the particular quarter and obviously where you're seeing not the level of net written premium growth on the other product lines that we're seeing workers comp is clearly the rate pressure that the whole entire industry is seeing there. That rate pressure is driven based on, you know, the Bureau's law cost recommendations that continue to put minuses across the industry and that's just an indication of the health of the line where the largest workers comp writer in the country and on a calendar year basis, we feel terrific about the results of that and that's basically what's driving some of that net written premium change that you that you've mentioned. Yeah, you're just to be clear we feel great about the workers comp lines. We feel great about our results this quarter this year and we feel great about the outlook. Got it.
Speaker 1: Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead.
Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead.
Speaker 11: Hey, good morning. First one I had for you is on casualty. And specifically, I wanted to ask you about that some of the comments that have come out of the larger reinsurance companies. I mean, it sounds...
Hey, good morning.
First one I have is on casualty and specifically.
Specifically I wanted to ask you about the some of the comments that have come out of the larger reinsurance companies I mean it sounds.
Speaker 17: like they've gotten a bit more cautious in their spans on US casualty in general and I guess the social inflation trends and so forth. And you know, certainly you guys, some of you saw a little bit of that in general ability and commercial lines, but I just want to see if you can provide perspective on, you know,
They've gotten a bit more cautious in their stance on U S casualty in general and I guess as social inflation trends and so forth.
Certainly you guys sound like you saw a little bit of that in general liability and commercial lines, but I just wanted to see if you could provide perspective on.
Speaker 17: How big of an issue do you really think that is the industry at this point?
How big of an issue do you really think that is the industry at this point and is there anything unique about your exposure that sort of Insulates you whether it's.
Speaker 17: And is there anything unique about your exposure that sort of insulates you, whether it's, you know, the size of business that, you know, you tend to ride and that kind of...
The size of business.
You tend to write in that kind of thing.
Yeah, Alex it's Alan we think that commentary is well placed and frankly, we've been on that bandwagon since I don't know 2018 or something like that so.
Speaker 3: Yeah, Alex and Sallen, we think that commentary is well-placed, and frankly, we've been on that bandwagon since, I don't know, 2018 or something like that. So, you know, we think we rang that bell very, very early. We think we've reacted to it consistently, even during the pandemic when you might have looked at the data and thought that things were improving. We've said consistently, we don't believe it. We think it's here. We think it's at higher levels. We think it's inflating faster.
We think we ring that bell very very early we think we've reacted to it consistently even during the pandemic. When you might have looked at the data and thought that things were improving we've said consistently we don't believe it we think it's here we think it's at higher levels, we think it's inflate faster.
Speaker 3: And so what we've seen is inside the underlying, the combined ratios that we're reporting in business insurance.
And so.
And so what what we've seen is is inside.
Michael Zaremski: Thank you. And then my second question, awesome, behind. Do you have any CYPQ there? Because I did notice that the underlying loss ratio was flat year over year, just given the rate commentary and RPC commentary was on maybe we feel a little bit of improvement there. Yeah, you're on its stand. So a little earlier in the call and in Greg's comments we called out there. We did see some benefit from earn price, but a half a dozen other things that would happen in any quarter.
Underlying that.
Combined ratios that we're reporting and business insurance so.
Speaker 5: So we do think that it continues to be an important issue to watch. And we've taken a lot of price and part in response to that. So it's...
So we do think that it continues to be an important issue to watch and.
We've taken a lot of price and in part in response to that so.
<unk>.
It's an issue and we think were on top of it.
Got it thank you and follow up I had is on the auto insurance specific with you. Obviously showed a good amount of improvement which is great to see.
Speaker 17: Got it, thank you. And follow up I had on the auto insurance specifically. And you all obviously showed a good amount of improvement, which is great to see. How much of that is driven by the severity beginning to calm down or stabilize in at least? I mean, any color you can provide on those trends and maybe specifically even repair and what you're seeing there.
Michael Zaremski: Could be some good guys could be some bad guys could be mix could be Bayshire could be not cat weather. There were some favorables and something unfavorables netted to a modest unfavorable offset the pricing benefit, but nothing significant there.
How much of that is driven by the severity beginning to calm down or stabilizing at least.
Any color you can provide on those trends and maybe specifically even repair and what youre seeing there.
Paul Newsom: Your next question comes from the line of Paul Newsom from Piper Sandler. Please go ahead. Good morning, thanks for the call. I wanted to ask if you could help me think more about the cat load prospectively and one of the things I was wondering about this may go to the definition of how you think about cats. The important is that inflation is effectively pushing losses that otherwise the past would not have been cat losses into the cat designation.
Speaker 7: Sure, Alex, Michael, I'll just clarify a couple of things I said earlier. So it really is the acceleration of earn pricing, earning through and driving that underlying improvement. But when you think about the external trends and external costs, it definitely is also a result of those external trends moderating. And we had been talking about double digit loss cost trends, particularly in the physical damage space.
Sure Alex it's Mike.
Just clarify a couple of things and as I said earlier. So so it really is the acceleration of earned pricing are earning through and driving that underlying improvement but.
Paul Newsom: And that may be what how much of that it may be a part of why the cat mode may be dropped. Just let me talk to him that would be good. I think the sort of second piece of the question the answer would would be yes to the degree that some of what we've seen in higher cat losses is the impact of inflation over the last several years and just the value of those claims going up.
But when you think about the external trends.
An external cost that definitely is also.
A result of those external trends are moderating and we had been talking about double digit loss cost trends.
Particularly in the physical damage space for a quarter upon quarter upon quarter.
Speaker 7: for quarter upon quarter upon quarter, you know, those trends moved into the single digits this quarter. So it was really both the earned pricing and the moderating trends driving that improvement.
Those trends moved into the single digit this quarter. So it was really both the earned pricing and the moderating trends driving that improvement.
Your next question comes from the line of Scott <unk> from RBC capital markets. Please go ahead.
Speaker 1: Your next question comes from the line of Scott Helleniac from RBC Capital Markets. Please go ahead.
Speaker 18: Yes, good morning. Just warning that if you could comment on the recent proposed reforms in the state of California really to keep private insurers, you know, from in the state from leaving the state. Do you think that the issues there are appropriate? Do you think they're enough and does that impact your strategy there either way in either direction, just any overall kind of first views on some of the proposals out there.
Yes. Good morning, just wondering if you could comment on the recent proposed reforms.
California really to keep our private insurers.
And the state from leaving the state.
Paul Newsom: So yes, over time more things would would fall into what would get designated as quote unquote catastrophes given given a threshold. Other than that, thinking about cats, you know, we're looking at long term weather trends, medium term weather trends near term weather trends. We're putting more weight on nearer term weather trends. And as both Greg and Michael have talked about trying to react with very strong pricing changes in terms in conditions and risk selection where we think it's where we think it's appropriate.
Do you think that.
As there are appropriate do you think there are enough and does that impact your strategy. There you either way in either direction just any.
Any overall kind of first views on some of the proposals out there.
Speaker 7: Sure Scott, it's Michael. I'll share a couple of thoughts. First of all, the idea of regulatory reform in California is positive news.
Sure Scott its Michael.
Sure a couple of thoughts first of all the idea of regulatory reform in California is positive news.
Speaker 7: That said, I really don't think there are enough details available to evaluate. You've got a framework.
That said I really don't think there are enough details available to evaluate <unk> got a framework that the governor has asked the commissioner to take action on but the details underneath that framework and how it is going to be implemented have yet to be defined and so deciding.
Speaker 7: that their governor has asked the commissioner to take action on, but the details underneath that framework and how it's going to be implemented have yet to be defined. And so deciding whether it's a net positive or not and what actions take as a result, there just really aren't enough details yet to evaluate that further. But we certainly are encouraged by the fact that California is considering regulatory reform when we think it's long overdue.
Paul Newsom: There is also clearly an uptick in catastrophe activity this year. So you know, last year, I think last quarter, I think Alan maybe gave a statistic that in the 91 days of the quarter, there were 88 days in which there was a PCS event occurring in the third quarter. There were 92 days in the quarter on 91 of those 92 days. There was a PCS event occurring. So the increasing catastrophes is the combination of several factors.
Whether it's a net positive or not and what actions to take as a result, there just really aren't enough details yet to evaluate that that further but we certainly are.
Encouraged by the fact that California's considering regulatory reform and we think is long overdue.
Okay understood. Thanks.
Speaker 1: And we have time for one more question. Bob, who in from Morgan Stanley , please go ahead.
And we have time for one more question Bob Wang from Morgan Stanley . Please go ahead.
Paul Newsom: One is they're do seem to be more storms more frequently to more people have moved into into harms way in terms of where the demographic spread of risk is. And three inflation has resulted in the impact of those costs being higher. Is there any way to think about whether or not that would have an impact on the underlying to vibration? Should essentially move the same claim to the cat designation from the underlying?
Speaker 14: Thank you. Thank you. Most of my questions were answered, but maybe just one thing you mentioned on the prepared remarks about tech investment. Can you possibly unpack that a little bit? What are the key technological aspects that you're focusing on in terms of investment? I'm assuming cloud is always going to be part, big part of your investment just given that it is a consumption based expense model, but are there other IT capabilities that you would like to call out?
Thank you.
Thank you both of my questions were answered, but maybe just the one thing you mentioned on the prepared remarks about talking about the men.
Can you, possibly unpack that a little bit of what are the key technological aspect that you're focusing on in terms of the investment I'm, assuming cloud is always going to be part big part of their your mathematics, given though that is consumption based.
<unk> model, but are there other IQ capability that you would like to call out.
Yes.
Yeah. So Bob good morning, it's Alan Thank you for the question.
Speaker 3: Yeah, so Bob, good morning. It's Alan. Thank you for the question. You know, we would be.
Be really happy to take this offline with you we've talked really extensively about this over a long period of time.
Speaker 3: really happy to take this offline with you. We've talked really extensively about this over a long period of time. But broadly, the investments that we're making across the organization fall into three buckets. One, extending our lead in risk expertise, two, providing great experiences to our customers, agents, brokers, and employees.
Paul Newsom: You know, Paul, sometimes we do see that in a quarter where it's bucketing where things will spill over into the cat number that would have otherwise been an underlying, that was not a big factor this quarter. It's not like there were a bunch of close calls because of inflation spilled over into a cat designation. This was, you know, a significantly high number of severe convective storms for a third quarter that created a bunch of catastrophes. So this was not a definitional bucketing close call issue. That does happen sometimes, didn't happen this quarter.
But broadly the investments that we're making across the organization fall into three buckets, one extending our lead in risk expertise to providing great experiences to our customers agents brokers and employees and three optimizing productivity and efficiency and that happens in a lot of different ways at the enterprise level and it happens.
Speaker 3: and three optimizing productivity and efficiency. And that happens in a lot of different ways at the enterprise level, and it happens segment by segment. But at the enterprise, broadly speaking, it's digitizing the value chain.
<unk> segment by segment, but at the enterprise broadly speaking, it's digitizing the value chain.
Speaker 3: digitizing the customer journey, modernizing the foundation, advanced analytics, automation, fast-respeed to market, getting the right price on the risk, things like that. And in terms of what's going on in the businesses, it's...
Digitizing the customer journey modernizing the foundation.
Michael Ward: Your next question comes from the line of Michael Ward from City. Please go ahead. Thanks, guys. Good morning. I was curious about personal auto. Just wondering if there was an impact from current year reserves on the underlying result. And if you could maybe expand on the frequency and severity trends. Sure, Michael. It's Michael. You know, in terms of CYPQ, not a significant amount. I mean, we called out the earned impact of pricing that really is the driver of the improvement in underlying.
<unk> analytics automation faster speed to market getting the right price on the risk things like that and in terms of what's going on in the businesses.
Speaker 3: It's partner integration, sales and service, better front end for customers. It's on and on. It's focused and it's ambitious, but it also covers a lot of ground. So we've talked a lot about it extensively and we'd be happy to meet with you and share more.
<unk> partner integration sales and service better front end for customers.
It's on and on it is it has its focus and its ambitious.
Michael Ward: And then as respects frequency and severity, frequency largely coming in, you know, in line with expectation. And if you look at external indices, miles driven is up to 3%. It's pretty consistent with the trend that's been on. And so not a lot to talk about on the frequency side. And then really the moderating trends that I described are really coming from severity. As we continue to see in particular physical damage severity moderate quarter over quarter over quarter as we go through 2023.
But it's also covers a lot of ground. So we've talked a lot about it extensively and we'd be happy to meet with you and share more.
Speaker 19: Okay, thank you for that. And maybe just like a follow up on workers' comp and an apology for belaboring the point on this is that is it possible to maybe unpack a little bit in terms of how the loss ratio looks like for workers' comp versus other parts of business insurance. I'm assuming this does not impact your loss cost trend of 5.5% to 6% but just curious as to if you can give a little bit of details there.
Okay. Thank you for that and maybe just like a follow up on workers comp and apologies for belaboring the point on that.
Is it possible to maybe unpack a little bit in terms of how the loss ratio look like for worker comp versus other parts of business insurance I mean, I'm, assuming that does not impact your loss cost trend of five 5% to 6%, but just curious as to if you can give a little bit about details there.
Speaker 3: Yeah, we're not going to break out the losses by product line, but it certainly is wrapped in the, you know, the overall number that we've talked about historically.
Yeah, we're not going to breakout.
The.
Losses by product line, but it certainly is wrapped in the the overall number that we've talked about historically.
Okay. Thank you.
Thank you.
Speaker 1: Thank you. Ms. Abby Goldstein, I will turn the call back over to you.
Thank you Ms Abbe Goldstein I will turn the call back over to you.
Michael Klein: Thanks. And then on commercial property, just wondering, you know, how should we think about the impact of the growth on the CY margins? And could it, if there's more volatility and noncap property might back affect your growth appetite next year? Michael Stan. So I think we're we're very aware and cognizant of the amount of property that we're putting on the books, where we're putting it on the books and what that's doing to our, to our total exposures, we price property, you know, with with the risk load given given the uncertainty and variability that that can come with it.
Speaker 1: Great, thanks everyone. We appreciate you're joining us today for our call and as usual, if there's any follow-up, please feel free to reach out to a Master Relations. Have a good day. This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Great. Thanks, everyone. We appreciate your joining us today for our call and as usual if theres any follow up please feel free to reach out to Investor relations have a good day.
This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker 20: The.
Okay.
Michael Klein: In terms of in terms of the margin from a how much property you're writing, there can be a mix change over time. If you think about, you know, the relative loss ratios of the lines and some of that's driven by the duration of the liability in the lines, property historically tends to run a lower underlying loss ratio than for example, workers comp. So you can you could get a mix change over time.
Michael Klein: Tell me if that's not responsive to your question. The one thing I'd add to that also is that when you look at our property growth, the thrust of that growth really is being driven based on rate and exposure change. Thirdly, we're being active and very selective on the new business front. But when you look at what's driving the net written premium change, it does start with rate and exposure change. It ends from retention.
Meyer Shields: Your next question comes from the line of Mayor Shields from KBW. Please go ahead. Great thanks. So the question starts for Jeff. We've seen GNA expenses rise significantly faster than written premium every quarter this year. And I'm hoping you could talk to what's going on there. Yeah. Absolutely. This is Jeff. Thanks, Mayor. The question on expenses is we're definitely making strategic investments to support our future success. And broadly speaking, I give you two buckets. It's employees and it's also technology investments and and think platform. But I remind you all in the context of while we're delivering executive returns.
Meyer Shields: Yes, that's very helpful. Second question. And I'm obviously shooting a little bit in the dark, but it looks like last year and this year, the run rate of workers' compensation reserve releases is a lot higher than preceding years. And as long as you could talk through what that changes, is it just COVID related frequency benefit or are there other factors? In my or stand, you know, comp has been pretty consistently for for a number of years, a pretty favorable development story.
Meyer Shields: And when it is, it's across a number of accident years. That's continued to be the case in 2022 and 2023. We're really just reacting to, you know, we've had this conversation before. You've got to be really careful with your assumption around medical cost trend given the duration of the liability. Quarter goes by, bunch of claims closed. You see what would actually happen in terms of severity relative to what you had previously allowed for and you make an adjustment. And we're really just following the numbers in that regard. We've certainly not become any more aggressive in the way we're reserving for workers' comp. It's just the mathematical output of the changes that we've seen.
Alex Scott: Your next question comes to the line of Alex Scott from Goldman Sachs.
Alex Scott: Please go ahead. Hey, good morning. First one I have to use on casualty and specifically wanted to ask you about some of the comments that have come out of the larger reinsurance companies. I mean, it sounds like they've gotten a bit more cautious in their spans on US casualty in general. And I guess the social inflation trends and so forth. You know, certainly you guys sound like you saw a little bit of that in general liability and commercial lines, but I just want to see if you could provide perspective on, you know, how big of an issue do you really think that is the industry at this point?
Alan Schnitzer: And is there anything unique about your exposure that sort of insulates you whether it's, you know, the size of business that, you know, you tend to ride and that kind of thing? Yeah, Alex and Salon, we think that commentary is well placed. And frankly, we've been on that bandwagon since, I don't know, 2018 or something like that. So, you know, we think we rang that bell very, very early. We think we've reacted to it consistently even during the pandemic when you might have looked at the data and thought that things were improving.
Alan Schnitzer: We've said consistently, we don't believe it. We think it's here. We think it's at higher levels. We think it's inflating faster. And so what we've seen is inside the, you know, the underlying, the combineration is that we're reporting in business insurance. So we do think that it continues to be an important issue to watch. And, you know, we've taken a lot of price in part in response to that. So, um, It's an issue and we think we're on top of it.
Michael Klein: Got it, thank you. And follow-up I had on the auto insurance specifically. You all obviously showed a good amount of improvement, which is great to see.
Michael Klein: You know, how much of that is driven by the severity beginning to calm down or stabilizing at least? I mean, any color you can provide on those trends and maybe specifically even repair there and what you're seeing there. Sure, Alex, Michael. I'll just clarify a couple of things I said earlier. So it really is the acceleration of earn pricing, earning through and driving that underlying improvement. But when you think about the external trends and external costs, it definitely is also a result of those external trends moderating.
Michael Klein: And, you know, we had been talking about double digit loss cost trends, particularly in the physical damage space for a quarter upon quarter upon quarter. You know, those trends moved into the single digits this quarter. So it was really both the earn pricing and the moderating trends driving that improvement.
Scott Heleniak: Your next question comes from the line of Scott Helleniac from RBC Capital Markets. Please go ahead.
Michael Klein: Yes, good morning. Just warning if you could comment on the recent proposed reforms in the state of California really to keep private insurance, you know, in the state from leaving the state. Do you think that the issues there are appropriate? Do you think they're enough? And does that impact your strategy there either way in either direction, just any overall kind of first views on some of the proposals out there? Sure, Scott.
Michael Klein: It's Michael. I'll share a couple of thoughts. First of all, you know, the idea of regulatory reform in California is positive news. That said, I really don't think there are enough details available to evaluate. You've got a framework that the governor has asked the commissioner to take action on, but the details underneath that framework and how it's going to be implemented have yet to be defined. And so deciding, you know, whether it's a net positive or not and what actions take as a result, there just really aren't enough details yet to evaluate that further. But we certainly are encouraged by the fact that California is considering regulatory reform when we think it's long overdue. Understood.
Bob: Thanks. And we have time for one more question.
Alan Schnitzer: Bob, who in from Morgan Stanley, please go ahead. Thank you. Most of my questions were answered, but maybe just one thing you mentioned on the prepared remarks about tech investment. Can you possibly unpack that a little bit of what are the key technological aspects that you're focusing on in terms of investment? I'm assuming cloud is always going to be part big part of your investment, just given that it is a consumption based expense model. But are there other IT capabilities that you would like to call out?
Alan Schnitzer: Yeah, so Bob, good morning. It's Alan. Thank you for the question. You know, we would be really happy to take this off line with you. We've talked really extensively about this over a long period of time. But broadly, you know, the investments that we're making across the organization fall into three buckets. One, extending our lead in risk expertise to providing great experiences to our customers, agents, brokers and employees, and three optimizing productivity and efficiency.
Alan Schnitzer: And that happens in a lot of different ways at the enterprise level. And it happens segment by segment. But at the enterprise, you know, broadly speaking, it's digitizing the value chain, digitizing the customer journey, modernizing the foundation, advanced analytics, automation, faster speed to market, getting the right price on the risk, things like that. And in terms of what's going on in the businesses, it's partner integrations, sales and service, better front end for customers. It's on and on. It's focused and it's ambitious, but it's also covers a lot of around.
Michael Klein: So we've talked a lot about it extensively and we'd be happy to meet within Suremore. Thank you for that.
Michael Klein: And maybe just like a follow-up on workers' comp and an apology for belaboring the point on this, is that is it possible to maybe unpack a little bit in terms of how the loss ratio looks like for workers' comp versus other parts of business insurance? I'm assuming this does not impact your loss cost trend of 5.5% to 6%, but just curious as to if you can give a little bit of detail there. Yeah, we're not going to break out the losses by product line, but it certainly is wrapped in the overall number that we've talked about historically. Okay, thank you. Thank you.
Abbe Goldstein: And thank you, Ms. Abbe Goldstein, I will turn the call back over to you. Great, thanks everyone. We appreciate you're joining us today for our call and as usual, if there's any follow-up, please feel free to reach out to a Master Relations. Have a good day.
Unknown Executive: This concludes today's conference call. Thank you for your participation and you may now disconnect. Thank you.