Q4 2024 The Hartford Financial Services Group Inc Earnings Call
But the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Susan Spivak Senior Vice President of Investor Relations. Thank you. Please go ahead.
Speaker Change: Good morning, and thank you for joining us today for our call and webcast on fourth quarter and 2024 earnings yesterday, we reported results and posted all the earnings related materials on our website now I'd like to introduce our speaker to start we have Chris Swift, Chairman and Chief Executive Officer, followed by back.
Speaker Change: Costello, our chief financial Officer after their prepared remarks, we will begin taking your questions.
Speaker Change: Also with us to assist with your questions are several members of our management team just a few comments before Chris begins.
Speaker Change: <unk> call includes forward looking statements as defined under the private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and actual results could be materially different we do not assume any obligation to update information or forward looking statements provided.
Speaker Change: On this call investors should also consider the risks and uncertainties that could cause actual results to differ from these statements. A detailed description of those risks and uncertainties can be found in our SEC filings.
Speaker Change: Our commentary today includes non-GAAP financial measures explanations and reconciliations of these measures to the comparable GAAP measures are included in our SEC filings as well as in the news release and financial supplement.
Speaker Change: Finally, please note that no portion of this conference call may be reproduced or rebroadcast in any form without the hartford's prior written consent.
Speaker Change: Replays of this webcast and an official transcript will be available on the Hartford's website for one year.
Chris Swift: I'll now turn the call over to Chris.
Good morning, and thank you for joining us today.
Speaker Change: Beginning I wanted to take a moment to address the recent oil players that have devastated the Los Angeles community.
Chris Swift: Our thoughts are with all those impacted by this tragedy.
Chris Swift: On the ground is working tirelessly to help our customers rebuild and recover and I thank them for their dedication.
Speaker Change: After Beth and I summarize our outstanding fourth quarter and full year results.
Speaker Change: We will then be joined by our business leaders for our Q&A session, including Mo Tooker, who was appointed President effective Tomorrow February <unk>.
Oh lead all our P&C businesses.
Speaker Change: It will be responsible for stewarding several enterprise wide initiatives.
Speaker Change: It was an exceptional leader with a strong reputation for strategic growth customer focused solutions.
Speaker Change: Underwriting discipline and building a cohesive culture.
Speaker Change: He is ideally suited to step into the president role as we advance our growth and innovation strategy aimed at addressing our customers' changing needs.
Speaker Change: So let's get started.
Speaker Change: Our fourth quarter results capped off another outstanding year of financial performance and strategic achievements.
Speaker Change: These results highlight the strength of our franchise.
Speaker Change: Particularly our exceptional underwriting execution.
Speaker Change: Extensive distribution relationships and an unparalleled customer experience.
Speaker Change: I wanted to extend my heartfelt thanks to our dedicated employees.
Speaker Change: Your unwavering commitment and hard work are the driving force behind our success.
Speaker Change: Reflecting on some key achievements from 2024 for both the quarter and the year.
Speaker Change: Topline growth in commercial loans was 6% for the quarter with an underlying combined ratio of 87.1.
Speaker Change: For the year growth was 9%.
Speaker Change: The underlying combined ratio of $87 nine was consistent with prior year.
Speaker Change: Personal lines achieved nine three points of underlying combined ratio improvement in the quarter, including over 10 points in auto.
Speaker Change: For the year personal lines delivered an underwriting gain.
Speaker Change: Including an auto underlying loss ratio that was one point better than our expectations.
Speaker Change: We continue to achieve strong renewal written pricing increases across P&C during the quarter.
Speaker Change: Including notable double digit increases in commercial and personal auto commercial property.
Speaker Change: Homeowners and general liability.
Speaker Change: Group benefits delivered an impressive core earnings margin of seven 8% for the quarter.
Speaker Change: And eight 2% for the year led by strong life and disability results.
Speaker Change: <unk>.
Speaker Change: Our investment portfolio continues to generate solid performance.
Speaker Change: All of these items contributed to an outstanding core earnings Roe.
Speaker Change: A 16, 7% for the year.
Speaker Change: So let me dive deeper into the performance of each of our businesses.
Speaker Change: Our commercial lines business achieved significant topline growth, while maintaining highly profitable underlying margins.
Speaker Change: Premium growth was driven by strong pricing increases across most lines.
Speaker Change: Double digit new business growth in our SME focused business and.
Speaker Change: And exposure growth that continues to benefit from a resilient economy.
Speaker Change: As expected underlying margins for the year were consistent with 2023, reflecting our steadfast commitment to disciplined underwriting while sustaining industry leading performance.
Favorable underwriting results in property, along with strong renewal written pricing execution across all lines offset industrywide elevated liability severity.
Speaker Change: Beth will provide specifics around prior year development in her comments, but I wanted to take a moment to address our general liability reserves.
Speaker Change: Based on our fourth quarter review, we have strengthened our general liability reserves by $130 million before tax.
Speaker Change: We believe that we have addressed the most recent trends and have adjusted our ultimate losses Accordingly.
Speaker Change: Reflecting the potential for increasing settlement costs due to a higher percentage of attorney representation across all claim sizes.
Speaker Change: And the rise in average settlement rates.
Speaker Change: Moving into each of our commercial lines businesses.
To offset industry wide elevated liability severity.
Speaker Change: Commercial remains the cornerstone of growth and profitability for the Hartford setting.
Beth will provide specifics around prior year development in her comments, but I wanted to take a moment to address our general liability reserves.
Speaker Change: Setting an industry standard that is difficult to replicate in the market.
Speaker Change: I'm very pleased to share that for the sixth consecutive year de Novo group is ranked the Hartford as the number one small commercial carrier.
Based on our fourth quarter review, we have strengthened our general liability reserves by $130 million before tax.
Speaker Change: Overall digital capabilities.
We believe that we have addressed the most recent trends and have adjusted our ultimate losses Accordingly.
Speaker Change: An important competitive advantage in this market.
Speaker Change: Our top ranking reflects our commitment to providing exceptional functionality ease of use.
Selecting the potential for increasing settlement costs due to a higher percentage of attorney representation across all claim sizes and.
Speaker Change: And unparalleled support and access to our agents and customers.
The rise in average settlement rates.
Speaker Change: Our financial performance reflects this top ranking where we achieved a record breaking written premium of $5 5 billion in 2024, including $1 1 billion of new business, while extending a decade long trend of annual sub 90 underlying combined ratios.
Moving into each of our commercial lines businesses small commercial remains the cornerstone of growth and profitability for the Hartford setting an industry standard that is difficult to replicate in the market.
I am very pleased to share that for the sixth consecutive year Qdoba group is ranked the Hartford as the number one small commercial carrier in overall digital capabilities.
Speaker Change: With another year of exceptional results in relentless advancement of our capabilities I remain incredibly bullish on the outlook for our small commercial business.
An important competitive advantage in this market.
Speaker Change: Our middle and large commercial organization continues to demonstrate strong growth in underlying profitability.
Our top ranking reflects our commitment to providing exceptional functionality ease of use.
Speaker Change: We are capitalizing on elevated submission flow.
And unparalleled support and access to our agents and customers.
Speaker Change: And in part by our strategic investments to expand product capabilities and.
Our financial performance reflects this top ranking where we achieved a record breaking written premium of $5 5 billion in 2024, including $1 1 billion of new business, while extending a decade long trend of annual sub 90 underlying combined ratios.
Speaker Change: And enhance the efficiency of the broker and agent experience.
Speaker Change: Our investments in middle and large commercial position us well to drive additional top line growth and deliver exceptional results.
Speaker Change: While fourth quarter, new business was slower than previous quarters full year performance included strong topline growth and an underlying margin that remains below 90.
With another year of exceptional results in relentless advancement of our capabilities I remain incredibly bullish on the outlook for our small commercial business.
Speaker Change: Written premium growth reflects strong renewal rate execution, and a 16% increase in middle market, new business with robust growth across nearly all product lines.
Our middle and large commercial organization continues to demonstrate strong growth in underlying profitability we.
We are capitalizing on elevated submission flow.
Speaker Change: Led by construction and marine.
In part by our strategic investments to expand product capabilities.
Speaker Change: 2025, we expect to sustain our track record of delivering meaningful growth with underwriting discipline.
And enhance the efficiency of the broker and agent experience.
Our investments in middle and large commercial position us well to drive additional top line growth and deliver exceptional results.
Speaker Change: Global specialty had an exceptional year, maintaining excellent underlying margin performance in the low to mid <unk> for the past three years.
While fourth quarter, new business was slower than previous quarters full year performance included strong topline growth and an underlying margin that remained below 90.
Speaker Change: Our competitive position breadth of products and solid renewal written pricing drove strong gross written premium growth and record new business.
Written premium growth reflects strong renewal rate execution, and a 16% increase in middle market, new business with robust growth across nearly all product lines.
Speaker Change: This expansion was fueled by significant contributions from global re.
Speaker Change: And our wholesale business we.
Speaker Change: We remain excited about our position in the wholesale market.
Speaker Change: And across global specialty with execution that has never been stronger.
Led by construction and marine.
2025, we expect to sustain our track record of delivering meaningful growth with underwriting discipline.
Speaker Change: The transformational work we have done over the last five years has put us in a strong position to accelerate our market, leading competitive advantage driven by technology data science and an experienced workforce.
Global specialty had an exceptional year, maintaining excellent underlying margin performance in the low to mid <unk> for the past three years.
Speaker Change: Whether in standard lines, our E&S lines, we are gaining market share due to our unique underwriting capabilities and strong distribution relationships.
Our competitive position breadth of products and solid renewal written pricing drove strong gross written premium growth and record new business.
Speaker Change: Across commercial lines, our continued emphasis on property expansion generated 16% premium growth this year.
This expansion was fueled by significant contributions from global re.
And our wholesale business we.
We remain excited about our position in the wholesale market.
Speaker Change: We achieved our full year goal ending the year with $3 billion in written premium and plan to continue building on this success in 2025.
And across global specialty with execution that has never been stronger.
The transformational work we have done over the last five years has put us in a strong position to accelerate our market, leading competitive advantage driven by technology data science and an experienced workforce.
Speaker Change: We remain confident that the market conditions support earnings strong risk adjusted returns.
Through disciplined underwriting, while maintaining a stable approach to catastrophe risk management.
Speaker Change: Despite industry wide elevated catastrophe losses, we are proud that our full year cat ratio remained flat with 2023, even with our significant property portfolio expansion.
Whether in standard lines, our E&S lines, we are gaining market share due to our unique underwriting capabilities and strong distribution relationships.
Across commercial lines, our continued emphasis on property expansion generated 16% premium growth this year.
Speaker Change: Moving to pricing in commercial lines renewal written pricing in the quarter, excluding workers' compensation of nine 7% was up 40 basis points from the prior quarter.
We achieved our full year goal ending the year with $3 billion in written premium and plan to continue building on this success in 2025.
Speaker Change: All in ex comp renewal written pricing in commercial lines remained comfortably above loss cost trends.
We remain confident that the market conditions support earnings strong risk adjusted returns.
Speaker Change: Workers' compensation pricing was slightly down sequentially.
Through disciplined underwriting, while maintaining a stable approach to catastrophe risk management.
Speaker Change: As we look to 2025 pricing, we are focused on keeping pace with loss cost trends.
Despite industry wide elevated catastrophe losses, we are proud that our full year cat ratio remained flat with 2023.
Across commercial lines with our diversified and expanding product portfolio and innovative mindset. We are primed to continue to grow market share at highly attractive margins.
Even with our significant property portfolio expansion.
Moving to pricing in commercial lines renewal written pricing in the quarter, excluding workers' compensation of nine 7% was up 40 basis points from the prior quarter.
Speaker Change: Turning to personal lines 2024 was a transformative year.
Speaker Change: <unk> as well for the future.
Speaker Change: We have positioned the business with new products and capabilities revamped our operating routine and.
All in ex comp renewal written pricing in commercial lines remained comfortably above loss cost trends.
Speaker Change: And equipped ourselves with data and technology resources.
Speaker Change: We have faced business and environmental challenges with unparalleled determination.
Workers' compensation pricing was slightly down sequentially.
As we look to 2025 pricing, we are focused on keeping pace with loss cost trends.
Speaker Change: And I want to recognize the team's hard work and commitment to our vision and strategy.
Across commercial lines with our diversified and expanding product portfolio and innovative mindset. We are primed to continue to grow market share at highly attractive margins.
Speaker Change: For 2024, and auto we achieved significant rate increases across the book.
Speaker Change: Driving an overall auto underlying loss ratio improvement of seven three points.
Turning to personal lines 2024 was a transformative year.
Speaker Change: Over one point better than the high end of our expectations.
Speaker Change: As a result of the significant written pricing actions that will earn into the book.
<unk> as well for the future.
We have positioned the business with new products and capabilities revamped our operating routine and.
Speaker Change: Bind with moderating severity trends, we expect continued underlying combined ratio improvement to reach the mid nineties during 2025.
And equipped ourselves with data and technology resources.
We have faced business and environmental challenges with unparalleled determination.
Speaker Change: Our homeowners business had an exceptional year highlighted by an impressive underlying combined ratio for the quarter.
And I want to recognize the team's hard work and commitment to our vision and strategy.
Speaker Change: We have seen in over a decade.
Speaker Change: And a slightly improved cat ratio in a year of elevated industry catastrophe losses.
For 2024, and auto we achieved significant rate increases across the book driver.
Driving an overall auto underlying loss ratio improvement of seven three points.
Speaker Change: Pricing remained strong all year outpacing underlying loss cost trends.
Speaker Change: Substantial investments have significantly improved price to risk matching and enhanced underwriting capabilities that are benefiting the homeowners book more broadly.
Over one point better than the high end of our expectations.
As a result of the significant written pricing actions that will earn into the book combined with moderating severity trends. We expect continued underlying combined ratio improvement to reach the mid nineties during 2025.
Speaker Change: With our rates and insurance to value keeping pace with loss trend.
Speaker Change: We are confident about our strong position in the market.
Speaker Change: Turning to group benefits are.
Our homeowners business had an exceptional year highlighted by an impressive underlying combined ratio for the quarter.
Speaker Change: Our strong core earnings margin in 2024 demonstrates focused execution.
The best we've seen in over a decade.
Speaker Change: A resilient economy.
And a slightly improved cat ratio in a year of elevated industry catastrophe losses.
Speaker Change: Improved mortality trends.
And continued strong disability results.
Speaker Change: Group life mortality trends were favorable.
Pricing remained strong all year outpacing underlying loss cost trends.
Speaker Change: Though they are expected to remain above pre pandemic levels.
Substantial investments have significantly improved price to risk matching and enhanced underwriting capabilities.
Speaker Change: The full year disability loss ratio of 68% Pri.
Speaker Change: Primarily reflects favorable long term disability trends.
That are benefiting the homeowners book more broadly.
Speaker Change: Offset by pressure in paid family and medical leave products.
With our rates and insurance to value keeping pace with loss trend we.
Speaker Change: <unk> products are highly utilized and valued by employees.
We are confident about our strong position in the market.
Speaker Change: And we are implementing the necessary rate and underwriting actions to improve the margins.
Turning to group benefits are.
Speaker Change: Overall, the benefit landscape is evolving with increased awareness of features and benefits, which is positively impacting our supplemental products such as critical illness hospital indemnity and accident.
Our strong core earnings margin in 2024 demonstrates focused execution.
A resilient economy.
Improved mortality trends.
And continued strong disability results.
Group life mortality trends were favorable.
Speaker Change: We continue to expect the group benefits market to remain dynamic with digital transformation product innovation and increasing customer demands.
They are expected to remain above pre pandemic levels.
The full year disability loss ratio of 68%.
Speaker Change: As a result, we are investing in this business and have a clear roadmap that I am confident will only strengthen our market leadership position.
Primarily reflects favorable long term disability trends.
Offsetting by pressure and paid family and medical leave products.
These leaf products are highly utilized and valued by employees.
Speaker Change: Looking ahead, we expect a modest increase in sales during 2025 and are off to a solid start.
And we are implementing the necessary rate and underwriting actions to improve the margins.
Speaker Change: Core earnings margins in recent years have exceeded our long term targets. However, we.
Overall, the benefit landscape is evolving with increased awareness of features and benefits, which is positively impacting our supplemental products such as critical illness hospital indemnity and accident.
Speaker Change: We continue to expect a core earnings margin of 6% to 7% in this business with disability incidence trends returning to historic levels.
We continue to expect the group benefits market to remain dynamic.
Speaker Change: Moving to investments the portfolio continues to support the Hartford's financial and strategic goals performing well across a range of asset classes and market conditions.
With digital transformation product innovation and increasing customer demands.
As a result, we are investing in this business and have a clear roadmap that I am confident will only strengthen our market leadership position.
Speaker Change: We will provide more details.
Speaker Change: In closing excellent fourth quarter results capped a year of outstanding financial performance positioning us to sustain consistent and superior result in 2025.
Looking ahead, we expect a modest increase in sales during 2025 and are off to a solid start.
Core earnings margins in recent years have exceeded our long term targets. However.
Speaker Change: I remain incredibly optimistic about our future because.
We continue to expect a core earnings margin of 6% to 7% in this business.
Speaker Change: 2024 financial results have showcased the effectiveness of our strategy and the value and our ongoing investments.
Disability incidents trends returning to historic levels.
Speaker Change: Commercial lines continues to maintain excellent underlying margins, while delivering robust top line growth.
Moving to investments the portfolio continues to support the Hartford's financial and strategic goals performing well across a range of asset classes and market conditions.
Speaker Change: Group benefits core earnings margin remains outstanding.
Speaker Change: We have achieved key milestones in our personal lines journey and plan to return auto to targeted profitability by mid 2025.
Beth: Beth will provide more details.
Beth: In closing excellent fourth quarter results capped a year of outstanding financial performance positioning us to sustain consistent and superior results in 2025.
Speaker Change: Investment income remained strong supported by attractive yields and a diversified durable portfolio of assets.
Beth: I remain incredibly optimistic about our future because.
Speaker Change: And.
Speaker Change: Share repurchases and dividends remain our primary capital management tool.
Beth: 2024 financial results have showcased the effectiveness of our strategy and the value in our ongoing investments.
Speaker Change: As our businesses continued to generate excess capital, we will proactively manage capital resources to further drive shareholder value.
Beth: Commercial lines continues to maintain excellent underlying margins, while delivering robust top line growth group.
Speaker Change: All of these factors contributed to my excitement and confidence about the future of the Hartford and our ability to extend our track record of delivering industry, leading financial performance.
Beth: Group benefits core earnings margin remains outstanding.
We have achieved key milestones.
Beth: In our personal lines journey and plan to return auto to targeted profitability by mid 2025.
Bob: Now I'll turn the call over to Bob to provide more detailed commentary on the quarter.
Speaker Change: Thank you Chris Corr.
Beth: Investment income remained strong supported by attractive yields and a diversified durable portfolio of assets.
Speaker Change: Core earnings for the quarter were $865 million or $2 94 per diluted share with a full year core earnings ROE of 16, 7%.
Beth: And.
Beth: Share repurchases and dividends remain our primary capital management tool.
Speaker Change: Commercial lines had a strong quarter with core earnings of $665 million.
Beth: As our businesses continued to generate excess capital, we will proactively manage capital resources to further drive shareholder value.
Speaker Change: Written premium growth of 6% and an underlying combined ratio of 87 one.
Speaker Change: Small commercial continues to deliver excellent results with written premium growth of 9%, including 22% new business growth and underlying combined ratio of $86 seven.
Beth: All of these factors contribute to my excitement and confidence about the future of the Hartford and our ability to extend our track record of delivering industry, leading financial performance.
Speaker Change: This is the 18th straight quarter of an underlying combined ratio below 90.
Now I'll turn the call over to Bob to provide more detailed commentary on the quarter.
Bob: Thank you Chris.
Speaker Change: Middle and large commercial had another quarter of strong profitability with an underlying combined ratio of 92 slightly improved from the prior year and written premium growth of 5%, reflecting lower new business as we remain disciplined, particularly with elevated general liability severe.
Bob: Core earnings for the quarter were 865 million or $2 94 per diluted share full year core earnings ROE of 16, 7%.
Bob: Commercial lines had a strong quarter with core earnings of $665 million.
Bob: Premium growth of 6% and an underlying combined ratio of 87 one.
Speaker Change: Or any loss trends.
Speaker Change: Global specialties fourth quarter underlying combined ratio was an excellent 83, six with record earned premium of $865 million.
Bob: Small commercial continues to deliver excellent results with written premium growth of 9%, including 22% new business growth and underlying combined ratio of $86 seven.
Speaker Change: Written premium growth of 3% in the quarter reflects lower new business in primary and excess casualty and from our global reinsurance business, which declined 14% primarily due to lower premium in Latin America.
Bob: This is the 18th straight quarter of an underlying combined ratio below 90.
Bob: Middle and large commercial had another quarter of strong profitability with an underlying combined ratio of 92 slightly improved from the prior year and written premium growth of 5%, reflecting lower new business as we remain disciplined, particularly with elevated general liability severe.
Speaker Change: Global specialty written premium excluding global rate was up 6%.
Speaker Change: In personal lines core earnings for the quarter increased to 155 million, including the first underwriting gain in two years with an underlying combined ratio of 92, driven by a $17 three point improvement in the loss ratio over the prior year the fourth.
Bob: Or any loss trends.
Bob: Global specialties fourth quarter underlying combined ratio was an excellent 83, six with record earned premium of $865 million.
Speaker Change: Quarter auto underlying combined ratio of one three improved 10 five points from the 2023 period and homeowners producing outstanding underlying combined ratio of 61 seven witten.
Bob: Written premium growth of 3% in the quarter reflects lower new business in primary and excess casualty and from our global reinsurance business, which declined 14% primarily due to lower premium in Latin America.
Speaker Change: Written premium and personal lines increased 12% in the fourth quarter in part driven by steady and successful rate actions.
Bob: Global specialty written premium excluding global re was up 6%.
Speaker Change: In auto we achieved written pricing increases of 19, 1% and earned pricing increases of 21, 9%.
Bob: In personal lines core earnings for the quarter increased to 155 million, including the first underwriting gain in two years with an underlying combined ratio of 92, driven by a $17 three point improvement in the loss ratio over the prior year the fourth.
Speaker Change: In homeowners written pricing increases were 13, 9% and 14, 9% on an earned basis.
Speaker Change: Additionally, new business growth was robust in both homeowners and auto with homeowners more than doubling to $59 million and auto increasing by 18% to $77 million.
Bob: Quarter auto underlying combined ratio of one three improved 10 five points from the 2023 period and homeowners producing outstanding underlying combined ratio of 61 seven witten.
Speaker Change: The personal lines fourth quarter expense ratio of $26 five increase from the prior year by one nine points, primarily driven by higher direct marketing costs higher staffing cost and higher commissions, partially offset by the impact of higher earned premium.
Written premium and personal lines increased 12% in the fourth quarter in part driven by steady and successful rate actions.
Bob: In auto we achieved written pricing increases of 19, 1% and earned pricing increases of 21, 9%.
Speaker Change: Total P&C net unfavorable prior accident year development within core earnings was $97 million before tax primarily driven by a $141 million of asbestos and environmental development.
Bob: In homeowners written pricing increases were 13, 9% and 14, 9% on an earned basis.
Bob: Additionally, new business <unk>.
Bob: Robust in both homeowners and auto with homeowners more than doubling to $59 million and auto increasing by 18% to $77 million.
Speaker Change: Excluding the A&D development core prior accident year net development was favorable by $44 million due to reserve reductions in workers' compensation catastrophes.
Bob: The personal lines fourth quarter expense ratio of 26 point increase in the prior year by one nine points, primarily driven by higher direct marketing cost higher staffing costs and higher commissions, partially offset by the impact of higher earned premium.
Speaker Change: On professional liability and personal auto partially offset by increases in general liability and commercial auto.
Speaker Change: As Chris mentioned, we strengthened our general liability reserves this quarter by $130 million before tax.
Speaker Change: This included strengthening to the 2015 to 2018 accident years, driven by higher than expected construction defect claim activity in those years.
Bob: Total P&C net unfavorable prior accident year development with in core earnings was $97 million before tax.
Bob: Merely driven by $141 million of asbestos and environmental development.
Speaker Change: In addition across our general liability lines, we strengthened the incurred but not reported reserves or more recent accident years as we observed an increase in severity on a reported claim above our expectations and anticipate a higher claims severity trend on unreported claims as the industry continues to face.
Bob: Excluding the A&D development core prior accident year net development was favorable by $44 million due to reserve reductions in workers' compensation catastrophes.
Bob: On professional liability and personal auto partially offset by increases in general liability and commercial auto.
Speaker Change: Increasing settlement costs with rising attorney representation rates and higher average settlement rates.
Bob: As Chris mentioned, we strengthened our general liability reserves this quarter by $130 million before tax.
Speaker Change: We completed our A&E reserve study in the quarter, resulting in an increase in reserves of $203 million comprised of 167 million for asbestos and $36 million for environmental.
Bob: This included strengthening to the 2015 to 2018 accident years, driven by higher than expected construction defect claim activity in those years.
Speaker Change: As I mentioned $141 million impacted core earnings and 62 million was recorded as a deferred gain exhausting. The ADC cover we have for any.
Bob: In addition across our general liability lines, we strengthened the incurred but not reported reserves for more recent accident years as we observed an increase in severity on a reported claims above our expectations and anticipate a higher claims severity trend on unreported claims as the industry continues to face.
Speaker Change: As a reminder, we have recorded a total of $850 million before tax as a deferred gain within other liability for <unk> as of December 31.
Speaker Change: For our navigators ADC in 2024, we have amortized $145 million of the total $209 million deferred gain.
Bob: Increasing settlement costs with rising attorney representation rates and higher average settlement rates.
Bob: We completed our A&E reserve study in the quarter, resulting in an increase in reserves of $203 million comprised of 167 million for asbestos and 36 million for environmental.
Speaker Change: Based on our estimate of payment patterns, we expect the remaining balance of $64 million to be amortized in 2025.
Speaker Change: This will positively impact net income and have no impact to core earnings.
Bob: As I mentioned $141 million impacted core earnings and 62 million was recorded as a deferred gain exhausting. The ADC cover we have for any.
Speaker Change: With respect to cats P&C current accident year catastrophes in the fourth quarter were $80 million before tax which was essentially flat to the prior year and included $68 million from Hurricane Mellon as well as net reductions for caf incurred earlier in year of $18 million.
Bob: As a reminder, we have recorded a total of $850 million before tax as a deferred gain within other liability or any as of December 31.
Speaker Change: For the year cats totaled $768 million.
Bob: For our navigators ADC in 2024, we have amortized $145 million of the total $209 million deferred gain.
Speaker Change: We continue to actively manage our cat exposure to aggregation management and underwriting discipline, especially in certain higher risk areas.
Bob: Based on our estimate of payment patterns, we expect the remaining balance of $64 million to be amortized in 2025.
Speaker Change: Additionally, we have a robust and comprehensive reinsurance program on both a per occurrence and aggregate basis.
Bob: This will positively impact net income and have no impact to core earnings.
Speaker Change: In terms of architecture <unk> reinsurance program renewal on January one we were very pleased with the placements and terms and conditions for our programs.
Bob: With respect to cats P&C current accident year catastrophes in the fourth quarter were $80 million before tax which was essentially flat to the prior year and included $68 million from Hurricane Mellon as well as net reductions for caf incurred earlier in year of $18 million.
Speaker Change: Our expiring core per occurrence catastrophe protection was renewed an approximate 10% decrease in costs on a risk adjusted basis.
Speaker Change: Based on publicly available information compares favorably with the overall market.
For the year cats totaled $768 million.
Speaker Change: Speaks to the quality of our underwriting strong reinsurer relationships and favorable experience.
Bob: We continue to actively manage our cat exposure to aggregation management and underwriting discipline, especially in certain higher risk areas.
Speaker Change: Additionally, we continue to strategically leverage the combination of traditional reinsurance capacity with the sponsorship of our catastrophe Bond foundation re to ensure robust and diversified protection for our portfolio.
Bob: Additionally, we have a robust and comprehensive reinsurance program on both a per occurrence and aggregate basis.
Bob: In terms of architecture <unk> reinsurance program renewal on January one we were very pleased with the placements and terms and conditions for our programs.
Speaker Change: As of January one after the reset of our catastrophe bond or occurrence program provides protection from peak peril up to a gross loss events of $1 5 billion.
Bob: Our expiring core per occurrence catastrophe protection was renewed an approximate 10% decrease in costs on a risk adjusted basis, which based on publicly available information compares favorably with the overall market and speaks to the quality of our underwriting strong reinsurer relationships.
Speaker Change: The majority of that protection is secured on a multiyear basis.
Speaker Change: We also renewed our aggregate treaty under the same structure and at a favorable decrease in cost on a risk adjusted basis.
Speaker Change: The continuing strength and diversification of our property occurrence and aggregate protection aligns with and supports our strategic growth and property writings.
Bob: Favorable experience.
Bob: Additionally, we continue to strategically leverage the combination of traditional reinsurance capacity with the sponsorship of our catastrophe bonds Foundation re to ensure robust and diversified protection for our portfolio.
Speaker Change: Although it is too early to estimate the potential losses from the current California wildfires. We are closely monitoring the situation in areas, where we have ensured properties and businesses at risk.
As of January one after the reset of our catastrophe bond or occurrence program provides protection from peak peril up to a gross loss events of $1 5 billion.
Speaker Change: Our current reinsurance programs include coverage for wildfires that attaches at $200 million and exhaust at $1 2 billion.
Bob: The majority of that protection is secured on a multiyear basis.
Speaker Change: Our reinsurance program does include provisions, allowing the combination of events subject to ours and radius provisions.
Bob: We also renewed our aggregate treaty under the same structure and at a favorable decrease in cost on a risk adjusted basis.
Speaker Change: We have summarized the catastrophe reinsurance programs within the slide deck.
Bob: The continuing strength and diversification of our property occurrence and aggregate protection aligns with and supports our strategic growth and property writings.
Speaker Change: Moving to group benefits, we achieved core earnings of $139 million for the quarter.
Speaker Change: The core earnings margin of seven 8% for the quarter reflects improved life results and continued strong disability performance.
Bob: Although it is too early to estimate the potential losses from the current California wildfires. We are closely monitoring the situation in areas, where we have ensured properties and businesses at risk.
Speaker Change: The group disability loss ratio of $66 nine compared to 63 six in the fourth quarter of 2023 was driven by a higher loss ratio and paid family and medical lead products and slightly higher LTV incidents in 2024. After two years of all time historically low.
Bob: Our current reinsurance programs include coverage for wildfires that attaches at $200 million and exhaust at $1 2 billion.
Bob: Our reinsurance program does include provisions, allowing the combination of events subject to hours and radius provisions.
Speaker Change: Incidence par.
Speaker Change: Partially offset by favorable long term disability claim recoveries.
Bob: We have summarized the catastrophe reinsurance programs within the slide deck.
Speaker Change: The group life loss ratio of $79 nine for the quarter improved three one points versus prior year, reflecting an improving mortality trend.
Bob: Moving to group benefits, we achieved core earnings of $139 million for the quarter.
Bob: Our core earnings margin of seven 8% for the quarter reflects improved life results and continued strong disability performance.
Speaker Change: The group benefits expense ratio of 26, 7% increased two five points for the quarter, reflecting higher staffing costs and increased investments in technology.
Bob: The group disability loss ratio of $66 nine compared to $63 six in the fourth quarter of 2023 was driven by a higher loss ratio and paid family and medical lead products and slightly higher LTV incidents in 2024. After two years of all time historically low.
Speaker Change: Fully insured ongoing sales in the quarter of 68 million combined with increased exposure on existing accounts and excellent persistency above 90%.
Speaker Change: Resulted in a 1% growth and fully insured ongoing premiums.
Incidents.
Bob: Partially offset by favorable long term disability claim recoveries.
Speaker Change: Turning to investments our diversified portfolio continues to produce solid results.
Bob: The group life loss ratio of $79 nine for the quarter improved three one points versus prior year, reflecting an improving mortality trend.
Speaker Change: The overall credit quality of the portfolio remains high with an average credit rating of AA plus.
Speaker Change: For the quarter net investment income was $714 million.
Bob: The group benefits expense ratio of 26, 7% increased two five points for the quarter, reflecting higher staffing costs and increased investments in technology.
Speaker Change: The total annualized portfolio yield excluding limited partnerships was four 6% before tax 10 basis points above third quarter.
Bob: Fully insured ongoing sales in the quarter of 68 million combined with increased exposure on existing accounts and excellent persistency above 90%.
Speaker Change: We continue to benefit from higher reinvestment rates and accretive trading activity, earning into the portfolio.
Speaker Change: The fourth quarter reinvestment yield continue to exceed the sales and maturity yield.
Bob: <unk> and a 1% growth and fully insured ongoing premiums.
Speaker Change: Looking forward to 2025, we expect net investment income excluding Lps to be higher driven by an increased level of invested assets, resulting from continued growth and anticipate yields to be marginally higher than 2024.
Bob: Turning to investments our diversified portfolio continues to produce solid results.
Bob: The overall credit quality of the portfolio remains high with an average credit rating of a plus.
Bob: For the quarter net investment income was $714 million.
As expected our fourth quarter annualized LP returns of six 4% before tax were higher than previous quarters.
Bob: The total annualized portfolio yield excluding limited partnerships was four 6% before tax 10 basis points above third quarter.
Speaker Change: Continue to anticipate LP returns to improve in 2025 exceeding 2024 on a full year basis.
Bob: We continue to benefit from higher reinvestment rates and accretive trading activity, earning into the portfolio.
Speaker Change: Turning to capital as of December 31, holding company resources totaled $1 3 billion.
Bob: The fourth quarter reinvestment yield continued to exceed the sales of maturity yield.
Speaker Change: Our 2025, we expect net dividends from the operating company of approximately $2 5, billion% to 9% increase over 2024.
Bob: Looking forward to 2025, we expect net investment income excluding Lps to be higher driven by an increased level of invested assets, resulting from continued growth and anticipate yields to be marginally higher than 2024.
Speaker Change: During the quarter, we repurchased three 4 million shares under our share repurchase program for $400 million and we expect to remain at that level of repurchases in the first quarter.
Bob: As expected our fourth quarter annualized LP returns of six 4% before tax were higher than previous quarters.
Speaker Change: As of year end, we had 315 billion remaining on our share repurchase authorization through December 31 2026.
Bob: Continue to anticipate LP returns to improve in 2025 exceeding 2024 on a full year basis.
Speaker Change: To wrap up 2020 for business performance was excellent and we are well positioned to continue to deliver on our targeted returns and enhance value for all of our stakeholders.
Bob: Turning to capital as of December 31, holding company resources totaled $1 3 billion.
Susan Spivak: I will now turn the call back to Susan.
Bob: For 2025, we expect net dividends from the operating company of approximately $2 5, billion% to 9% increase over 2024.
Speaker Change: We have about 30 minutes for questions. Operator can you. Please repeat the instructions for asking a question.
Bob: During the quarter, we repurchased three 4 million shares under our share repurchase program.
Speaker Change: Certainly as a reminder to ask a question. Please press star followed by the number one on your telephone keypad in the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Bob: $400 million and we expect to remain at that level of repurchases in the first quarter.
Speaker Change: Our first question comes from Andrew <unk> from TD Securities. Please go ahead. Your line is open.
Bob: As of year end, we had 315 billion remaining on our share repurchase authorization through December 31 2026.
Speaker Change: Hey, good morning.
Speaker Change: First question.
Bob: To wrap up 2020 for business performance was excellent and we are well positioned to continue to deliver on our targeted returns and enhance value for all of our stakeholders.
Speaker Change: I hate to even bring this went up because the quarter was so darn excellent, but the prior year development of.
Speaker Change: General liability of $130 million.
Susan: I will now turn the call back to Susan.
Could you breakout that mix between 15, and 18 underwriting year construction Deepak policies versus the IV and are on the more recent accident years, what was the mix there and then with that.
Speaker Change: We have about 30 minutes for questions. Operator can you. Please repeat the instructions for asking a question.
Speaker Change: Certainly as a reminder to ask a question. Please press star followed by the number one on your telephone keypad in the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Speaker Change: Really curious about how confident going forward you won't like we need to take other GL charges because.
Speaker Change: Our first question comes from Andrew Klingerman from TD Securities. Please go ahead. Your line is open.
Speaker Change: I think we have construction defect policies and correct me if im wrong.
Andrew Klingerman: Hey, good morning.
Speaker Change: The pricing now is much higher for labor and material loads is thats, probably the reason for 2016 to 18 charges.
Speaker Change: First question.
Speaker Change: I hate to even bring this went up because the quarter was so darn excellent, but the prior year development.
General liability of $130 million.
Speaker Change: So I'm kind of curious.
Speaker Change: Construction defect in particular, but I think those are much tighter policies today.
Speaker Change: Could you breakout that mix between 15, and 18 underwriting year construction defect policies versus the <unk> on the more recent accident years, what was the mix there and then with that.
Speaker Change: Andrew Thank you for joining us for the question, let me give you some context and then I'll ask Scott.
Speaker Change: At her commentary.
Speaker Change: The splits by by years so.
Speaker Change: Really curious about how confident going forward you won't like we need to take other GL charges because.
Speaker Change: Youre right.
Speaker Change: We made a move on our reserves and added $130 million.
Speaker Change: I think we have construction defect policies and correct me if I'm wrong.
Speaker Change: <unk> across a number of accident years and product lines.
Speaker Change: The pricing now is much higher for labor and material loads is thats, probably the reason for 2016 to 18 charges.
Speaker Change: We also did a little move in commercial auto.
Speaker Change: I think what I really want you to know and you said it.
Speaker Change: With this move.
Speaker Change: We'll explain more on some of the approach changes that we made this quarter I feel highly confident.
Speaker Change: So I'm kind of curious.
Speaker Change: Construction defect in particular, but I think those are much tighter policies today.
Speaker Change: Yes that we've put.
Speaker Change: Good.
Speaker Change: Andrew Thank you for joining us for the question, let me give you some context and then I'll ask Pat.
Speaker Change: It's not all a good chunk of this behind us.
Speaker Change: And we've been working hard at.
Speaker Change: At her commentary.
Speaker Change: Getting our reserves right.
Speaker Change: The splits by by year so.
Speaker Change: The quarter, but more importantly pricing our products for the new trend.
Speaker Change: Youre right.
Speaker Change: We made a move on our reserves and added $130 million.
Speaker Change: To make sure that we're improving our economics and to the extent possible. So on the <unk> side.
Speaker Change: Oh <unk> across a number of accident years and product lines.
Speaker Change: I am highly highly confident I.
Speaker Change: I think the implication though there is we also then needed to take them.
Speaker Change: We also did a little move in commercial auto.
Speaker Change: I think what I really want you to know and you said it was.
Speaker Change: I'll move on our 2024 accident year.
Speaker Change: With this move that will explain more on some of the approach changes that we made this quarter I feel highly confident.
Speaker Change: We added about one point.
Speaker Change: On a year to date basis to our expectations for GL. So we needed to true 2024, and then as we look to 2025.
Speaker Change: That we put.
Speaker Change: Good.
Speaker Change: It's not all a good chunk of this behind us.
Speaker Change: And we've been working hard at.
Speaker Change: I could share with you that.
Speaker Change: We have these higher loss cost trends.
Speaker Change: Getting our reserves right.
Speaker Change: And our assumptions.
Speaker Change: The quarter, but more importantly pricing our products for the new trend.
Speaker Change: <unk>.
Speaker Change: Our underwriters are already reacting with.
Speaker Change: To make sure that we're improving our economics and to the extent possible. So on the <unk> side.
Speaker Change: With increased pricing it really effective one one and will continue throughout the rest of the year. So comprehensively I feel like we got our arms around it and are hitting the ground running.
Speaker Change: I am highly highly confident I.
Speaker Change: I think the implication though there is we also then needed to take them.
Speaker Change: As hard as we can in 2025.
Speaker Change: I'll move on our 2024 accident year.
Speaker Change: And if I put that all in context for you Andrew of all people gets it.
We added about one point.
Speaker Change: On a year to date basis to our expectations for GL. So we need to true up 2024, and then as we look to 2025.
Speaker Change: I do believe we could generate.
Speaker Change: Margins that are consistent.
Speaker Change: Who is 2024.
Speaker Change: And that's ultimately the proof of all our actions all our strategies.
Speaker Change: I could share with you that.
Speaker Change: All our ability to execute at a high level.
Speaker Change: We have these higher loss cost trends.
Speaker Change: And I think that's an important data point for you and others to here.
Speaker Change: And our assumptions.
Speaker Change: The team our underwriters are already reacting.
Speaker Change: It's best to do the splits and any other commentary she'd like to make yes. Thank you Chris so.
Speaker Change: With increased pricing it really effective one one and will continue throughout the rest of the year. So comprehensively I feel like we got our arms around it and are hitting the ground running.
Speaker Change: As it relates to the liability reserve increases between sort of the older accident years. The 15 to 18 and then more recent years I'd say the split is roughly half and half and Andrew I would agree with your characterization of the older years and that really is related to just sort of increased costs that have had.
Speaker Change: As hard as we can in 2025.
Andrew Klingerman: If I put that all in context for you Andrew of all people gets it.
I do believe we could generate.
Speaker Change: And think of sort of post COVID-19 and the inflation that we've seen.
Margins that are consistent.
Speaker Change: Who is 2024.
Speaker Change: That really is related to a legacy book and as we've talked about in the past we've made adjustments to those reserves. That's a book that we've done significant re underwriting on and really feel I feel that's contained in those years and more recent years that activity I would I would characterize it is more related to social inflation and you know as it relates to how we.
Speaker Change: Ultimately the proof of all our actions all of our strategies or our ability to execute at a high level.
Speaker Change: I think that's an important data point for you and others to here.
Speaker Change: So I'll ask Beth to do the splits and any other commentary she'd like to make yes. Thank you Chris so.
Speaker Change: As it relates to the liability reserve increases between sort of the older accident years. The 15 to 18 and then more recent years I'd say the split is roughly half and half.
Speaker Change: <unk> the reserve increases this year this quarter I would say we did have a little different approach you know in the previous quarters. When we had <unk> in the general liability lines, we were reacting to the elevated activity. We were seeing we were adjusting that accordingly, and if we had followed that same approach this quarter I think our reserve strengthening we would've.
Speaker Change: And Andrew I would agree with your characterization of the older years and that really is related to just sort of increased costs that have happened I think of sort of post COVID-19 and the inflation that we've seen.
Speaker Change: Ben we're consistent with what we saw in previous quarters, but given that it was another quarter of this elevated activity.
Speaker Change: That really is related to a legacy book and as we've talked about in the past and we've made adjustments to those reserves as a book that we've done significant re underwriting on and really feel I feel that's contained in those years and more recent years that activity I would I would characterize is more related to social inflation and you know as it relates to how we.
Speaker Change: This quarter not only did we react to the observed activity. We also increased it increased our severity assumptions going forward for unsettled and unreported.
Speaker Change: Reserves, resulting in a larger increase to IV and are and.
Speaker Change: And as Chris said, we also incorporated these estimates into our 2024 accident year. So when we step back when you look at the actions that we took for prior years the actions that we've taken in the current year.
Speaker Change: <unk> the reserve increases this year this quarter I would say we did it a little different approach you know in the previous quarters. When we had <unk> in the general liability lines, we were reacting to the elevated activity. We were seeing we were adjusting that accordingly, and if we had followed that same approach this quarter I think our reserve strengthening we would've.
Speaker Change: But we think this positions us very well going into 2025, both in terms if the overall adequacy of our GL reserves and equally important and in Chris' comments on this but I want to reemphasize that these trends are incorporated into our pricing models going forward and that's what our business leaders are executing on with the goal.
Speaker Change: Ben we're consistent with what we saw in previous quarters, but given that it was another quarter of this elevated activity. This.
Speaker Change: This quarter not only did we react to the observed activity. We also increased it increased our severity assumptions going forward for unsettled and unreported.
Speaker Change: Getting pricing increases above these loss trends.
Speaker Change: Okay very helpful and just quickly on <unk>.
Speaker Change: Reserves, resulting in a larger increase to IV and are and.
Speaker Change: Premium in commercial.
Speaker Change: Small commercial was really strong 9% mid large was five and I think last year, there was kind of a.
Speaker Change: And as Chris said, we also incorporated these estimates into our 2024 accident year. So when we step back when you look at the actions that we took for prior years the actions that we've taken in the current year.
Speaker Change: Disconnect on her there was some underperformance in some of your competitors and you were able to capitalize so I want to understand can.
Speaker Change: But we think this positions us very well going into 2025, both in terms if the overall adequacy of our GL reserves and equally important and in Chris' comments on this but I want to reemphasize that these trends are incorporated into our pricing models going forward and that's what our business leaders are executing on with the goal of.
Speaker Change: Do you still have that momentum in small commercial in that upper single digits, and then with mid to large it's five I think in the past Mohit talked about mid <unk>.
Speaker Change: The lower end of mid being pretty robust just like small commercial so how sustainable is the mid single digit.
Speaker Change: Getting pricing increases above these loss trends.
Speaker Change: Mid large net written premium growth.
Speaker Change: Okay very helpful and just quickly on <unk>.
Speaker Change: Andrew I'll start and then ask <unk> to comment so I think on an overall basis. If you look at the components of commercial particularly on a year to date basis, we feel really good about the growth execution, our capturing additional market share so nothing philosophically.
Speaker Change: Premium in commercial.
Speaker Change: Small commercial was really strong 9% mid large was five and I think last year, there was kind of.
Speaker Change: Disconnect on her.
Speaker Change: Some underperformance in some of your competitors and you were able to capitalize so I want to understand can.
Speaker Change: Is going to change in our approach other than we just need to continue to be disciplined from an underwriting side and yes from.
Speaker Change: Do you still have that momentum in small commercial in that upper single digits, and then with mid to large it's five I think in the past Mohit talked about mid <unk>.
Speaker Change: From quarter to quarter, you can have.
Speaker Change: Some variations.
Speaker Change: The competitive marketplace, others might lean in a little bit more to us, but I really would want you to know.
Speaker Change: The lower end of mid being pretty robust just like small commercial so how sustainable is the mid single digit.
Speaker Change: Yes, we want to grow.
Speaker Change: Or more market share and serve more clients and serve more of our agency needs.
Speaker Change: Mid large net written premium growth.
Speaker Change: Not only on our terms and conditions and with the proper underwriting and proper pricing and I think that's really what's reflected in this quarter, but what would you add yes, maybe I'll take it a little bit deeper Andrew I would say the small commercial just had a terrific year, 9% overall.
Speaker Change: Andrew I'll start and then ask.
Speaker Change: Mo to comment so I think on an overall basis. If you look at the components of commercial particularly on a year to date basis, we feel really good about the growth the execution, our capturing additional market share so nothing philosophically.
Speaker Change: New and renewal strong flows continue to be really good and this is especially in the face of some disruption around us over the past couple of years and I think the team has really been measured.
Speaker Change: <unk> is going to change in our approach other than we just need to continue to be disciplined from an underwriting side and yes.
Speaker Change: From quarter to quarter, you can have.
Speaker Change: And the way they've grown so that we can be consistently growing going forward.
Speaker Change: Some variations.
Speaker Change: It's a competitive marketplace, others might lean in a little bit more to us, but I really would want you to know.
Speaker Change: I think really what you saw in the quarter was our strategic advantage is throwing through showing through our investments in technology, helping a customer on the agents get things into the system easier to data advantage and then on top of that for small I think we just had a really good year on the E&S finding front and they will continue to push into the United States.
Speaker Change: Yes, we want to grow and capture more market share and serve more clients and serve more of our agency needs.
Speaker Change: Not only on our terms and conditions and with the proper underwriting and proper pricing and I think that's really what's reflected in this quarter, but what would you add yes, maybe I'll take it a little bit deeper Andrew I would say the small commercial just had a terrific year, 9% overall.
Speaker Change: We can bring our same strategic abilities into that space.
Speaker Change: Middle and large commercial is a little bit of a different story.
Speaker Change: We're really happy there too with the 9% for the year, but the market is competitive.
Speaker Change: New and renewal strong flows continue to be really good and this is especially in the face of some disruption around us over the past couple of years and I think the team has really been measured.
Speaker Change: The team there has really tried to stay discipline and what we saw in the quarter was a little bit more of a competitive market, especially in the workers comp the GL and the umbrella space and we're just going to make choices on that and Thats. What the team did I was really proud of what they did.
Speaker Change: And the way they've grown so that we can be consistently growing going forward.
Speaker Change: I think really what you saw in the quarter was our strategic advantage is throwing through showing through our investments in technology, helping a customer on the agents get things into the system easier to data advantage and then all on top of that for small I think we just had a really good year on the E&S binding front and they will continue to push into the United States.
Speaker Change: But I will kind of echo Chris's comments, I think it's an out of pattern quarter, we still see submission flow really good into the middle and large commercial space, especially in the lower end to your point.
Chris Swift: The market is broadly supportive from a pricing perspective, and again the investments that we're making in that space for trying to take all of that advantage, we haven't small into the middle space and we think that just allows us to gain market share in the middle market space over time, So again, I think two different stories, but confident about our ability to grow it.
Speaker Change: We can bring our same strategic abilities into that space.
Speaker Change: Middle and large commercial is a little bit of a different story.
Speaker Change: We're really happy there too with the 9% for the year, but the market is competitive and.
<unk> grown market share over time.
Speaker Change: The team there has really tried to stay discipline and what we saw in the quarter was a little bit more of a competitive market, especially in the workers comp the GL and the umbrella space and we're just going to make choices on that and Thats. What the team did I was really proud of what they did.
Chris Swift: Yes.
Chris Swift: Thanks, so much.
Chris Swift: Our next question comes from Brian Meredith from UBS. Please go ahead. Your line is open.
Brian Meredith: Yes. Thanks. Good morning first one at best I was trying to get a baseline on kind of what the underlying loss ratio. It looks like in commercial lines with some of the Internet. You you were talking about so what was the kind of favorable non cat property loss and then any current year development. When you increase that IV or anything for 2024 that may have impacted it.
Speaker Change: But I will kind of echo Chris's comments, I think it's an out of pattern quarter, we still see submission flow really good into the middle and large commercial space, especially in the lower end to your point.
Speaker Change: The market is broadly supportive from a pricing perspective, and again the investments that we're making in that space for trying to take all of that advantage, we haven't small into the middle space and we think that just allows us to gain market share in the middle market space over time, So again, I think two different stories, but confident about our ability to grow it.
Brian Meredith: Brian If I understand your question Beth can add her commentary.
Brian Meredith: I think I think what I said in my.
Brian Meredith: Commentary was for the GL line there was a 1.2.
Speaker Change: And grow market share over time.
Brian Meredith: On a year to date basis for.
Speaker Change: Thanks, so much.
Brian Meredith: For the elevated.
Brian Meredith: Combined ratio given some of the things we just talked about from <unk>, there's probably two five points.
Speaker Change: Our next question comes from Brian Meredith from UBS. Please go ahead. Your line is open.
Brian Meredith: Yes. Thanks. Good morning, first one I was trying to get a baseline on kind of what the underlying loss ratio it looks like in commercial lines with some of the internet.
Brian Meredith: In the quarter on a comparable basis year over year.
Brian Meredith: And then we're also asking about property and I think I heard I think you mentioned the non cat weather was a little bit favorable this quarter.
Brian Meredith: We're talking about so what was the kind of favorable non cat property loss and then.
Brian Meredith: Any current year development, when you increase it IV, nor anything for 2020 for the baby back to that.
Brian Meredith: So.
Brian Meredith: I know, you're jumping and trying to get numbers from me so.
Brian Meredith: Hi, Brian.
Brian Meredith: I would say yes.
Brian Meredith: I understand your question.
Brian Meredith: And at her commentary.
Brian Meredith: I would say.
Brian Meredith: On a year to date base.
Brian Meredith: I think I think what I said in my.
Brian Meredith: Mrs.
Brian Meredith: Compared to prior year are our non cat property experiences about nine tenths of a point better.
Brian Meredith: Commentary was for the GL line, there was a one point.
Brian Meredith: True up on a year to date basis.
Brian Meredith: For the elevated.
Brian Meredith: And we in prior year.
Brian Meredith: Combined ratio given some of the things we just talked about from <unk>, there's probably two five points.
Brian Meredith: From an expectation side is probably one five points, a little better than our expectation.
Brian Meredith: In the quarter on a comparable basis year over year.
Brian Meredith: No I would agree with that and as you know our non cat property can obviously bounce around quarter to quarter.
And then we're also asking about property and I think I heard I think you mentioned that.
Brian Meredith: But in looking at the numbers that Chris just quoted relative to the prior year I'd also say that we did take underwriting actions in 'twenty three on our property book. So some of that we would expect would continue.
Brian Meredith: Non cat weather was a little bit favorable this quarter.
Brian Meredith: So.
Brian Meredith: I know you're jumping trying to get numbers from me so.
Brian Meredith: I would say yes.
Brian Meredith: <unk>.
Brian Meredith: Gotcha Thats helpful.
Brian Meredith: I would say.
Brian Meredith: And then I was just wondering is it possible to give us a little more color on perhaps exposure to the.
Brian Meredith: On a year to date basis.
Brian Meredith: Compared to prior year, our non cat property experiences about nine tenths of a point better.
Brian Meredith: La wildfires here kind of what your share in the area is.
Brian Meredith: Do you have commercial exposure with your small commercial business.
Brian Meredith: And we in prior year.
Brian Meredith: From an expectation side is probably one five points, a little better than our expectation.
Brian Meredith: Do you think youre going to hit your cat reinsurance programs here.
Brian Meredith: Yes.
Brian Meredith: No I would agree with that and as you know our non cat property can obviously bounce around quarter to quarter.
Brian Meredith: And I tag team and.
Speaker Change: I would I would say I think you are very observant that this is for us it's going to be both.
Speaker Change: But in looking at the numbers that Chris just quoted relative to the prior year I'd also say that we did take underwriting actions in 'twenty three on our property book. So some of that we would expect would continue.
Speaker Change: Commercial lines event in our personal lines of that.
Speaker Change: If I look at our personal lines market share for home and auto because obviously some.
Speaker Change: Cars it will also be damaged.
Brian Meredith: <unk>.
Brian Meredith: Got you that's helpful.
Speaker Change: Less than 1%.
Brian Meredith: And then I was just wondering is it possible to give us a little more color on perhaps exposure to the.
Speaker Change: We've managed California very tightly.
Speaker Change: I would say over the last seven or eight years Beth.
Brian Meredith: Les wildfires here kind of what your share in the area is.
Speaker Change: With.
Speaker Change: Concentrations of risk.
Brian Meredith: Do you have commercial exposure with your small commercial business.
Speaker Change: Risks that we had in certain zones that we needed to remediate so <unk>.
Brian Meredith: Do you think youre going to hit your cat reinsurance programs here.
Speaker Change: Personal lines, obviously, what we will have some losses and then a bigger market share is in our middle market book and our.
Brian Meredith: Yes.
Brian Meredith: It's tough and I tag team and.
Speaker Change: Our BOP product small commercial so we do have.
Brian Meredith: I would I would say I think you're very observant that this is for us it's going to be both.
Speaker Change: Larger market share there, we will have to see how things develop and we just been recently been able to get good.
Brian Meredith: Commercial lines event in our personal lines of that.
Brian Meredith: If I look at our personal lines market share for home and auto because obviously suit cars.
Speaker Change: On site.
Speaker Change: Start to do more.
Speaker Change: Inspections, we have our reinsurance business it'll have a little bit of exposure and then we'll have to see what the fair plan does with any assessment. So instead of just putting numbers out we really wanted to just be more deliberate and thoughtful and when we're ready O'brien will we'll share with you what we believe.
Brian Meredith: <unk> will also be damaged.
Brian Meredith: And we're less than 1%.
Brian Meredith: We've managed California very tightly.
Speaker Change: I would say over the last seven or eight years Beth.
Brian Meredith: With.
Brian Meredith: Concentrations of risk.
Brian Meredith: Risks that we had in certain zones that we needed to remediate so <unk>.
Speaker Change: And so that's what would you add yeah. So again.
Brian Meredith: Personal lines, obviously, what we will have some losses and then a bigger market share is in our middle market book and our.
Speaker Change: Maybe to put it in context as you asked to our reinsurance program.
Speaker Change: As we sit here today, and we look at our exposures.
Brian Meredith: Our BOP product small commercial so we do have.
Speaker Change: As I said in my prepared remarks, our first part of our per occurrence coverage starts at losses amongst a breach 200 million to that first layer, we have $150 million of protection in excess of 200, and we retained 60% of that 40% of that is reinsured and very likely that we will be in that layer. The next layer.
Brian Meredith: A larger market share there, we will have to see how things develop and we just been recently been able to get good.
Brian Meredith: On site.
Brian Meredith: Start to do more.
Brian Meredith: Inspections we.
Brian Meredith: We have our reinsurance business that will have a little bit of exposure and then we'll have to see what the fair plan does with any assessment. So instead of just putting numbers out we really wanted to just be more deliberate.
Speaker Change: <unk> then comes in at $350 million that layer again provides $150 million excess of $3 50, we retained 25%, we reinsure, 75% sitting here today, it's not entirely clear that will be at that level, we could very well be below that again all of that would exclude global re global re has its own.
Brian Meredith: Shortfall and when we're ready O'brien will we'll share with you what we believe and see so first what would you add yeah. So again.
Brian Meredith: Maybe to put it in context as you asked to our reinsurance program.
Speaker Change: Retrocession program that program attaches when U S property losses hit $60 million and we would right now we would expect to be below that so hopefully that gives you. Some context of just how we're framing it and the last thing I'll just remind you out of is that as it relates to wildfire losses up to losses of 350 million <unk>.
Brian Meredith: As we sit here today, and we look at our exposures.
Brian Meredith: As I said in my prepared remarks, our first part of our per occurrence coverage starts at losses on state breached 200 million to that first layer, we have $150 million of protection in excess of 200, and we retained 60% of that 40% of that is reinsured and very likely that we will be in that layer. The next layer.
Speaker Change: <unk> global re those losses would count towards our aggregate treaty, which again attaches similar to last year at $750 million.
Brian Meredith: Then comes in at $350 million that layer again provides $150 million excess of $3 50, we retained 25%, we reinsure, 75% sitting here today, it's not entirely clear that will be at that level, we could very well be below that again all of that would exclude global re global re has its own <unk>.
Speaker Change: Great Great color. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Elyse Greenspan from Wells Fargo. Please go ahead. Your line is open.
Elyse Greenspan: Hi, Thanks. Good morning. My first question is on group disability loss ratio ticked up by 3.3 points from last year I was hoping to get a sense how much of that was driven by paid family medical leave versus higher LTV incidents.
Brian Meredith: Retrocession program that program attaches when U S property losses hit $60 million and we would right now we would expect to be below that so hopefully that gives you. Some context of just how we're framing it and the last thing I'll just remind you out of is that as it relates to wildfire losses up to losses of $350 million.
Speaker Change: Elyse, thanks for joining us.
Speaker Change: I would say when we characterize our LTV excuse me our disability book. It includes both the LCD portion the STD portion and then obviously.
Brian Meredith: <unk> global re those losses would count towards our aggregate treaty, which again attaches similar to last year at $750 million.
Speaker Change: Some of our new paid medical and family leave products. So.
Brian Meredith: Great Great color. Thank you.
Speaker Change: Call it year over year basis.
Brian Meredith: Okay.
Speaker Change: Our next question comes from Elyse Greenspan from Wells Fargo. Please go ahead. Your line is open.
Speaker Change: I'd say that the PFS M L.
Speaker Change: Incident trends that are elevated as creating three points.
Elyse Greenspan: Hi, Thanks. Good morning, My first question is on <unk>.
Speaker Change: That difference.
Elyse Greenspan: Disability loss ratio ticked up by 3.3 points from last year, I was hoping to get a sense how much of that was driven by paid family medical leave versus higher LTV incidents.
Speaker Change: Our long term disability incidence is one point.
Speaker Change: And then the offset to that is our recoveries are terminations or probably one point better. So that's the that's the stuff between years I would have you sort of thinking about.
Elyse Greenspan: Elyse, thanks for joining us.
Elyse Greenspan: Yes, I would say when we characterize our LTC excuse me our disability book that includes both the LCD portion the STD portion and then obviously.
Speaker Change: Thanks, and then my second question.
Speaker Change: Is on the kind of the high level of you you provided on commercial lines for 2025, Chris I think in response to an earlier question, you said kind of like flat.
Elyse Greenspan: Some of our new paid medical and family leave products. So.
Underlying combined ratio when I you pointed to that contemplating continued higher G. L. Pics, but then you guys did say that there was one five points of favorable non cat and 24 are you assuming that that normalizes ligand and reverses and your outlook for flat margins in 'twenty five and is there anything.
Elyse Greenspan: Call it year over year basis.
Elyse Greenspan: I'd say that the PFS M L.
Elyse Greenspan: Oh <unk>.
Elyse Greenspan: <unk> trends that are elevated as creating three points of that difference.
Elyse Greenspan: Our long term disability incidence is one point.
Elyse Greenspan: And then the offset to that is our recoveries are terminations or probably one point better. So that's the that's the stuff between years. So I would have you sort of think about.
Speaker Change: Also we need to think about kind of when thinking about commercial margins in 'twenty five.
Speaker Change: Yes, I would say again you heard it right right I think we're ending the year at.
Elyse Greenspan: Thanks, and then my second question.
Speaker Change: 87%.
Speaker Change: Nine.
Speaker Change: He is on the kind of the high level of you you provided on commercial lines for 2025, Chris I think in response to an earlier question, you said kind of like flat.
Speaker Change: And our underlying combined ratio in commercial lines and I think we can produce a consistent result in 2025.
Speaker Change: What I want you to hear if you wanted to do all the pluses and minuses by product line and things like that I'm not going to do that.
Elyse Greenspan: Underlying combined ratio.
Speaker Change: To that contemplating.
Higher G. L. Pics, but then you guys did say that there was one five points of favorable non cat and 24 are you assuming that that normalizes ligand and reverses and your outlook for flat margins in 'twenty five and is there anything else, we need to think about kind of when thinking about commercial margins in 'twenty five.
Speaker Change: I'm going to tell you that that's what we're going to deliver in totality with.
Speaker Change: Diversified product line point of view executing strongly particularly in the general liability lines and if there is.
Speaker Change: Returns to normal or if there is.
Speaker Change: Additional benefits that we're able to.
Speaker Change: That will all be part of the results that we'll communicate quarterly to you on it but I'm not going to get into a reconciliation by product line.
Speaker Change: Yes, I would say again you heard it right right I think we're ending the year at.
Speaker Change: 87%.
Speaker Change: Nine.
Chris Swift: Got it thanks, Chris.
Speaker Change: And our underlying combined ratio in commercial lines.
Speaker Change: Yeah.
Speaker Change: We can produce a consistent result.
Speaker Change: Our next question comes from Bob Huang from Morgan Stanley. Please go ahead. Your line is open.
Speaker Change: 2025.
Speaker Change: That's what I want you to hear if you want to do all the pluses and minuses by product line and things like that I'm not going to do that.
Speaker Change: Hi.
Bob Huang: You might have addressed it so apologies if this is a little redundant. So if we think about the GL reserve charge this quarter.
Speaker Change: I'm going to tell you that that's what we're going to deliver in totality with.
Speaker Change: Diversified product line point of view executing strongly particularly in the general liability lines and if there is.
Bob Huang: Two smaller ones in prior quarter can you maybe help us get a sense of how.
Bob Huang: How much of the loss picks would've gone up.
Speaker Change: Returns to normal or if there is.
Bob Huang: From the initial loss pick assumptions for the year like just that's where the entire book.
Speaker Change: Additional benefits that we're able to again that'll all be part of the results that we'll communicate quarterly to you on it but I'm not going to get into a reconciliation by product line.
Bob Huang: That would be the first question.
Bob Huang: Yes, I think.
Bob Huang: Hey, Bob Thanks for the question, it's actually a good one.
Chris: Got it thanks, Chris.
Speaker Change: All I'm going to ask you to do is wait until we file the 10-K, some schedule piece Youll see it there plus Beth do you want to add any color right now, but I would say that the overall trends Bob.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Bob Huang from Morgan Stanley. Please go ahead. Your line is open.
Speaker Change: Yeah.
Bob Huang: Talked about as far as Ah.
Speaker Change: Hi.
Speaker Change: You might have addressed that so apologies. If this is a little redundant. So if we think about the GL reserve charge this quarter.
Speaker Change: Tony Rep rate slip and falls in certain areas.
Bob Huang: Just the dollar levels of.
Bob Huang: To settle some of these cases the time limit demands.
Speaker Change: And the two smaller ones in prior quarter can you maybe help us get a sense of.
Bob Huang: The plaintiff bar users to sort of jams.
Speaker Change: How much of the loss picks would've gone up.
Speaker Change: That is generally consistent and nothing is changing and as Beth said, we did take us just a more holistic approach to.
Speaker Change: From the initial loss pick assumptions for the year like this where the entire book.
Speaker Change: That would be the first question.
Speaker Change: Yes, I think.
Speaker Change: Estimating that these trends most likely will continue and that's what's reflected in the charge but.
Speaker Change: Hey, Bob Thanks for the question, it's actually a good one.
Speaker Change: Paul I'm going to ask you to do is wait until we file the 10-K, some schedule piece Youll see it there plus Beth do you want to add any color right now, but I would say that the overall trends Bob.
Speaker Change: I'd ask you just to wait for the K and the scheduled piece to be filed and you can see those trends.
Speaker Change: Okay.
Speaker Change: Okay got it.
Speaker Change: My follow up is the group benefits.
Speaker Change: Talked about as far as.
Speaker Change: One thing you previously said with the moderating incidence and SaaS claims recovery really drove a lot of the outperformance in the prior quarter.
Tony: Tony Rep rate slip and falls in certain areas.
Speaker Change: Just the dollar levels of.
Speaker Change: To settle some of these cases, the time limit demands that.
Speaker Change: Especially in long term disability now it does look like it's changing this quarter to be a more normalized trend.
Speaker Change: The plaintiff bar users to sort of jams.
Speaker Change: That is generally consistent and nothing is changing and as Beth said when we did it would take us just a more holistic approach to.
Speaker Change: Is there like how should we think about what is a normal run rate for that.
Long term disability business in terms of.
Speaker Change: Estimating that these trends most likely will continue and that's what's reflected in the charge but.
Speaker Change: The incidence of claims recovery knowing that the last two year goes to abnormally low.
Speaker Change: Yes.
Speaker Change: I'd ask you just to wait for the K and the scheduled piece to be filed and you can see those trends.
Speaker Change:
Speaker Change: I'll do my best to try to explain that to you.
Mike: And then im going to ask Mike to add his commentary.
Speaker Change: Okay got it.
Mike: I would first start with saying that remember a lot of our LTV.
Speaker Change: My follow up is the group benefits.
Speaker Change: One thing you previously said with the moderating incidence and SaaS claims recovery really drove a lot of the outperformance in the prior quarter.
Mike: Clients and policies have 90, or even 180 day elimination periods. So really the last two quarters of the year, we're not out of elimination period.
Speaker Change: In long term disability now it does look like it's changing this quarter to be at more normalized trend.
And we're still sort of in Pik.
Mike: And when we look at sort of trends in totality.
Speaker Change: Is there like how should we think about what is a normal run rate.
Those were some of the some of the judgments we always make an.
Speaker Change: Of that.
Speaker Change: Long term disability business in terms of.
Mike: From quarter to quarter, we might make judgments that are different.
Speaker Change: The incidence of claims recovery, knowing that the last two year ago abnormally low.
Mike: On what's emerging versus whats still in pick so I would say, though that overall.
Speaker Change: Yes.
Speaker Change: I'll do my best to try to explain that to you.
Mike: Over the last two years, our disability incidence trends had been like all time lows and rock bottoms.
Speaker Change: And then im going to ask Mike to add his.
Speaker Change: Commentary.
Speaker Change: I would first start with saying that remember a lot of our LTV.
Mike: And what we are beginning to reflect now is just to.
Speaker Change: Clients and policies have 90, or even a 180 day elimination periods. So really the last two quarters of the year, we're not out of elimination period.
Mike: I'll call it a more normalized return to mean.
Mike: Assumptions, so that we don't get caught short in any M&A.
Speaker Change: And we're still sort of in Pik.
Speaker Change: Our reserving positions here. So those are the two components I would share with you and I'll ask Mike to add any of his color Chris.
Speaker Change: And when we look at sort of trends in totality.
Speaker Change: Those were some of the some of the judgments and we always make an.
Speaker Change: Chris I think you captured that well the only couple of items that I would add to your point on what we saw with historically low incidence levels and that was really back in 2022, and two 2023 accident years.
Speaker Change: From quarter to quarter, we might make judgments that are sort of different on.
Speaker Change: On what's emerging versus whats still in pick so I would say, though that overall.
Speaker Change: And when we look at that and we look at where were running more recently I would say our recent experience that you're seeing here in the quarter, we correlate back to about a five year average of incidents historical sort of average and thats about where we set our pricing. So as you know we've got rate guarantees generally two to three or maybe beyond.
Speaker Change: Over the last two years, our disability incidence trends had been like at all time lows and rock bottoms.
Speaker Change: And what we are beginning to reflect now is just a.
Speaker Change: I'll call it a.
Speaker Change: More normalized return to mean assumptions, so that we don't get caught short in any.
Speaker Change: Three years, so we're looking at a longer term average around both incidence and recovery. So again I would just leave you with incidence rates more recently trending back to historical five year average and then a recovery experience has been very favorable our team does an outstanding job on the claim side and we expect to see strong performance.
Speaker Change: Our reserving positions here. So those are the two components I would share with you and I'll ask Mike to add any of his color Chris.
Speaker Change: Chris I think you captured that well the only couple of items that I would add to your point on what we saw with historically low incidence levels and that was really back in 2022, and two 2023 accident years.
Speaker Change: Moving forward.
Speaker Change: Okay. Thank you for that.
Speaker Change: And when we look at that and we look at where were running more recently I would say our recent experience that you're seeing here in the quarter, we correlate back to about a five year average of incidents historical sort of average.
Speaker Change: Our next question comes from Josh Shanker from Bank of America. Please go ahead. Your line is open.
Josh Shanker: Yes. Thank you.
Chris Swift: Chris back for all the detail on the casualty stuff is one more question is more philosophical I think that you've gotten yourself comfortable that you've put this issue to bed generally putting something bad means that you put a layer of caution on top of something.
Speaker Change: That's about where we set our pricing. So as you know we've got rate guarantees generally two three or maybe beyond three years. So we're looking at a longer term average around both incidents and recoveries. So again I would just leave you with incidence rates more recently trending back to historical five year average and then recovery experience.
Chris Swift: Beyond your best actuarial estimate of where it is so you don't have to revisit that again.
Chris Swift: I know that you're always trying to get to the best number.
Speaker Change: It's been very favorable our team does an outstanding job on the claim side and we expect to see strong performance moving forward.
Chris Swift: In the Grand scheme of things a $130 million is not a lot of.
Chris Swift: Reserves, given the size of our general liability book.
Speaker Change: Okay. Thank you for that.
Chris Swift: <unk> done something differently other than given the data you have gone to the the most precise number you can or if you put a layer of caution on top of the number.
Speaker Change: Our next question comes from Josh Shanker from Bank of America. Please go ahead. Your line is open.
Speaker Change: Yes, Thank you Chris.
Speaker Change: Chris back for all the detail on the casualty stuff is one more question is more philosophical I think that you've gotten yourself comfortable that you've put this issue to bed generally putting something bad means that you put a layer of caution on top of something.
Josh Shanker: Well, Josh I don't know that I can.
Call it caution, but as I said in my response to the first question.
Josh Shanker: We did evaluate the reserves a little differently this quarter.
Josh Shanker: And that's why the reserve charge was higher than what you've seen in previous quarter. So I'll leave you with that that was how can we be.
Speaker Change: Beyond your best actuarial estimate of where it is so you don't have to revisit that again.
Josh Shanker: Have evaluated sort of the current trend and an expectation that that trend will continue.
Speaker Change: I know that you're always trying to get to the best number.
Speaker Change: In the Grand scheme of things a $130 million is not a lot of.
Josh Shanker: Have included that in our estimate for prior accident years, we built that into our call for the 24 accident year and as I said, it's built into our pricing models going forward.
Speaker Change: Reserves, given the size of our general liability book.
Speaker Change: Have you done something differently other than given the data you have gone to the the most precise number you can or have you put a layer of caution on top of the number.
Speaker Change: Okay, and then on the personal lines business I see you're growing in homeowners still bleeding from auto.
Josh Shanker: Well, Josh I don't know that.
Josh Shanker: I'd call it caution, but as I said in my response to the first question, we did evaluate the reserves a little differently this quarter.
Josh Shanker: To the extent that the.
The product design is it generally designed to be sold as a home auto bundle.
Josh Shanker: And that's why the reserve charge was higher than what you've seen in previous quarters. So I'll leave you with that that was how can we be.
Josh Shanker: And is there any risk of adverse selection selling monoline homeowners.
Josh Shanker: Have evaluated sort of the current trend and an expectation that that trend will continue.
Speaker Change: Thank you Josh.
Josh Shanker: Scene.
Speaker Change: The improvement that's been Melinda and the team have made there. So I think we're in a good position.
Josh Shanker: Have included that in our estimate for prior accident years, we built that into our call for the 24 accident year and as I said, it's built into our pricing models going forward.
Speaker Change: I'll look to Melinda at her color, but I think right now, we probably bundle 75% of our homeowners.
Speaker Change: Homeowners business with auto.
Speaker Change: Not a big.
Josh Shanker: Okay, and then on the personal lines business I see you're growing in homeowners still bleeding from auto.
Speaker Change: For mono line homeowners player.
Speaker Change: We do do it on occasion, particularly as our agency channel is.
Josh Shanker: To the extent that the.
Speaker Change: <unk> revised a little bit with <unk>.
Josh Shanker: The product design.
Josh Shanker: Germany designed to be sold as a home auto bundle.
Speaker Change: On older product.
Speaker Change: So that's what I would say, but Linda what would you add.
Josh Shanker: And is there any risk of adverse selection selling monoline homeowners.
Linda: Yes, I think we're really proud of the performance of our home business as evidenced by the results this quarter and on a full year basis.
Josh Shanker: Thank you Josh for seeing the.
Speaker Change: You look at our home business over a long period of time, we've generated combined ratios in the low nineties, which really compares favorably to the industry.
Josh Shanker: The improvement that's Melinda and the team have made there. So I think we're in a good position.
Josh Shanker: I'll look to Melinda add her color, but I think right now.
Speaker Change: So as we think about the performance the investments we've made in the products and capabilities.
Josh Shanker: Probably bundle 75% of our homeowners.
Homeowners business with auto.
Speaker Change: We believe we can grow the business with our auto and where are we right at mono line do so in a way that is judicious and thoughtful.
Josh Shanker: Not a big.
Josh Shanker: For mono line homeowners player.
Josh Shanker: We do do it on occasion and particularly us.
Speaker Change: And Josh I would just add one last point I think the team led by our risk management team. Our underwriters have really taken to heart modeling sort of on a by peril basis.
Josh Shanker: Our agency channel is.
Josh Shanker: Being revived a little bit with <unk>.
Josh Shanker: On older product.
Josh Shanker: So that's what I would say, but Linda what would you add.
Linda: I think we're really proud of the performance of our home business as evidenced by the results this quarter and on a full year basis, and if you look at our home business over a long period of time, we've generated combined ratios in the low nineties, which really compares favorably to the industry.
Speaker Change: All of the things that could go wrong wrong from a from a weather from an earthquake from of wildfires as we're seeing so I really have the most.
Speaker Change: And the improvements we've made one in our modeling our risk selection matching price and risk and.
Linda: So as we think about the performance the investments we've made in the products and capabilities.
Speaker Change: I would like the opportunity to continue to grow thoughtfully in the homeowners market because.
We believe we can grow the business with our auto and where are we right at mono line do so in a way that is judicious and thoughtful.
Speaker Change: Again, it's a needed product.
Speaker Change: There's a lot of disruption in those marketplaces, but.
Speaker Change: And Josh I would just add one last point I think.
Speaker Change: We're going to continue to be cautious and thoughtful but I think we got a pretty good track record.
Speaker Change: <unk> led by our risk management team, our underwriters have really taken to heart modeling sort of on a by peril basis all of the things that could go wrong from from a whether from a earthquake from of wildfires as we're seeing so I really have.
Speaker Change: Vince I know you've been putting in a lot of work I appreciate it.
Speaker Change: Our next question comes from David <unk> from Evercore ISI. Please go ahead. Your line is open.
Speaker Change: Hey, Thanks, Good morning, I had a follow up question.
Speaker Change: The most confidence in the improvements we've made one in our modeling our risk selection matching price and risk and.
Speaker Change: On the general liability reserves and I appreciate it sounds like you guys took a more proactive approach on the reserves. This quarter I guess I'm wondering now after the changes you've made what sort of severity assumption you guys are embedding in the reserves on the more recent years and what you guys are thinking.
Speaker Change: I would like the opportunity to continue to grow thoughtfully in the homeowners market because.
Speaker Change: Again, it's a needed product.
Speaker Change: There's a lot of disruption in those marketplaces, but.
Speaker Change: Going forward in 2025.
Speaker Change: We're going to continue to be cautious and thoughtful but I think we've got a pretty good track record.
Chris Swift: Yes, David it's Chris.
Vince: Vince I know you've been putting in a lot of work I appreciate it.
Speaker Change: I would say.
Speaker Change: Aggregate when you think about sort of liability lines.
Speaker Change: Yeah.
Speaker Change: Our next question comes from David <unk> from Evercore ISI. Please go ahead. Your line is open.
Speaker Change: I would say were low.
Double digit range currently.
Speaker Change: Some of the primary.
David: Hey, Thanks, Good morning, I had a follow up question on the general.
Speaker Change: Lines of business might be a little lower in our general industries, and then the umbrella and excess might be a little higher sort of and even in the 15 16 range but.
David: Liability reserves and I appreciate it sounds like you guys took a more proactive approach on the reserves. This quarter I guess I'm wondering now after the changes you've made what shortening severity assumption you guys are embedding in the reserves on the more recent years and what you guys are thinking.
I would say the recent year, where probably exiting low double digits in aggregate.
Speaker Change: And thats, what we need to react too from a pricing side.
That's already baked into all of our pricing models that our underwriters are executing two beginning here in January.
David: Going forward in 2025.
Chris: Yes, David it's Chris.
Speaker Change: That's that's the mission for next year, particularly in any liability line and cooling in commercial auto we got we got to stay up with these elevated loss cost trends.
David: I would say.
Speaker Change: In the aggregate when you think about sort of liability lines.
David: I would say were low.
Speaker Change: Double digit range currently.
Speaker Change: I know the team knows how to do that very very well.
Speaker Change: Some of the primary.
Speaker Change: Empathetic way, while still taking care of customers and agents, but we got if we got to protect our margins.
Speaker Change: Lines of business might be a little lower in our general industries, and then the umbrella and excess might be a little higher.
Speaker Change: Got it understood and then.
Speaker Change: And even in the 15 16 range, but I.
Speaker Change: Just another question and I guess this one is a bigger picture question just in terms of the reserving process.
Speaker Change: I would say the recent year, where probably exiting low double digits in aggregate.
Speaker Change: Could you guys remind me when you first started recognizing this impact of higher attorney Rep.
Speaker Change: That's what we need to react too from a pricing side.
Speaker Change: That's already baked into all our pricing models that our underwriters are executing two beginning here in January.
Speaker Change: And I guess have you guys changed your approach.
And that's that's the mission for next year, particularly in any liability line and cooling in commercial auto we got we got to stay up with these elevated loss cost trends.
Just detecting these trends over the last year or so I'm just wondering if there's been anything that that you guys have done that might be picking up on it a little bit more than in the past.
Speaker Change: I know the team knows how to do that very very well in an empathetic way, while still taking care of customers and agents, but we got if we got to protect our margins.
Speaker Change: Yes, I wouldn't I wouldn't say, there's anything dramatic.
Speaker Change: I really thought the question was just meant to torture us David.
Speaker Change: Yeah.
Speaker Change: But.
Speaker Change: Got it understood and then.
Speaker Change: I think our listening post what we're doing with our claim lawyers.
Speaker Change: Just another question and I guess this one is a bigger picture question just in terms of the reserving process.
Speaker Change: Our claims teams in totality.
Speaker Change:
Speaker Change: Could you guys remind me when you first started recognizing this impact of higher character attorney Rep.
Speaker Change: Theres nothing I don't think we missed per se I, just think it's a magnitude of sort of some of the strategies.
Speaker Change: And I guess have you guys changed your approach to.
Speaker Change: <unk> uses particularly with time.
Speaker Change: Our demands.
Speaker Change: Just detecting these trends over the last year or so I'm just wondering if there's been anything that that you guys have done that might be picking up on it a little bit more than in the past.
So if you get that wrong.
Speaker Change: The potential magnitude is really.
Speaker Change: Greater on a claim side.
Speaker Change: We saw much more I'll call. It just basic slip and fall activity as we've talked about in the past. So I don't think there's anything that we're missing if anything maybe we were just a little too optimistic on how severe these trends are going to be and how long they were going to continue but that's what I would say yeah. The only thing I would add.
Speaker Change: Yes, I wouldn't I wouldn't say, there's anything dramatic.
Speaker Change: I really thought the question was just meant to torture us David.
Speaker Change: But.
Speaker Change: I think our listening post what we're doing with our claim lawyers are.
Speaker Change: Our claim teams in totality.
Speaker Change: To that David is that.
Speaker Change: Theres nothing I don't think we missed per se I, just think it's a magnitude of sort of some of the strategies that the plaintiff bars uses particularly with time.
Speaker Change: Last quarter, we talked about the fact that we saw activity that was above our expectations. So the notion around increased attorney wrapped with increased severity.
Speaker Change: Bart demands.
Speaker Change: That was built into our assumptions is just last quarter when we as Chris pointed out when we saw actual activity coming in time limit demand.
Speaker Change: So if you get that wrong I mean, the potential magnitude is really.
Speaker Change: Greater on a claim side.
Speaker Change: An attorney Rep rates changing.
Speaker Change: We saw much more I'll call. It just basic slip and fall activity as we've talked about in the past. So I don't think there's anything that we're missing if anything maybe we were just a little too optimistic on how severe these trends, we're going to be and how long they were going to continue but that's what I would say yeah. The only thing I would add.
Speaker Change: What our expectation was.
Speaker Change: So we made some of those adjustments and I think we've commented on this last quarter that when we look over all at our general liability.
Speaker Change: Business, we've definitely seen a decrease in frequency over the last several years, so that points to a lot of very favorable.
Speaker Change: To that David is that.
Speaker Change: Favorable underwriting actions that we've taken what we are seeing though is that when we broke out the categories of claims into no attorney Rep Attorney rapid litigated all three of those Buck.
Speaker Change: Last quarter, we talked about the fact that we saw activity that was above our expectations. So the notion around increased attorney wrapped with increased severity.
Speaker Change: That was built into our assumptions is just last quarter when we as Chris pointed out when we saw actual activity coming in time limit demand.
Speaker Change: Buckets from a frequency perspective, we're coming down it's just that the frequency decrease was higher in the non attorney non litigated bucket than some of the other buckets and and that is again. These claims have have seasoned became more evident.
Speaker Change: An attorney Rep rates changing.
Speaker Change: From what our expectation was.
Speaker Change: That's where we made some of those adjustments and I think we've commented on this last quarter that you know when we look over all at our general liability.
Speaker Change: In the last quarter or so.
Speaker Change: Yeah.
Speaker Change: Understood. Thank you I appreciate that color.
Speaker Change: Business, we've definitely seen a decrease in frequency over the last several years, so that points to a lot of very.
Speaker Change: Okay.
Speaker Change: Our last question today will come from Gregory Peters from Raymond James. Please go ahead. Your line is open.
Speaker Change: Favorable underwriting actions that we've taken what we are seeing though is that when we broke out the categories of claims into no attorney Rep Attorney Rep and litigated all three of those Bucks.
Speaker Change: Good morning, everyone.
Speaker Change: Congratulations on your promotion.
Speaker Change: In your comments you spoke about the increase in the expense ratio in personal lines. I was wondering if you can unpack what's going on there a little bit in more detail just it's kind of counterintuitive given.
Speaker Change: Buckets from a frequency perspective were coming down it's just that the frequency decrease was higher in the non attorney non litigated bucket than some of the other buckets and and that is again. These claims have seasoned became more evident.
Speaker Change: Premium and rate increases are flowing through.
Speaker Change: Some of the.
Speaker Change: New business restrictions that have been put in place prior to see expense ratio following that because that makes sense.
Speaker Change: Last quarter or so.
Speaker Change: Oh.
Speaker Change: Yeah.
Speaker Change: I think Greg I'll ask Melinda add her color it could be a little bit of mix right as we mixing a little bit more agency there we're still investing in.
Speaker Change: Understood. Thank you I appreciate that color.
Speaker Change: Okay.
Speaker Change: Our last question today will come from Gregory Peters from Raymond James. Please go ahead. Your line is open.
Speaker Change: The platform somewhat we're at the tail end of the.
Gregory Peters: Good morning, everyone.
Speaker Change: Congratulations on your promotion.
Speaker Change: The direct response.
Speaker Change: In your comments you spoke about the increase in the expense ratio in personal lines. I was wondering if you can unpack what's going on there a little bit in more detail just it's kind of counterintuitive given.
Speaker Change: Our rollout of prevail. So that's $45 50 states that we are contemplating.
Speaker Change: Our broader agency strategy that we're spending some money on but Melinda would you add anything else just maybe.
Speaker Change: Premium and rate increases are flowing through and.
Speaker Change: Alright.
Speaker Change: Just wanted to revisit some of the best comment because she alluded to the themes earlier in the quarter. We were up about two points that was largely driven by marketing and by higher commissions and you know the premium growth that we are driving certainly overtime and the Pip growth that we're seeing in home that's all come with investment.
Speaker Change: Some of the.
Speaker Change: New business restrictions that have been put in place prior to see the expense ratio going up because that makes sense.
Speaker Change: Alright.
Speaker Change: I think Greg I'll ask Melinda added her color it could be a little bit of mix right as we mixing a little bit more.
Speaker Change: As you can see there we're still investing in.
Speaker Change: And new business growth until marketing spend and commissions are that are the primary driver in the quarter.
Speaker Change: The platform somewhat we're at the tail end of.
Speaker Change: Yes.
Speaker Change: The direct response rollout of prevail. So that's $45 50 states that we are contemplating.
Speaker Change: Got it and I guess.
Speaker Change: Our reserve question, but in a totally different subject area.
Speaker Change: Our broader agency strategy that we're spending some money on but Melinda would you add anything else just maybe.
Speaker Change: Everyone seems to be still taking A&D reserves.
Speaker Change: It sounds like.
Speaker Change: This number goes away.
Speaker Change: Right.
Speaker Change: Alright.
Speaker Change: Do you have some perspective like an outstanding claim counts.
Speaker Change: Just wanted to revisit some of the best comment because she alluded to the themes earlier in the quarter. We were up about two points that was largely driven by marketing and by higher commissions and the premium growth that we are driving certainly overtime and the Pip growth that we're seeing in home that's all come with investment.
Speaker Change: You would think that this would start to subside that just doesn't for the industry and for you guys.
Speaker Change: Okay.
Speaker Change: Oh, that's a hell of a last question Greg of today so.
Speaker Change: Uh huh.
Speaker Change: I would share with you just a high level observation and Beth can add her as is.
And new business growth until marketing spend and commissions are that are the primary driver in the quarter.
Beth: Yes, I think frequency of claims is coming down.
Speaker Change: Particularly in the meso area.
Speaker Change: Got it and I guess.
Speaker Change: But severity is going up as again the plaintiffs is trying to extract the same amount of economics or greater economics per claim.
Speaker Change: Our reserve question, but in a totally different subject area.
Speaker Change: Everyone seems to be still taking A&D reserves.
Speaker Change: It sounds like.
And then sort of the whole.
Speaker Change: This number goes away.
Speaker Change: <unk> de so.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Right.
Speaker Change: Do you have some perspective like an outstanding claim counts.
Speaker Change: Hopeful that at least the frequency trends continuing.
Speaker Change: You would think that this would start to subside that just doesn't for the industry and for you guys.
And we'll try to manage the severity trends as best way we can.
Speaker Change: Yes, that's why we did the Amy cover years ago. When we did obviously, we fully utilized it.
Speaker Change: Oh, that's a hell of a last question Greg of today.
Speaker Change: Uh huh.
Speaker Change: Which turned out to be a good trade for.
Speaker Change: I would share with you just a high level observation and Beth can add her as is.
Speaker Change: Shareholders and we'll just manage it the best we can going forward, but it's continuing.
Speaker Change: Yes, I think frequency of claims is coming down.
Speaker Change: A continuing issue for sure.
Speaker Change: Particularly in the meso area.
Speaker Change: Yes, I think I'd add too much to that I mean, obviously on the frequency piece. Some of it is is a little bit of just what our expectations were so.
Speaker Change: But severity is going up as again the plaintiffs is trying to extract the same amount of economics, if greater economics per claim.
Speaker Change: Might see a little bit of a decrease we would've expected baby millwork and so some of that impact are our study each year kind of where our particular insureds and then insurance that we provide for particular insureds, where that shows up sort of as we do the ground up study bye bye.
Speaker Change: And then sort of the.
Speaker Change: <unk> de so.
Speaker Change: Yes.
Speaker Change: Hopeful that at least the frequency trends to continue.
Speaker Change: And we'll try to manage the severity trends as best way we can.
Speaker Change: Yes, that's why we did the Amy cover years ago. When we did obviously, we fully utilized it.
Speaker Change: <unk> and that can change year to year, and we had a little bit more activity that we saw in accounts, where we just had a little bit more exposure than some of the others and then an environmental there we had a little bit of just increase in remediation costs, one coming from our coal ash.
Speaker Change: Which turned out to be a good trade for.
Speaker Change: Shareholders and we'll just manage it the best we can going forward, but it's to.
Speaker Change: As a continuing issue for sure.
Speaker Change: Yes, I think I'd add too much to that I mean, obviously on the frequency piece. Some of it is is a little bit of just what our expectations were so low that you might see a little bit of a decrease we would've expected baby millwork and so some of that impacts our our study each year kind of where our particular.
Speaker Change: Claim and things like that is a similar similar themes I would say to what we've seen in the past.
Speaker Change: Okay.
Speaker Change: Got it thanks.
Speaker Change: We are out of time for questions I would like to turn the call back over to Susan Spivak for closing remarks.
Speaker Change: Our Insureds and then insurance that we provide for particular insureds, where that shows up sort of as we do the ground up study bye bye.
Susan Spivak: Thank you for all joining us today and as always please reach out with any additional questions. We look forward to seeing many of you over the next coming weeks and have a great day.
Speaker Change: Sure and that can change year to year, we had a little bit more activity that we saw in accounts, where we just had a little bit more exposure than some of the others and then an environmental there we had a little bit of increase in remediation costs, one coming from our coal ash.
This concludes today's conference call. Thank you for your participation you may now.
Speaker Change: Claim and things like that is a similar similar themes I would say to what we've seen in the past.
Speaker Change: Okay.
Speaker Change: Got it thanks.
Speaker Change: We're out of time for questions I would like to turn the call back over to Susan Spivak for closing remarks.
Susan Spivak: Thank you for all joining us today and as always please reach out with any additional questions. We look forward to seeing many of you over the next coming week and have a great day.
Susan Spivak: This concludes today's conference call. Thank you for your participation you may now disconnect.
Susan Spivak:
Susan Spivak: