Q4 2024 American Financial Group Inc Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by and welcome to American Financial Group 2024.
Speaker Change: Quarter results conference call at this time, all participants are in a listen only mode. After the speaker's presentation. We'll have a question and answer session. If you would like to ask a question on the statute. Please press star one on your telephone you will then hear an automated message advises that your hands raised if you would like to remove yourself from the queue.
Speaker Change: Please press Star one again, please be advised that today's conference is being recorded I would now like to turn the conference over to Diane Weiser. Please go ahead.
Diane Weiser: Good morning, and welcome to American Financial group's fourth quarter 2024 earnings results Conference call. We released our 2020 for fourth quarter and full year results yesterday afternoon, Our press release Investor supplement and webcast presentation are posted on Afg's website under the Investor Relations SEC.
Diane Weiser: These materials will be referenced during portions of today's call.
Speaker Change: I'm joined this morning by Carl Lindner, the third and Craig Lindner Co Ceos of American Financial Group, and Brian Hartman, Afg's CFO before I turn the discussion over to Carl I would like to draw your attention to the notes on slide two of our webcast. Some of the matters to be discussed today are forward looking these forward looking statements involve certain risks and uncertainties that could cause our actual REIT.
Speaker Change: Ralph and our financial condition to differ materially from these statements a detailed description of these risks and uncertainties can be found in <unk> filings with the Securities and Exchange Commission, which are also available on our website.
Speaker Change: We may include references to core net operating earnings a non-GAAP financial measure in our remarks or in responses to questions. A reconciliation of net earnings to core net operating earnings is included in our earnings release.
Speaker Change: And finally, if you are reading a transcript of this call. Please note that it may or may not be authorized or reviewed for accuracy and as a result, it may contain factual or transcription errors that could materially alter the intent or meaning of our statements.
Speaker Change: Now I'm pleased to turn the call over to Carl Lindner, the third to discuss our results.
Carl Lindner: Good morning, as we begin our remarks, it's important to acknowledge that our thoughts and prayers continue to include those who have been impacted by the devastation caused by the wildfires in southern California.
Carl Lindner: We're grateful to our claims professionals insurance specialists, who are helping our policyholders recover restore their businesses and rebuild their communities.
Carl Lindner: Now turning to our results I'll begin by sharing a few highlights of Afg's 2020 for fourth quarter and full year results after which Craig and I will walk through more details. We'll then open it up for Q&A, where Craig Brian and I'll be happy to respond to your questions.
Carl Lindner: Fourth quarter was a strong ending to a great year for AFG. In addition to producing an annual core operating return on equity in excess of 19% in 2024 net written premiums grew by 7% during the year and we continue to create value for our shareholders through effective capital management.
Carl Lindner: Our compelling mix of specialty insurance businesses entrepreneurial culture disciplined operating philosophy, and an astute team of in house investment professionals collected way have enabled us to outperform many of our peers over time.
Carl Lindner: And I, thank God, our talented management team and our great employees for helping us to achieve these results and I will turn the discussion over to Craig to walk us through some of these details.
Carl Lindner: Yeah.
Craig Lindner: Thanks Carl.
Craig Lindner: As Youll see on slide three Afg's core net operating earnings were $10 and <unk> 75 per share for the full year 2024, generating a core operating return on equity of 19, 3%.
Craig Lindner: This ROE is calculated using the average of the five most recent quarter end balances of shareholders' equity excluding OCI.
Craig Lindner: As Carl noted capital management is one of our highest priorities returning capital to our shareholders is an important component of our capital management strategy and reflects our strong financial position and our confidence in Afg's financial future.
We returned $791 million to shareholders during 2024, including $545 million or $6 50 per share and special dividends and $246 million in regular common stock dividends.
Craig Lindner: Dividend payments and share repurchases totaled $6 $3 billion over the last five years, including $50 per share in special dividends since the beginning of 2021.
Craig Lindner: And our quarterly dividend was increased by 12, 7% to an annual rate of $3 20 per share beginning in October of 2024.
Craig Lindner: Growth in book value per share, excluding OCI plus dividends was 19, 6% in 2024.
Craig Lindner: We're proud of the value we've created for shareholders over time.
Craig Lindner: As Carl noted, we closed out the year with a strong fourth quarter.
Craig Lindner: As you'll see on slides four and five fourth quarter 2024 core net operating earnings per share of $3.12 produced an annualized fourth quarter core return on equity of 21, 9%.
Craig Lindner: Now I'd like to turn to an overview of Afg's investment performance and financial position and share a few comments about afg's capital and liquidity.
Craig Lindner: The details surrounding our $15 $9 billion investment portfolio are presented on slides six and seven.
Craig Lindner: Looking at results for the fourth quarter property and casualty net investment income was approximately 21% higher than the comparable 2023 period. As a result of improved returns on alternative investments and the impact of strong reinvestment rate opportunities and higher balances of invested asked.
Craig Lindner: Yes.
Craig Lindner: For the 12 months ended December 31, 2024, P&C net investment income was $784 million, approximately 8% higher than 2023, and a new record for AFG.
Craig Lindner: Excluding alternative investments net investment income at our P&C insurance operation for.
Craig Lindner: For 2024 increased 11% year over year.
Craig Lindner: As Youll see on slide seven approximately 66% of our portfolio is invested in fixed maturities.
Craig Lindner: And the current interest rate environment, we're able to invest in fixed maturity securities at yields of approximately 575%.
Craig Lindner: Current reinvestment rates compare favorably to the 5% yield earned on fixed maturities and our P&C portfolio during the fourth quarter of 2024.
Craig Lindner: The duration of our P&C fixed maturity portfolio, including cash and cash equivalents was two eight years at December 31 2024.
Craig Lindner: The annualized return on alternative investments and our P&C portfolio was approximately four 9% for the 2020 for fourth quarter compared to 8% for the prior year prior year quarter.
Craig Lindner: Our business plan for 2025 assumes an 8% return on alternative investments longer term, we continue to remain optimistic regarding the prospects of attractive returns from our alternative investment portfolio with an expectation of returns averaging 10%.
Craig Lindner: Or better.
Craig Lindner: Please turn to slide eight where you'll find a summary of Afg's financial position at December 31, 2024.
Craig Lindner: During the quarter, we returned $404 million to our shareholders through the payment of a $4 per share special dividend in November and our regular 80 cent per share quarterly dividend.
Craig Lindner: AFG ended the year at a strong capital position and we expect our operations to continue to generate significant excess capital in 2025, which provides ample opportunity for acquisitions special dividends or share repurchases.
Craig Lindner: We evaluate the best alternatives for capital deployment, including the timing and amount of special dividends on a quarterly basis our.
Craig Lindner: Our current capital position and expectations give us the flexibility to pay a special dividend in the first half of the year.
Craig Lindner: We continue to view with total value creation as measured by growth in book value per share plus dividends as an important measure of performance over the long term.
Craig Lindner: For the three and 12 months ended December 31 2024.
Craig Lindner: Afg's growth in book value per share <unk>.
Excluding OCI plus dividends was five 4% and 19, 6% respectively.
Craig Lindner: Our strong operating results, coupled with effective capital management, and our entrepreneurial opportunistic culture and disciplined operating philosophy enable us to continue to create value for our shareholders.
Craig Lindner: I'll now turn the call over to Carl to discuss the results of our P&C operations at our business plan assumptions for 2025.
Carl Lindner: Thank you Craig.
Carl Lindner: Please turn to not pages slides nine and 10 of the webcast, which include an overview of our fourth quarter results, our property and transportation specialty casualty and specialty financial groups as well as AFG overall reported fourth quarter calendar year combined ratios below 90.
Carl Lindner: In addition to these strong underwriting margins refining opportunities to grow through new business opportunities that continued favorable pricing environment and increased exposures nearly all the businesses and our diversified specialty property and casualty portfolio continue to meet or exceed targeted returns and we set new records for premium production in.
Carl Lindner: <unk> 2024.
Carl Lindner: As Youll see on slide nine our specialty property and casualty businesses reported a strong finish to a successful year with an overall 89 combined ratio in the fourth quarter of 2024, albeit one three points higher than the 87 seven reported in the prior year fourth quarter results for the two out.
Carl Lindner: 2020 for fourth quarter include one one points of catastrophe losses, primarily the result of hurricane Melton compared to one four points in the 2023 fourth quarter and one eight points of adverse prior year development.
Carl Lindner: Compared to three three points of favorable prior year development in the fourth quarter of 2023.
Carl Lindner: We are pleased to report $70 million and overall favorable prior year reserve development in our specialty P&C businesses for the full year Andrew.
Andrew: Adverse prior year development in some of the social inflation exposed businesses within our specialty casualty group led to the overall adverse development in the fourth quarter for that group for AFG overall, yes.
Andrew: This reserve strengthening is consistent with the commentary we've shared throughout 2024, we continue to have a good amount of favorable development from our workers compensation businesses in the fourth quarter of 2024 in the fourth quarter. The favorable development in workers comp was more than offset by adverse development in our <unk>.
Andrew: Social inflation exposed umbrella and excess liability businesses the adverse development reflects higher than previously anticipated severity across several accident years.
Andrew: For the full year 2020 for casualty group reported $10 million now in net favorable prior year development as net favorable development from our workers comp businesses was substantially offset by adverse development in our social inflation exposed umbrella and excess liability and social services businesses.
Andrew: This was primarily due to higher than previously anticipated severity across several accident years.
Andrew: We continue to feel confident in the strength of our reserves and remain relentless in our focus on rate adequacy. Our insurance professionals are working collaboratively collaboratively across our own operations and across the industry address this.
Andrew: I'm pleased that despite the adverse development the businesses in our specialty casualty group reported a combined ratio below 90 for the fourth quarter and for the full year of 2024.
Andrew: For this group of long tailed lines of business that equates to a return on equity of around 30%. So overall. This is an enviable result, given the pressures of social inflation on some of these businesses.
Andrew: Fourth quarter 2024, gross and net written premiums were up three and 1% respectively. When compared to the same period in 2023 gross and net written premiums increased 9% and 7% respectively for the full year in 2024.
Andrew: Average renewal pricing across our property and casualty group, excluding our workers' comp business was up 8% in the fourth quarter and up 7% approximately overall both measures were in line with renewal rates in the previous quarter. We've reported overall renewal rate increases for 34 consecutive quarters and we believe we are.
Andrew: <unk> overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed targeted returns.
Now I'd like to turn to slide 10 to review a few highlights from each of our specialty property and casualty business groups.
Details are included in our earnings release, So I'll focus on summary results here.
Andrew: The businesses in the property and transportation group achieved a strong 89, 2% calendar year combined ratio over on the fourth quarter of 2024, an improvement of one one points over the 93 reported in the comparable 'twenty three period.
Andrew: The improvement was attributable to higher year over year underwriting profitability in our crop insurance operations.
Andrew: Coming into the fourth quarter, we were optimistic about the potential for an above average crop year in 2024.
Andrew: While decreases in commodity prices throughout the growing season in regenerate within insured deductibles the impacted abnormally dry conditions in certain states reduced yields, particularly soybean yields from what industry models, we're projecting and this resulted in an average crop year for AFG.
Andrew: Fourth quarter 2024, gross and net written premiums in this group were both down 6% from the comparable prior year period.
Andrew: The decrease was primarily due to the impact of lower year over year commodity pricing on winter wheat premiums.
Andrew: Coupled with elevated pricing competition in the non renewal of certain underperforming accounts in our transportation businesses.
Andrew: Overall renewal rates in this group increased 7% on average in the fourth quarter of 2024 in line with pricing.
Andrew: The previous quarter pricing for the full year for this group was up 8% overall.
Andrew: We continue to remain focused on rate adequacy, particularly in our commercial auto line of business, where rates were up approximately 20% in the fourth quarter.
Andrew: This is our 13th year of rate increases in this line.
Andrew: The businesses in our specialty casualty group achieved a very strong 89 calendar year combined ratio overall in the fourth quarter.
Andrew: Four four points higher than the excellent 84, 6% reported in the comparable period in 2023.
Andrew: Higher year over year underwriting profits in our targeted markets business were more than offset by lower underwriting profit in our excess liability workers' compensation and executive liability businesses underwriting profitability in our workers' compensation and executive liability businesses continues to be excellent.
Andrew: Fight the lower year over year profitability in these businesses.
Andrew: Fourth quarter 2024, gross and net written premiums increased 5%, 4%, respectively, when compared to the same prior year period primary drivers of growth for new business opportunities and favorable renewal pricing in several of our targeted marketed businesses and our excess and surplus lines business.
Andrew: Mergers and acquisition business also benefited from an increase in M&A activity.
Andrew: This growth was tempered by year lower year over year workers compensation premiums.
Andrew: Excluding workers' comp fourth quarter gross and net written premiums in this group both grew 8% year over year.
Andrew: Excluding our workers' comp businesses renewal rates for this group were approximately.
Andrew: 11% in the fourth quarter.
Andrew: An improvement of about a point from the previous quarter.
Andrew: Pricing in this group, including Workers' comp was up 8% in line with the third quarter for the full year pricing in this group excluding comp was 9%.
Andrew: I am pleased that we continue to achieve renewal rate increases of 10% or better during the quarter and several of our social inflation exposed businesses, including our social services excess liability and public entity businesses.
Andrew: Specialty financial group continued to achieve excellent underwriting margins and reported an outstanding 87 combined ratio for the fourth quarter of 2024, an improvement of six tenths of a point over the prior year period.
Andrew: Fourth quarter 2024, gross and net written premiums were up 11% and 12% respectively when compared to the prior year period, due primarily to the growth in our financial institutions business.
Andrew: Renewal pricing in this group was up 3% in the fourth quarter and up 6% for the full year.
Andrew: Now as we look to 2025 and Lula, providing formal earnings guidance. We provided several key assumptions underlying our 2025 business plan, which youll see summarized on slide 11.
Andrew: These assumptions for 2025 include growth in net written premiums of 5% from $7 1 billion reported last year.
Andrew: Our combined ratio of approximately 92, 5%.
Andrew: Our reinvestment rate of approximately 575%.
Andrew: And an annual return of approximately 8% on our $2 $7 billion portfolio of alternative investments.
Andrew: We expect that performance in line with these assumptions would result in core net operating earnings per share of approximately $10 50 in 2025 and generate a core operating return on equity excluding <unk> of approximately 18%.
Andrew: Our estimate for losses related to the southern California wildfires based on what we know currently is 60% to $70 million acknowledging that this remains a developing situation.
Andrew: This range is embedded in our 2025 assumptions.
Andrew: The combined ratio of 92.5% included in our 2025 business plan compared to the 91, 2% achieved in 2024 reflects anticipated improved loss experience in our social inflation exposed businesses.
Andrew: Optimism for the potential overall.
Andrew: Company.
Andrew: For net favorable reserve development and the overall company.
Andrew: Which we expect to be substantially offset by lower but still strong workers comp profitability and higher catastrophe losses, primarily due to.
Andrew: The California wildfires.
Andrew: Growth in certain product offerings that pay higher broker commissions and modestly lower ceding commissions from certain reinsurers are expected to elevate the expense ratio in 2025 relative to 2024 also.
Andrew: We believe that the combination of our reserve strength that continued healthy rate environment prudent growth and the ability to invest at a rate that exceeds our current portfolio yield positions us well for continued strong results in 2025 and beyond.
Andrew: Craig and I are pleased to report these exceptionally strong results for the fourth quarter and full year were proud of our proven track record of long term value creation, our insurance professionals have exercised their specialty P&C knowledge and experience to skillfully navigate the marketplace and our in house investment team has been both.
Andrew: Strategic and opportunistic in the management of our $15 $9 billion investment portfolio, we look forward to continuing to build long term value for our shareholders in 2025 and beyond.
Speaker Change: Now open lines for our Q&A portion of our of our call today, Gregg, Brian and I'd be happy to respond to your questions.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one I guess telephones youll hear an automated message advising your hand is raised.
Speaker Change: Also ask that you. Please wait for your name and company to be announced before you proceed with your question.
Speaker Change: While we compile the Q&A roster.
Speaker Change: Yeah.
Speaker Change: The first question that we have today will be coming from Gregory Peters of Raymond James Your line is open.
Speaker Change: Good morning, everyone.
Speaker Change: I guess.
Speaker Change: I'd like to just.
Speaker Change: Start with a question on your disclosure around the California wildfires.
Speaker Change: Maybe you can give us a sense of where the losses are coming from for you is this within the specialty financial business and financial institutions as a property the property side and the property transportation business.
Speaker Change: Give us some added color.
Speaker Change: And the type of exposures that resulted in the $60 million to $70 million.
Speaker Change: Estimated loss.
Greg: Yeah, Greg it.
Greg: Come from our property oriented businesses, the lender place property sure that well have losses there.
Greg: Things like property and the marine.
Greg: Our nonprofit business or businesses that are that have property exposures in California would be the would be the exposed businesses generally.
Greg: Okay.
Greg: And then.
Greg: Sure.
Greg: You mentioned in your comments about.
Greg: Some expense ratio pressures.
Greg: Wondering if you could just.
Greg: Revisit those comments and just give us a little extra detail about.
Greg: The lines of business that are driving the higher expense ratio, maybe its surety related I'm not sure, but maybe if you could just give us some color that'd be helpful.
Greg: Okay.
Greg: Hi, Greg This is Brian so when we're looking at our business opportunities. We're always looking at things from an overall return perspective, so not just the loss ratio or the expense ratio in isolation, but also the investment income opportunity. So in some cases.
Greg: Growing our business for example, our financial institutions business that runs at a higher commission ratio than say, our workers' comp business that runs lower that can impact impact the ratio. So when you look at that even with this it's really across the board have been good where when we look at the overall economics of the transaction paying out.
Greg: Higher Commission makes sense.
Greg: Got it Greg.
Speaker Change: Congratulations on the year and thanks for answering my questions.
Speaker Change: Thank you Mr. The next questions.
Speaker Change: And our next question will be coming from the line of John Newsome of Piper Sandler Your line is open.
John Newsome: Good morning.
Speaker Change: <unk> is a little bit more color on the.
Speaker Change: Casualty reserve development in the quarter.
Speaker Change: In particular, I'm curious what sort of underneath some of the excess pieces is it general liability under there isn't.
Speaker Change: Commercial auto does seem to be kind of a hot button areas industry wide that has had some issues.
Speaker Change: Just sort of what we can think about sort of what.
Speaker Change: The sources of those trends.
Speaker Change: Basis might be.
Speaker Change: Yes, the predominant way the adverse developments come from.
Speaker Change: And excess liability riding unit of ours that focuses on.
Speaker Change: Kind of the Fortune 500 fortune.
Speaker Change: Larger larger entities.
Speaker Change: Our other excess liability.
Speaker Change: Hey.
Speaker Change: The profitability is.
Speaker Change: Very good and.
Speaker Change: So it's really focused on kind of.
Speaker Change: One of our business units focused on a larger and larger companies.
Speaker Change: No that makes sense.
Speaker Change: And also thinking about that maybe kind of a philosophical.
Speaker Change: Thoughts on.
Speaker Change: How you think about taking are reacting to trend line.
In these kind of issues.
Speaker Change: It looks like Youre kind of taking a little bit every quarter kind of thing approach.
Speaker Change: But I'm curious, if there's sort of anything that triggers.
Speaker Change: A more aggressive or less aggressive.
Speaker Change: Approach to reserves when youre thinking about changing trend.
Brian Hartman: Yes, Brian you can weigh in also but again you know.
Brian Hartman: Historically, we look at every one of our businesses both from a reserving.
Brian Hartman: Actuarially quarter by quarter.
Brian Hartman: And that and we look for trends.
Brian Hartman: The loss ratio.
Loss ratio trends.
Brian Hartman: We see changes in loss ratio trends than that that impacts our decision on on reserving.
Brian Hartman: This quarter, we reacted to.
Brian Hartman: Two.
Brian Hartman: You know the facts that were before us and.
Brian Hartman: Particularly around one of our one of the businesses.
Brian Hartman: A fortune 500000 excess liability business in that.
Brian Hartman: So.
Brian Hartman: We try to be prudent.
Brian Hartman: And really look at all of our businesses.
Brian Hartman: Every quarter.
Brian Hartman: That.
Brian Hartman: Brian.
Brian Hartman: Yes.
Carl Lindner: To add to that so when we're looking at our business for example in the business that Carl mentioned.
Carl Lindner: 500, excess business and across all of our businesses when we're looking at that each quarter, we're reacting to.
Speaker Change: Increased severity in.
Speaker Change: The older years. So we're seeing actual increased severity in the years say 2019 and before but then also acknowledging that that trend would continue in adjusting our loss picks in the later years, even though we haven't experienced that yet so we're trying to react across all years. So the information that we see.
Speaker Change: Each quarter so.
Speaker Change: We're not even though it sounds like maybe youre, saying, we're taking it really each quarter, we really are taking a holistic approach and attempting to get to the best space based on what we know at the time each review.
Great. Thank you very much I appreciate the help as always.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone.
Speaker Change: One relates to the next question.
Speaker Change: And our next question is coming from the line of Andrew Anderson.
Speaker Change: Of Jefferies. Your line is open.
Andrew Anderson: Hey, Good morning, just wanted to go back to the 92 and a half combined ratio guide for 'twenty five.
Andrew Anderson: I guess it would be an expectation of average crop, which was the case in 'twenty four but if we also maybe strip out the California wildfires as part of the guide it sounds like you are booking to a <unk>.
Andrew Anderson: Higher workers' comp loss ratio next year I guess, one is that the case and two are you also booking to a higher casualty loss ratio and 25.
Andrew Anderson: So without going into too much detail business by business unit.
Andrew Anderson: What I would say is.
Andrew Anderson: You said that correctly is that we have an average crop year in 'twenty four and wood.
Andrew Anderson: And our plan would be an average crop year in 2025, and we do have the higher cat exposure from the California wildfires in there and then when you look at the workers' comp overall.
Speaker Change: Through <unk>.
Speaker Change: <unk> accident year picks and sort of tempered view of the potential for favorable development, we will have a higher pick in workers' comp So you're correct there too.
Speaker Change: Setting that is in the in the.
Speaker Change: Other casualty businesses, and our social inflation exposed businesses, where we've been taking underwriting actions, whether its rate increases or moving up higher in the tower.
Speaker Change: Or non renewing underperforming accounts all of those things, we're expecting our our loss ratio outside of the cats and the workers' comp to be better. So we're seeing improvement in our <unk>.
Speaker Change: Our loss ratio outside of workers comp and the catastrophes overall.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: So on the expense ratio side back to more of the driver of the increase and again that is a lot of that is mix of business and then to a lesser extent the ceding commissions from reinsurers, which are still good ceding commissions.
Speaker Change: As high as they have been kind of for the same reasons as we're seeing the adverse development.
Speaker Change: Okay. Thank you for the for the detail there.
Speaker Change: Maybe on specialty casually some some good rate in the quarter, 11% and seems like it's been accelerating throughout the year.
Speaker Change: And recognizing there is a 5% consolidated guide, but how should we think about maybe the specialty casualty haircut growth pick up a little bit just given where the rate level is or are you more focused on maintaining margins here.
Speaker Change: Well, excluding workers' comp I think we are growing kind of high single digit which.
Speaker Change: I think as is solid.
Speaker Change: I think at some point here.
Speaker Change: We could get helped also by.
Speaker Change: Workers' comp pricing kind of bottoming out.
Speaker Change: <unk> I think.
Speaker Change: <unk> has increased a little bit.
Speaker Change: And in our summer business in that.
Speaker Change: After churning a 15% rate declined.
Speaker Change: January last year.
Speaker Change: I think.
Speaker Change: This year I think it's 5%.
Speaker Change: Change so I think that may help us.
Speaker Change: The workers comp side also.
Great. Thank you for the color.
Speaker Change: Thank you one moment.
Speaker Change: Like to ask a question. Please press star one on your telephone.
Speaker Change: And our next question will be coming from the line of Michael So Murasky.
Speaker Change: Of BMO your line is open.
Speaker Change: Hi, This is Dan on for Mike, maybe just going back to the specialty casualty underlying improvement year over year just to clarify so is the improvement there coming from moving up in the tower in terms of condition changes and then may be just what inning would you say you are for.
Speaker Change: For the underwriting actions there thanks.
Speaker Change: So we've also been getting getting good price increases there as well so between the price increases the underwriting actions.
Speaker Change: And.
Speaker Change: And the moving up in the tower all of that.
Speaker Change: To improve our expectations around profitability from those business units.
Speaker Change: Keeping an eye on those things going forward so.
Speaker Change: And we will be careful in our picks to be.
Speaker Change: Not reflect does not reflect any kind of favorable impact we actually see it.
Speaker Change: No.
Speaker Change: So we hope it will be conservative in Opex, just because we're hoping to see.
Speaker Change: See those things come through.
Speaker Change: Lee.
Speaker Change: Ultimately we're looking at.
Speaker Change: And for improvement there from those things.
Speaker Change: Thanks, and then maybe just going back to the crop the change in.
Speaker Change: How you're viewing that year, just how that maybe you could size up the impact of how that changed.
Speaker Change: You're 25 guide and specifically the releases from the 24 accident year.
Speaker Change: Yes, I think.
Speaker Change: You really you were still continuing to settle claims sung.
Speaker Change: Some claims also in crop from.
Speaker Change: Last year also so I think the big change.
Speaker Change: It was really around a few states like Ohio and Minnesota.
Speaker Change: Where the soybean yields were substantially different than what the industry was modeling and what we what we were modeling.
Speaker Change: Matt.
Speaker Change: Alright.
Corn prices in soybean prices.
Speaker Change: We're down I think.
Speaker Change: 11, and 13% or something like that for corn and soybeans that.
Speaker Change: That was.
Speaker Change: Because our average deductible of farmers as you know was about 22%.
Speaker Change: Elsewhere in the summer and in the fall.
Speaker Change: Reflecting on that felt very optimistic we were headed towards a better year I think it's the yield variability state by state that you don't know about until you actually get declining and you settle them.
Speaker Change: So I think that was probably the biggest difference.
Speaker Change: That's really happened through year end and early on this year.
Speaker Change: One moment for the next question.
Speaker Change: And our next question will be coming from the line of Meyer Shields <unk>.
Speaker Change: Keefe Bruyette and Woods your line is open.
Speaker Change: Great. Thanks, so much.
Speaker Change: I want to go back to Brian's comments earlier, where you talked about sort of extrapolating worst severity from older accident years, two more recent accident years and I guess, obviously, we look at things on a high level.
Speaker Change: The reported financials, but it doesn't seem like we're seeing that level of increased severity baked into specialty casualty units, hoping you can walk through.
Speaker Change: The offset there.
Speaker Change: So I think of them in understanding your question.
Speaker Change: In the casualty.
Speaker Change: Business for example business we write in 2023 would've started off at a loss pick based on our experience through that date. So as we're getting iterative experience. We are reacting to that in our later years. The reason why it may not be that impactful because it would be.
Speaker Change: So the underwriting actions, we're taking would cause you think we should have a lower loss pick then we actually have.
Speaker Change: But that's because of the.
Speaker Change: Because of the offsetting impact of this increased severity in us picking up some of those more recent accident year loss picks based on that experience.
Speaker Change: Okay perfect that's helpful.
If I can return to commercial auto because in general that the line that seems to face some.
Social inflation and again you didn't mention any particular problem with now, but wondering just given us an update of where the what I'll call. The transportation book is in terms of targeted profitability.
Speaker Change: Yes, I think really.
Speaker Change: When you look at our overall.
Speaker Change: Commercial auto business overall on a we're making a small accident year and calendar year underwriting proppant in commercial auto overall with a solid return on equity.
Speaker Change: A small underwriting loss in commercial auto liability and as I've mentioned in previous calls.
Speaker Change: We're working hard.
Speaker Change: To get that to an underwriting profit.
Speaker Change: <unk>.
Speaker Change: Our transportation businesses right workers comp also and when you add the comp, we're making very solid underwriting profits and.
Speaker Change: Really solid good returns on equity.
Speaker Change: Just focused on commercial auto.
Speaker Change: We want we want to get to an underwriting profit in commercial auto liability and a stronger.
Speaker Change: ROE and stronger overall commercial auto underwriting profit.
Speaker Change: As I mentioned during the call you know, we got 20% and price increase.
Speaker Change: In the fourth quarter.
Speaker Change: <unk>.
Speaker Change: In commercial auto liability that was about 16%.
Speaker Change: During the whole year.
Speaker Change: Pretty strong so.
Speaker Change: I think between that and since 70% of our businesses.
Speaker Change: National Interstate is in alternative vehicles were also.
Speaker Change: Have the ability to increase the captive retentions if it makes sense in certain certain captives in and change our share of premium.
Speaker Change: So we're doing all of those things in order to to achieve.
Speaker Change: Underwriting profit in commercial auto liability.
Speaker Change: <unk>.
Speaker Change: Clearly you know commercial auto liability for for the industry and us.
Speaker Change: So one of the areas that.
<unk>.
Speaker Change: Social inflation on that particular, particularly the commercial auto liability.
Speaker Change: Part of that.
Speaker Change: With probably the industry seeing.
Speaker Change: 10% plus loss ratio trends.
Speaker Change: And that.
Speaker Change: <unk>.
Speaker Change: Yes, I think for the whole year, we grew about mid single digit.
Speaker Change: And that.
We write some large accounts in the fourth quarter.
Speaker Change: We are.
Speaker Change: We werent.
Speaker Change: Because of our focus on price and terms in that.
We lost some large accounts so.
Speaker Change: That had some impact on the business overall for the year again, we grew mid single digits so that.
Speaker Change: We're focused on on margin improvement in.
Speaker Change: In this business.
Speaker Change: And that.
Speaker Change: So obviously other a few other competitors took some large accounts.
Speaker Change: And.
Speaker Change: I don't know if maybe it may be.
Speaker Change: Non intelligent.
Speaker Change: Competition versus more competition I don't know.
Speaker Change: We specialize in this business again, we're overall in commercial auto where at solid returns and small underwriting profits.
Speaker Change: Our guys would tell me, that's probably about five points plus better than our competitors. So I am very pleased with with how we're positioned in.
Speaker Change: And who knows maybe as others come to grips.
Speaker Change: And trying to improve this business as a part of their portfolios who'll provide some more growth opportunities for us.
Speaker Change: Okay, great. Thank you so much.
Speaker Change: Thank you and that does conclude today's Q&A session I would like to go ahead and turn the call back over to Diane for closing remarks. Please go ahead.
Diane Weiser: Thank you and thank you all for participating this morning and for the Great discussion, we look forward to talking with you all again next quarter.
Diane Weiser: Thank you all for joining today's conference call. This does conclude today's meeting you may all disconnect.
Diane Weiser: Okay.
Diane Weiser: [music].