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PTVCA Protective Insurance

Participants
Han Huie Investor Relations
Jay Nichols Interim Chief Executive Officer
William Vens Chief Financial Officer
Brett Reiss Janney Montgomery Scott
Steve Spence RBC Wealth Management
Call transcript
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Operator

Greetings and welcome to the Protective Insurance Corporation’s Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Han Huie of MWW. Thank you, Han Huie, please go ahead.

Han Huie

Thank you. joining quarter morning XXXX for Insurance the all fourth Corporation conference you us for this Protective Thank call.

the hosting company’s it If copy at you today’s management which everyone accessed and of at Act the at call access be is Private website release, to to remind to as www.protectiveinsurance.com. you of a forward-looking for with time, may are which the press statements online are XXXX. call call, this At company’s maybe available the press the deemed Securities and this that investor did statements release, a you accompany would inform Litigation not presentation release, webcast well. historical website, in the along conference receive me within I live which Reform like not like of made the an earnings that may certain we during would meaning

statements in time-to-time in Corporation Insurance the that will Protective Although and detailed company’s give be differ no cause results release materially obtained. are the it are risks its and to forward-looking believes with on expectations from assurances expectations actual Factors press expectations from reflected reasonable SEC. assumptions, could can that the any included are the filings based with

turn would I over call the to and of like him. Corporation Now, to go Insurance introduce CEO Jay Interim Protective Please ahead. Nichols,

Jay Nichols

path very you of to everyone a customers, thank by morning and for our our I'm you, Thank to remaining good focused. our of serving team the just proud and start and call. joining Han stating profitability, that contributions embracing I want

in work well implementing our on way portfolio we operations work. have and solutions much and our We in segments need of that diagnostic to completed the the are

accomplished a While much much short of time. have we there very period in to do, is

specifically the progress will and items. on decision review initiatives volatility initiatives the overview our our manage will I earnings. rate, and our to I on During report our four I this on review. get focus on reduce provide to will comment call, strategic I an in will I will operating our of portfolio. to dividend

During by related a following; underwriting to $X.XX increased decline attributed had to declined losses was December value $XX.XX investment primarily commercial $X.XX dividend our payout markets. write-off of the $X.XX. The goodwill business, $X.XX decline severity and This the the we due $XX.XX. auto of to of our quarter, losses in line $X.XX of in investment book of of to from

development claims. a liability our to large by underwriting the in only unpredictable quarterly growth to was almost although the of experience prior The portfolio book been very severity severity range. X.X quarter impacting the On the our on rebounded investment premium. is brighter Full of value quarter, severity with year, basis, by in the to the the were quarter this auto appreciation for results year the end the approximately end to of entirely loss with things, related the XXXX portfolio. subsequent of accident our commercial has by in a side in line the $X.XX share, more severity quarter. market our XXXX impacted high related was due Historically, This ratio year points the in at

than perform expectations. workers better Our in cases continued compensation to results many at/or

was level increases Xst, or investment as initiative capital January business. volatility the more portfolio progress of results assets through across reduces our reduce year, significant considerable action is risk This go Unfortunately, for actually farther few to continuing rate support in our in our initiatives during and we our Additionally, our And on a of the much and get there to improvement support pricing clients. to the to primary our improving investment insurance the making broadly segments. we're our available took the and to our methodology need the investment portfolio. business redemptions at

Protective relate the While last the at in we few the a parade, to in rate significant there has months. here mindset been shift

rate way, XX to but targeted business. a quarter, in approaching in in excess cost a increasing line needed thoughtful, XX very auto analytical of XX%. is The our segments we are an speed. rate of inflation We commercial and commitment the accepted trend fact lost that Last with identified of of

these analyzing the drivers exercise last in encouraging the segments. a continued we During contribute analyzing has it factors months, we XX to of we in -- outcomes excess identified exercise the that This of few analyze experiencing. very as to results been are are

where identified base action where increase to business with rate our to or on we these we have appropriate. rates specialty provides taking capabilities, renew customer from signals believe shift We and that better focus strong need not better create We we and value. us can a information, are which

supported the for so the across that XX%. by need While of I auto is creates excess the are we insurance commercial rate fact rate in for need line XXXX uncertainty,

Our moving along second volatility also initiative is well. reducing

partners excess insightful information business on faculty the these facultative market. into severity found auto higher are layers is This commercial our layers. reducing pricing exposure to of and dual reinsurance also placing us of of lines and the have benefit giving we We providing our the agency

capacity possible. to a where continue distributions bring to more customers process significant our and towards work to We integrated will

We our essential partnerships streamline for our platform and the Strengthening making more on enhance also customers, to capabilities. data century and are to our XXst value our driven establishment and a our processes to success. infrastructure digital analytics the is better progress digital creating provide value of

share as of bring $X.XX are repurchases a of we made our share to group, effective increased that valuable $X.XX quarterly previous rating afternoon, repurchase maintaining appropriate. of peer and We quarter, and management to line previously resources capital preserve a provides dividend declared we this our per our when which and capital dividend is with as committed Board yesterday per view action This optionality in shares of the tool. from our was reduced Directors dividend As share. announced to

Our I in expanding Board will Unfortunately, comment of Directors term the the committed strategic this The our be area, will now shareholder I activities articles the of over review committee value. can nor opportunities to numerous to explore not our to long I the CFO, continues board this of remains maximize turn value. to maximization Vance. term call on regarding shareholder long William activity. on

William Vens

Thank you, Jay.

million As to $X.XX discussed the release, $XX.X income compares per in our net was which or our for $X.XX share quarter per fourth $XX.X fourth press of million net quarter. share loss year’s prior or

compared The of to $XXX.X loss for prior $X.XX share the million during Gross compared XXXX. or to of XXXX. million year quarter net written $XX.X per retail million in quarter net channels. million $X.XX and per to during the $XX.X by period. or Gross $XXX.X in to compensation current for the distribution and was full fourth income auto continued written the premiums totaled written premiums program workers $XXX.X the full of to commercial, our XXXX, year growth for For the X.X% million both $XXX.X XX.X% driven of which year share compares increased increased million increase products XXXX company's written

a the for compares of for operations fourth XX.X% an of resulting to combined quarter the combined Our quarter ratio in $XX.X loss million XXX.X%. fourth of of ratio XXXX. underwriting a produced This

the XXX.X% year was compares ceding elevated For reflects auto the XXXX increase The an earlier. ratio increase unfavorable, current an for the in year related fourth to combined four related the loss ratio variable the full accident increase of of severe in loss historical adjustment prior during The as year XXXX combined to related provisions $XX.X in quarter XXX.X% accident losses. for an additional in our year development ratio current reflects ratio million XXXX. estimates combined which million of a $XX.X combined ratio XXXX, of auto accident and in commercial the commercial premium, treaties, coverages, to discussed year reinsurance premium to loss

-- income quarter's increase settle During accident earnings challenging due more well call, increased discussed last an claims Jay litigation unfavorable how environment Fourth year severity claims. is as investment result to in net this prior during to the time development last of quarter as the loss year’s increased interest reinvestment flow as for leading funds rates, higher duration quarter from yields income an positive resulting in short The the investment invested income of in reflects higher fourth a X.X% well portfolio. as XXXX. fixed cash net compared to to increase increase average

XX.X% For net increased investment the compared full XXXX. income to of year XXXX,

expect We be net investment in income more to future increases modest.

However, flows. invested we positive continue higher assets due to to resulting expect future increases further expected from cash

remained Over duration cash, relatively level, fixed income including of effective has at an approximately year, X.X. duration the past our portfolio

average fixed high portfolio Our has including of rating income a minus. quality weighted AA cash,

of quarters low the of is income fourth a Throughout quarter first into fixed equity of these investments posture. were approximately were our more our income securities. short XXX actions from the the three of Proceeds tax in stocks portfolio million reallocated the Further, XX%. new reinvested tax from These of rate million approximately corporate opportunistic XXXX, still high investments fixed equity we basis shifting duration XXXX, income sales into and short sales short as into company fixed This we XX predominantly duration, duration with quality, consistent securities. During reallocated equity investment lower securities. to benefited conservative XXXX.

our favorable accretive at have consistent shorter reducing continuing prior growth In yields year Premium loss development our prior also Favorable has favorably yield commission the income, curve. compensation increased strategy expense from contracts, reinsurance of income our accident addition, to products ratio, sales to given a effect which in seeding of ratio, were end these is the discipline. from expense increase impacted the to contingent to stated with on due expense exercise workers the the expenses. year impact

period, is change increased decrease has earlier of initiatives XXXX two-year investment treaties. operating upon Protective. positive financial years flow over totaling of once XX, during per approximately the XXXX book dividends a to beginning December cash we're market results resulting sheet shareholders XXXX to per the us value with a year that the XXX $X.XX paid cash It focused portfolio is in was was reinsurance $X.XX positive by in and was per share our in at to a plus on us XXXX believe Reviewing share the share. ended million our the quarter, XX, value year XXXX during share position that dividends book XXXX. We of deliver decrease the fourth challenging lost shareholders this And Jay and which $X.XX strong supported appreciation has to value per portfolio. XXXX Book of Jay share payment per flow were our balance value December to share. not $X.XX December XX, for future. fellow Moving on well our better $XX.XX, consecutive the our that for again per due operating cash after mentioned operating of

As posted time, we've happy a financial website to brief fourth quarter This reviewing questions. take be our concludes presentation and we'd release, quarterly on our a At our protectiveinsurance.com. reminder, results formal press our statements this at commentary.

Operator

you. Thank

the We question will and answer now Instructions]. session. begin Thank [Operator you.

question Janney from first Montgomery from go Our Brett ahead. comes Scott. Reiss Please

Brett Reiss

left gentlemen. under morning share How Good authorization? your buyback much is

William Vens

robust a have pretty we authorization. Reiss, Brett

on shares. I think like it's perhaps the of million order X

So we any after go frankly would more in period. it's than quarterly

the resolution There's another pass so it. room And under to for plenty no authorization. there's need to of re-up the board

Brett Reiss

it Okay. book. And stock stock. XXX% we’ll to you'd of be back there are like on parameters Buffett dips mean with if I any where Berkshire, buy looking buy to

at book? like is would it to a a buyer? does it appreciated? Would that of XX% Your to to be to entice on stock bigger that be discount color have you Any Or book. about trade XX%

Jay Nichols

we As we at the be numbers. far are at appropriate shareholders and that those at the the think to creative of would book discount discount We time we would our we and market. levels to return a to would, the -- those as is in book

Brett Reiss

you or be A just B would B shares? buy both to And and the the looking shares

Jay Nichols

availability depends the and that [Indiscernible] then or on think other. more I the volume

Brett Reiss

a XXXX Okay. Is ratio combined kind to internal there at? you'd exit of targeted like

William Vens

any and looking so historically Reiss, on not breaking statements. we haven't we're this given forward with guidance call from that

Brett Reiss

new to litigation be than increases and you The that you're comfortable by going to going kind new increased will question. a due for been normal of of has increased to negatively time claims. more forward. more that And last That seems this settle the normal to the combined one challenging Are severity going impacted be Okay. just amount able ratio compensate rate institute the forward? to

Jay Nichols

And that -- normal very it. things. on caught the is That point industry. a a good a to and few new It's doing you've in we're

trying that On judgments. to to the we're recognition larger find to volatility the we're new the new setting some of larger larger address of claims and to reinsurance our also but normal normal driving we layers rates facultative that trying considering adjustment reduce that limit elements our on side those reinsurance also or are judgments, in excess are or

So incorporating normal we on yes in question the considering trend that is side answer new of rates. the your are the rate severity and

Brett Reiss

and that Could to reduce and you you're you are a I more amount bit bear into there? it? right. maybe just go of control to can litigation in examples? to and are the reduce just in Or to do you do there being things exposure of Right, happen to time just your grin these suggesting things into some mean, Can decrease what have more little you you terms proactively your settlement? give is me -- costs

Jay Nichols

is just which to claims we're And Well, the adjusting better there side wouldn't too. cases to on exposures quicker. reduce much say under outcomes on are do absolutely that our get I things we the can

We our our of action to case to and trying much a are deeply we're more the quickly and [Indiscernible] two, course sooner. much by reduce one, making decisions engaged on about settle reduce more expenses

Brett Reiss

Right.

Jay Nichols

are where other and in -- try the We if financing to also – there's there's litigation taking loss. to any engaged where identify some where actions

fantastic which we're a these keyed of it slightly normal the the to on in sort normal and doing on new cases. folks process take a cases. different the claims normal keyed a and industry I years think into settle job they get new are, I new so outcome But does necessary they're to And outcomes best the of are is good think good they're into into these on our getting -- doing they're

Brett Reiss

is there practice is stop permitted financing to Right. anything can do If litigation or that is days? there you a that these

Jay Nichols

is it say, actions stop There's as can as nothing the around that. out just -- are there's and taking is of to that well take figure a -- that I to to well. we some industry encouraging actions we supporters is And do very some which per and but can helpful we process that very to

Brett Reiss

Right. you questions. my Thank for answering many

Operator

Steve go Please Our comes Management. ahead. Wealth from next question RBC Spence with

Steve Spence

months I I Good an a last board with position? morning there would and us management announcement But to wonder if the succession at know light has I few gentlemen. that has in this interim a if like to can taken I you it, give apologize. little been time, respect the missed

Jay Nichols

to referring management succession On more you're me.

Steve Spence

Yes.

Jay Nichols

the So interim CEO. I'm

Steve Spence

way it apply to Trying – ask sloppy. to Apologize, find appropriate, correct politically the was question.

Jay Nichols

with me. necessary Not

for XXth, something I [Indiscernible] has was since a which CEO April in Interim ever from I've So, is the for well was been And as going XXXX. transition life. thoughtful for on appointed there process. me. process to is looking of of as I board with board CEO search both and And is opportunity, CEO as on very permanent and Chairman and on my in that a permanent a the a great a here October engaged

around long I longer Executive a my will And remain time. for goes the CEO period you we've made Chairman period that – time. and – a my disclosures my if compensation period is my over So to as not tenure of for as or to as look Chairman, new just contractor of whether my time or longer partner it’s a that

to period our So our our to our as people not of for interim that compensated of and mission interim. for consistency customers I'm approach my compensated time transition for maintain time through and I'm as and long my time.

work a well. thoughtful I'm and confident think very it I it's very process will out

Steve Spence

And many have problems there there on to that that give adverse quarters that of a be there's joined you I you they're pattern problem? can if a I your statistically you to shed you. price But serial the that? seems pattern and of combined you that. having time restate. here ratio client recognize coverage. as that us here, that pattern ratios. go of address periods to to defining Can any are for And doesn't color a In mispricing on you as role can having it think where how back don't say going correctly, Thank that appreciate there let's and product you're of little us light be here would and on I board a it mean

Jay Nichols

Sure. Sure.

reserve which the be made more clear, restate on back and this spoken of which only the and confident actually is one in reinsurance now posted point levels our to levels and So reserve prior for website. to of this both we on development the program our calls to go these a because we're up year development just relative quarter we've of didn't because and adverse and on points and have quarter ratio eight much loss

auto significant We physical As so and issues as portfolio better are in across -- rate comments. we portfolio my been there's commercial and right, a there say where to commercial far portfolio I workers that. auto And were is other side entire on trend to was liability you're on late addressing the there's the and performing as and rate volatility side. the rate and said the -- actions in moving losses actively to expectations or damage portfolio. the now -- whole both prepared are comp we across I so But been on parade would well than committed the

retentions on where to inadequate appearing rate are are where need not rate exactly making we So out the of business just basis granular a on on possible significant work the we've we a using rate try drilling portfolio limits. brush approach thousands and rate seeing to where -- of moves and it's lot sales and to continue very tens to down and on done a where apply down drill with to and that but figure lines across to of broad we of

the identified are or we've said that causes -- are that the those the think that through issues are I we identified the where before I sort are happy those of diagnostics and we’ve like So the of issues the really our contributing way action prior accounts. with rate moves I'm take And were there we're that. we for significant to periods. and in much more than on And in factors moving to January

Steve Spence

buy question. that to one addressable to Part it driven growth assuming and you. carrying that vehicles. in general you Thank see our aren't on has types in that that you has How theory product growth it out, the thesis And more do of is the relate addressable extent into been various flawed last people folks of department with volume, transported Is stores – the comment to I'm the Can the to the miles in investment walking would be of of market? which in market. a terms scenario?

Jay Nichols

there and commerce that came are look the we're Absolutely, miles I agree truckers more economy When so stated are a with is and And insurance company industry the the as driven many the you. role the in trucks cardboard miles well-organized to play and in winners space -- -- that there's and only we in an I are in Amazon and not are -- I winners more that. of trucking enabling driven.

have We share. market a small

So I undergoing is is our well. significant. significant the believe market that disruption as opportunity trucking do

market as significant And a very opportunity excitement for enabler dynamic sort there's in your the think going just market that new well an as of space trucks. space. a commerce we on mandated terms share and as on commerce as with the whole in a dispatch us. of endeavors digital well data this other there's in ELDs of this It's opportunity as the In what's and in we of interstate technology for digital host an

correct. is thesis So

Steve Spence

respect available and with accidents clicking industry per finger the bit data? little out in Is it a there to like your Or a the it metric driven that's is with up you put more combined miles folks there wind? in to

Jay Nichols

there's trend mile, no. much per it's There's trend per data. deaths on No, so mandated so accidents million much miles, there's the The data. data -- hundred on

the use more time to sticking based probability out in the those good is and it's we're There's you there's think not and factors, over towards form. reasonably whole a to in can host it. so many of and in the and I our get doing. convert been and it, factor question because of from we're pricing refer that's the layer analyze -- has a that The data challenge but wind. to to the what a it challenge They're occurrences -- industry, as trying no you longer then what quest, dimensions So is and finger signals you that lot I our pricing real moving we're historically we're probabilistic data away to to of in of spending pricing

Steve Spence

thank very questions. my Right. you much. I you Well appreciate taking

Jay Nichols

Thank you.

Operator

to at Jay time. There are turn would I no this comments. back over floor the to for like further closing questions Nichols

Jay Nichols

today. the thank Okay. to call I their want everyone for on time

extend by their Thank a for in Our shareholder, the recognize our Norton singular like was partnership. committed set to improving dearly want you three to all and We're very closing, I away continued endeavor and our for remember He and on company member will to progress. man a making want board here our missed operations also focus and is passed appreciation to time. to would than their us. a thank tangible we're February of to I who a be customers tenacity decades to for that our And Xnd. the more and commitment and path improvement. profitability. I special to Shapiro, on of producers people your

Operator

This concludes teleconference. today's

for your participation. your disconnect this you at may lines time. Thank You