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PTVCA Protective Insurance

Participants
Marilynn Meek IR
Jeremy Johnson CEO
John Barnett CFO
Ronald Bobman Capital Returns Management
Brett Reiss Janney Montgomery Scott
Jayme Wiggins Palm Valley Capital Management
Steven Spence RBC Capital Markets
Call transcript
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Operator

Greetings. Welcome to the Protective Insurance Corporation Third Quarter 2019 Earnings Conference Call. [Operator Instructions].

Please note, this conference is being recorded. I'll now turn the conference over to your host, Marilynn Meek.

begin. may You

Marilynn Meek

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

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

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

introduce CEO to Protective of Johnson, Insurance to turn Jeremy go him. Please over like the ahead. and now call would I Corporation,

Jeremy Johnson

and professional, Protective. and I'm as this CFO ago. he our that He a Good weeks morning, you join joining experienced and to John morning. a and thank finance us joined pleased for talented me very chose all few John is

show strategy. results our turnaround quarterly continued in Our progress

of and ensuring Insurance one industry. long-term large operate Property volatile most trucks, a in As Casualty segments of the in we specialist the of fleets

talent our pleased expenses ourselves that future. loss quarter, no accident managing pleased competitive expense ratio to and we to for our while reserves comfortable continued still technology am ratio, well with improvement in This year in we are over I the time and changes need the report for the in a material investing position

and credibility with and talent in call, strategy steer all quarterly been retain best to value constituents understand for can our culture to and reward with industry. and very competitive I my turnaround our to distribution As continue at the we priorities disciplined to of and last and partners advantage and ongoing the through bring customers will speak and bring build the said have execution a to Protective them meet to attract and confidence and be the in shape the

During team. we've and Officer, a the quarter, positions Officer several Financial Information key new in last other Chief Chief the on brought management

to ongoing Book turn a per X.X% after value and grew strategy. payment creation of the by the in of then share highlights about turnaround now quarterly will speak the X.X%. I our dividend quarter was little quarter third value total the and

Total return for X.X% was the year-to-date. and portfolio for the X% the quarter on investment

and to well-balanced value. is portfolio Our well-positioned create

our is leverage equity. X.XXx investment Our

million $XXX the duration contributing earnings, investment base Our securities in growth in income of solid dollars credit assets book to create we will fixed value in which or is of cash, quality. relatively short held high XX% are expect portfolio in a and our and future.

by Our lower higher our was quarter ratio QX XXX.X% loss third ratio as combined than higher slightly at expenses. offset was

to to included costs million do expense, charges debt of and the expense bad related well expect severance as recur. $X.X which not ratio third Our quarter for we new-hire-related as

analytics onboard same ratio. money harden capabilities. anticipate we actions enable And reductions, us infrastructure months, XX free our technology, which to us will next more at up talent reinvestment to and the further and the expense time, risk the in elevating without management and take remedial the for enable expense Over necessary

Overall, are current year improved XXXX to rate X.X improved XXXX. year compared points shift current points Improvements and in ratio -- compared by The by QX accident X.X QX premium during year improved not Removing the we and rates driven policies quarter, by the by were to liability commercial achievement loss by up could where, mix renewed auto. million XX.X%. pricing, XX.X%. by auto of the on commercial contract, two $XX.X rates improve

risks retaining portfolio. the better-priced attracting of Moreover, the are and we percentages into higher customers new well-priced

we risk are We and have optimize pricing the premium rates, effort that will to our in confident profitably. earn selection arriving and momentum in today remain that

As industry, a a trucking difficult climate. insurer we face specialist to litigation the

social transportation and in medical are the across by have factors defense required insurers. the costs adverse of recognized aggressive and Our recognizing These commercial is trend to inflation policy a demands. auto bar approach the claims, companies are and in our individual book handling industry trends plaintiffs' and target general a ultimate towards values, verdicts, has immune and the is carried Trucking the will as critical to defense loss favorite finance could by appropriate of that forward. litigation data an diligent recovery, required up. influx the we limits attracted that providing become and practices trends to being utilizing cases industry. be to all that nuclear and and making cases driving moves council values outsized seeing pushing to settlement Emboldened Expanded strategic been of when not more be the trial understand higher plaintiffs' theories lead vigorous available to higher potentially higher of a

customers the a team do specialist is we reason and claims value large the us. choose business experienced insurers that An bring part to part customers trucking of to our with why on focused large of

committed on continuously on making claims when to reserves older claims, adjustments and focused necessary. are establishing quickly reviewing new accurate We

financial development our not results insulates our a treaty in prior in in stock development we the auto adverse form material commercial accident reinsurance While reserve the we reinsured from years our of XXXX anticipate and no that do believe years experienced loss substantial through XX% quarter, deterioration potential position. in protection XXXX reserve largely for

strategy. very turnaround our executing believe on I are we well

an invest We continue we'll to and excellent have in talent. team,

pricing our improve and customers continues Our environment us. partners to value and distribution

I'll With turn questions over look make John's that, Working John, we roads following comments. your the call I now with them, to forward and help the safer. to to

John Barnett

Thank Jeremy. you,

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

quarter to For $XXX.X X.X% income million. the the share compared $X.XX written X net per net XX.X% premiums or prior share, Net of up of the for year the to million premiums million, $XXX.X earned which $X.XX period. first period. to XXXX, $X.X per to quarter months a totaled year $X.X decreased loss million Gross the for increased prior compares for

strengthening. premiums period. Gross first increase in first quarter The written was of related period's months for of to of prior third premiums compared attributed XXXX seeded to months to earned $XXX.X X XXXX prior the Net X.X% the for increased million to premiums the X.X% to X increased million. higher XXXX year $XXX.X reserve the

treaties of impacts combined corresponding strengthening quarter ratio additional XXXX. Reinsurance of in the in operations the which of reserve our the the during reflects loss historical $X.X of combined not to an third resulting quarter million, Our of third XXX.X premium in the third ratio the The recur quarter ratio XXXX, seeding did a the underwriting related third XXX.X. produced to for quarter of XXXX. for in of decrease compares a combined This and

produced was our months of a loss the of in which $XXX.X of For million, XXXX, combined X underwriting compared to resulting first operations XXXX. an ratio $XX.X million, flat

expectations a severity consistent the in continue to sector. ratios with automobile the loss rising at We maintain level year current accident commercial

current the accordingly. As learn performance more adjust year, more loss will time and passes, the of our accident we ultimate we about base

limited quarter increase in in resulting investment the quarter of from cash the net equivalent investments reflects cash as partnerships and and into from investments cash an equity as increased compared XX% Third third continued average income funds bonds. investment The income short-duration positive flow XXXX. increase reallocation well net high-quality to invested, and

share For for of Operating months again, the quarter, months flow increased XX, income XXXX, $X.XX dividend. during This increase share was, XXXX. per million per of months September of $XX.XX, X value of X Book first increase September the XXXX cash in X.X% investment cash positive the ended first $X.XX on $XX.X compared once positive net X was operating XXXX. or XXXX. XX, resulting was of in per the cash share flow to an XX% net during

that operating are to our a sheet. supported initiatives note do balance continue by strong We

concludes a this our third As formal happy reminder, reviewing our This At statements release, on to quarterly financial we press have questions. presentation and commentary. posted would website. quarter take our be we time, results brief a our

Operator

Instructions]. [Operator

question Management. the first Our from Returns Capital Ron of Bobman of line comes

Ronald Bobman

buyback presentation not there's activity please? activity so call little bit I and and quarter's a quarter you specifics the on the provided that the the share got if the been seen end. apologize us, you with poster I I on Could during any since if have late

John Barnett

buyback the included period. have we for Yes, the

the during we've So shares. XX% XXX,XXX book Total in shares $X.X quarter, value. million shares at current of were repurchased

Ronald Bobman

anything And okay. quarter-end? since Great, the

John Barnett

very Yes, minimal amount.

Ronald Bobman

to rate remarks, of in increase out business you when along ultimately being mentioned the multiyear Jeremy, you then rate I profitably. And of, had a the rate where statement followed then Okay. shortly of, got the prepared you XX% an in with -- in lines the earn average you currently you strip on, think, your million you that a average I portion, approximately. provided, but $XX your after information roughly XX% when renewing written of the you premium sort expect as

it's me if but that I think wrong accurate. heard I So stop

is of of clean sure, XXX.X want quarter, Given this the takeaway effect, you QX. and reserves absence these you make most increases just recent the is I XXX example, My combined essence being with in the to a inferring, of the associated in is rate of that businesses any that adverse that to this the number, is quarter, so clean development there a ratio ultimately, material currently number. what given were expect bound, be sort in redundancy for sort in

Jeremy Johnson

really not point make. That's that trying the to I'm

you year, into this premium prior from the about our got you've in quarters. quarter quarter from If think accident an earning combined

as Some level in at we that the business writing that -- it that you future of quarter are a business we as running today, still our the of When example, earning that quarter. That's The that us. for that will, writing into same books for we're earns hot. profit now about are was at into a not is this pricing level we premium the business priced was we today. produce think the that this discontinued, business, running have is, think in,

mojo -- business on we kind in QX of getting book. really a XXXX sorry, I'm of got increases have with XXXX and a You the QX QX of that difficult of was going XXXX priced before rate

renewed the a over by premium some you for current the out an price we we the longer. renewal, going it, we business of a little on you're we don't next, at comes got quarter. and also is When the premium just know. at it from that we price almost that is get that from renew a bit call And price point let's business And any quarters, comes up. have on will that you as in believe appropriate up what rate will quarter quarters then today that to given -- then by is renewed earning acceptable you that more future contract as think But have business four in -- earning this premium but look

an lot we also quite there's Now where of environment are a trend. in

got still to of the from significantly So you loss-ratio a even you've increase stay claims price fairly standpoint, because costs. every if the want year, just

in going for -- -- is significant. price is believe because of our to our business certainly seeing the we're liability auto the fixed commercial trend I lost foreseeable appropriate line so -- trend. believe in don't price keeping really certainly for I not a be don't So where future

our make getting increases that stay have sense? in we to So to just rate still keep Does book.

Ronald Bobman

that What's What is the you underlying book these business assumption trend are on that trend loss higher quarter's incorporating the that current assuming you're loss the the you into rates? of -- that? current at period Absolutely. renewed

Jeremy Johnson

tell will attachment actually points we And portfolio, not as across attach, I different higher the that. rather in trend. I'd -- Ronald, that the the trend disclose we we you our look higher at you disclose don't that.

so our with got you've of if than are, But we attachment, generally and And on to you're will if and -- industry. $X-million forth. or line so lower that attachment promulgating I... you factors tell So we're I a trend promulgating be in believe trend of X-dollar a a the

Ronald Bobman

despite is Okay. you've the in going there's very in the the I Is not only to mentioned, understand. mix going down, sort multiyear on of auto? mix what's -- -- How call been this the on about prior, nature multiyear reference policies. generally, commercial but of

Jeremy Johnson

Yes.

Ronald Bobman

was, it's you it is? Could Where you think where it going? talk where about

Jeremy Johnson

sure. Well,

So you numbers. rough I'm going give just to

about half the year commitment two of our book on year, on into the was providing really excess kind of stopped that and So two portfolio, a of we year quarter commitments. turning this first

general as policies come up, those a we're a rule have basis. as on So renewing two them year not

next year or a year the couple think forward the policies. be an policy. practice Upon may we quarters, underwriting X fully to or deals going that got there other any two annual X, -- will within it's anything extraordinary renew for So X have I our But than two we offer of off will not reasons. part of occasion,

Ronald Bobman

remaining annual on will commitment without of be March March -- come all excess the two then so Okay, a late will enforced the year outstanding? XXXX, be book enforced portfolio -- policies all of

Jeremy Johnson

of say by be deals. still there some into would XXXX, quarter second may I the moving

Ronald Bobman

point. Okay. understand Close enough. your I

Jeremy Johnson

Yes.

Ronald Bobman

a in or Okay. in how talk and 'XX, transportation was the where and in think the say, that public let's little Could in about that's recent mix going? bit early you significant you past 'XX,

Jeremy Johnson

Yes.

essentially small XX fleets, larger a -- and to we was we larger that up a book, million had we units -- public book fairly and book. books transportation. fleet then saw X of deterioration certainly We that fleet So significant in had sorry XX

a that rate that We're and retaining book. book book that But we book, needs volume think that we $XX too, committed thereabouts, fleet that so down. book or million Ron. fleet $XX on which to million we've and then run XX% was we And are of probably smaller the smaller had

to think I has fleets. and enforced you for million forward rate could about $XX the of premium smaller probably run So think being million of us majority the for about transportation like going public $XX been that

Operator

Montgomery comes question Scott. Janney of the from Reiss line next of Our Brett

Brett Reiss

Welcome aboard, John.

John Barnett

you. Thank

Brett Reiss

you expenses, you What this which higher have quarter your combined would -- mentioned been ratio in the without Jeremy mentioned the remarks. opening

Jeremy Johnson

lower, approximately. About X points

Brett Reiss

right. All

XXX? XXX, of would've around been instead it So

Jeremy Johnson

and XXX Yes. change, yes.

Brett Reiss

All that's good. right. Well,

Jeremy Johnson

absolutely. progress, It's

Brett Reiss

at yes. to in I shares. just to the back had looking -- the buyback second up release repurchased this arithmetic shares, and the quarter your third Yes, whole -- XXX,XXX XXX,XXX the in circle quarter, Can share it's I'm X you for on where purchased quarter. months

So I you up -- XXXX? this hear like with it come purchased quarter. XX,XXX to Did shares say you I was

John Barnett

Yes.

repurchased we shares XXX,XXX this really For during this quarter. quarter,

quarter. third the During

Brett Reiss

right. All

B what? the quarter. of the and an it A was between the at During share? right, price All is average And the breakdown and what

John Barnett

value. price In shares. the line what with XX% historically, repurchased of it very was current we've little of A And book was our our repurchase

Brett Reiss

All right.

So $XX.XX so $XX.XX? times X.XX, around

John Barnett

there. around Right

Brett Reiss

How on Okay. ratings buyback And to share down jeopardizing authorization? buy here? to remains back the continue aggressively wherewithal without much have stock you your do

John Barnett

the current on we based appropriate share repurchase, feel time, this At our Yes. have for approval to plan the we near-term. execute

Operator

line of Our Palm next the from question Jayme comes Capital. from Wiggins Valley

Jayme Wiggins

ones, you're newer customers, keeping ones? bigger smaller unique about more you're older general versus what cancellation's pricing? Are the In towards anything is there renewing besides the customers, not business the

Jeremy Johnson

market more generally really. On driven, made we accounts an categorization part, that that shouldn't certainly we to the more we're -- -- it's, and don't there's a losing a account they the been accounts commercial most i.e. business, likely needs we lose for that on need we're average we more speaking, mean auto But where lose the rate anymore. have -- price. find we than that the the I it's lose just liability handful of that books book, be not

is that's losing So that make than average more that sense? -- more accounts underpriced. Does We thing. the think losing good a of are we're underpriced account we're

Jayme Wiggins

non-transportation had coverage with you litigation last guys customer your major clients. XXXX which Protective One Group, in first Personnel space. marketing was quarter's in I think, And you Yes. workers' In more disclosed comp Staffing to that XX-Q, began me. from

a who like in Now core in serving writing PSG decision for leadership a lawsuits what exactly ask, auto it was couple sure policies commercial space I serve I Protective appears one, are similar into the so, different not of a of workers' toxic still that especially is team. companies also with to engaging attempt the insurance client But why? will aren't and and market Protective's outside went them. compensation clients other this recognize you if to that but I'm proceeded

Jeremy Johnson

in we exposures. starting certainly about we So smaller the in and or million of book that PEOs. We even where relatively, workers' tail write And a do the I a -- write think of company probably companies as take stores actually future about want of the that and low-risk will see specialist little for very compensation as $XX outside trucking manufacturers. not of as focus some retail think off restaurants any We some write kind some specialist book in transportation wheels wheels. the small you'll and that. I to I Frankly, on space,

that's We And compensation us for committed remain standpoint. area that only workers’ probably book of also But growers. for extremely have we that cannabis that book well that's focused performed we a our are be of cannabis outside will growers. the our compensation to. from on the And wheels workers'

Operator

Instructions]. [Operator

the next of Spence question RBC from Our line Steve Capital comes of Markets.

Steven Spence

surprised I cost item a mentioned and days that which has Street of there. detail to guys level that more that This industry I competitive Obviously And had one and the gone the first your case interview ask The it you What's would not is that like? little indication, are a up to rates I'm a been. had that the on couple hear Journal, environment for was their is carrier wanted bit in insurance than scale? costs, of was high believe, even they XX from aren't favorable where number their cited. cited But to environment seem monthly you pricing Wall cited. in the more an profit to a XX% ago, has the coverage. questions. shippers $XXX,XXX in that bit $XXX,XXX ran one squeeze certainly story be you a than up if But about

Jeremy Johnson

So is market have We the just excess It's excess book. book. There you competition in a but that our on risk short less I that we lot a competition the in to time. good that it's We the in a a amount answer we obviously of primary like market. than the We a highly underpriced. is mean, question in certainly and the hard distress more lot -- have have think we environment. in not it's it's there see feel, numbers, and a market competitive

about these So if if primary more really verdicts, excess increases the million, -- a building because and of hitting million up kind to about nuclear large if people you higher but in taken significantly first a the bigger getting then you that's tower claim the might in might the claim. the bigger. midsize you carriers as rate tower of your you the were company a anyway million of were could be increases you excess more trucking expect It's insurance it's of because you think rate we're it's by to $X the extrapolation gets verdicts, area hitting that of than expect tower tower impact would hitting primary as you excess away if just the think hitting the $X that for $XX go

for hitting and layers that's by truckers. It truckers in higher target make in and more for there's distress more auto trucking or large increasing whether extraordinarily in for in the value. a the really driven transportation umbrella sense? industry who claims -- verdicts volume and the is is anybody these in private are lot extraordinary in and nuclear that that public excess the Does buffer and commercial So

Steven Spence

I'm might in able on to from of in the relief Okay. what going -- we in price to get more price a way, of the be much to XX, the to the And XX there How asking get get, ratio XXX. further? related to thumb is rule underwriting look digits double how down will you to combined And in from just much order range granted to a pure the obviously, that operating combined ratio? we're you have terms be dark but claims it are standpoint, your experience

Jeremy Johnson

have very It's have be mean, cite, one answer. bit I a a numbers question that a numbers multiple achieving in answer ratio to business cite, we ROE. of question. of that The tough different XX% a we little to XX, rate with the we because were you It's think legitimate bit -- this books interest rate we tough environment, It's you that of XX, combined probably kind a needs. if would

target book in increases achieve workers’ us to a to expect it reasonable commercial So our to take shorter those very point in try sustain a compensation through us our a auto earn are time reasonable on as book. to will hopefully price and

Steven Spence

seemed to currently sort in about that than you these it easy Okay. right. from that -- numbers. are one work right envelope That's at us arithmetically. again, should magnitude, get Not you look say. But we if it's me, certain easier pardon lazy quite you were of the looking it that on just to I'm least the for. all to order was I answer all certainly, need or it I people, the more -- we but for of at back are of the be getting half But

Jeremy Johnson

these Yes. I year and hit there's renewal, on come haven't that single need price on the will I'm we and In further digits to yet come think and And then we have wrong off. continue we that two rate so the in portfolio. changed far for those auto, that's haven't before, sorry, not -- spoken deals trend word, through mean up not a we commercial have -- commercial I'd certainly some we say increases I've of as that's auto. about high we're

significant to rate anticipate continue So we believe need on auto get we and portfolio. commercial the yes, that we'll fairly

Steven Spence

how bit we ensuring of is quick Okay. get your to how does opposed services And With soft miles weaker does little to providing economy? work? relates the a you. In that How as pass questions a how more context for quickly two it vehicles, as you're for if recession, if for we pricing that driven it the to driven, and through bill had into then premiums? sensitive miles you

Jeremy Johnson

pass course would down. earns driven, miles forms, of year. the premium are over yes, Many the policies premium premiums, the to absolutely. through If come It less I of mean is also some be be that It minimums, too there should top should line but translation risk. translation course, there's would into may -- through our a into on of reporting less there less the bottom there's be line. as

Steven Spence

Good for point. and he you recall Mr. Shapiro's I I way of if he My A is question we've believe correctly very in his last X/X shares reported holds the was -- the that holdings, Is able shares is a since it bit Estate, they and that low of company, and sell? shares the How work? purchased market? a in that does convert to Are in an that the overhang B quarter. into of roughly, that

Jeremy Johnson

that into on call. really get to don't this want I

Operator

line of question the comes Management. Capital Bobman from Ron of Next Returns

Ronald Bobman

One more topic. Retention.

put we sequential the as compared if sort aside let's and how in retention wheels did the say, quarter workers' third -- second quarter? this comp the to, On compare proceeding on of book, focus just

John Barnett

It was little a bit. down

Ronald Bobman

you more Could specific? be

John Barnett

mid-XXs high trading XXs it was be was if the overall third in the it quarter, quarter. second it in-- running would If in

Ronald Bobman

in fourth the that... little it change magnitude or down the that is bit. quarter now -- that you currently is a Is for your you're is magnitude conviction characterized And of pursuing that Okay. rate

John Barnett

No, no.

Ronald Bobman

Okay. Quick answer. firm and

Jeremy Johnson

better said And that the retaining earlier, Yes. accounts. we think are we I as

the retention. I'm always to for look mean, commitment down, is ratio to to and rates you not measuring to in our I get top on is I have mean, priority loss try rate the line book a But and -- me. get into balance So order

Operator

question-and-answer the the reached now over end call the session. of closing Jeremy back I will any to remarks. have for We turn Johnson

Jeremy Johnson

questions. Thank all forward joining you to of to you next and look appreciate great call you speaking quarter. And I the and

Operator

conference. This concludes today's

disconnect for this lines at and your wonderful time. may participation, day. Thank have a You your you