BIRMINGHAM, Ala.–(BUSINESS WIRE)–ProAssurance Corporation (NYSE: PRA) reports net income of $13.9 million, or $0.26 per diluted share, and operating income(1) of $3.5 million, or $0.06 per diluted share, for the three months ended December 31, 2022.
Highlights – Fourth Quarter and Full Year 2022(2)
- Gross premiums written of $224 million (+3%) and $1.1 billion (+15%)
- Favorable prior accident year reserve development of $5 million and $37 million
- Consolidated combined ratio of 104.2% and 105.3%
-
Consolidated operating ratio of 93.0% and 96.0%
- The full year operating ratio improved by 1.7 points compared to 2021
-
Net investment income of $29 million (+53%) and $96 million (+36%)
- The full year net investment income increased by $25 million compared to 2021
- Adjusted book value per share(1) of $25.99 as of December 31, 2022. Adjusted book value per share was $26.16 as of December 31, 2021.
|
(1) |
Represents a Non-GAAP financial measure. See a reconciliation to its GAAP counterpart under the heading “Non-GAAP Financial Measures” that follows |
|
|
(2) |
Comparisons are to the fourth quarter and the full year of 2021. All items are listed with quarterly results first, full year results second. |
Management Commentary & Results of Operations
Our fourth quarter and full year results for 2022 reflect two major trends in our markets. In our operating segments, competition and higher than anticipated loss severity trends exert pressure on loss ratios and underwriting profits. In the investment markets, the higher interest rate environment provides meaningful improvement in the return we earn on our invested assets, and our investment leverage enhances the impact the higher rates have on our earnings potential.
Full year premiums continued to grow in all of our core operations, as the Specialty P&C, Workers’ Compensation Insurance, and the Segregated Portfolio Cell Reinsurance segments all produced increases in the top line for 2022.
Ned Rand, President and Chief Executive Officer of ProAssurance, highlighted the strong premium retention in the Specialty P&C segment, which improved 4 points in 2022. “I’m pleased to see that in a challenging marketplace, our customers are remaining loyal to the ProAssurance brand and our reputation in the medical community. Thank you to all our team members who work hard every day to provide that top-notch service. Our Workers’ Compensation Insurance segment generated a positive result, as their efforts brought the combined ratio in the segment to below 100% for the year, a nice improvement over 2021.”
Rand continued, “Throughout 2022 we continued to make progress in integrating systems, advancing our data science capabilities, and returning to normalized staffing levels. We believe these are all important contributors to our future success. Our policyholder retention and ability to achieve premium rate increases are bright spots for our top line growth and profitability. Our industry faces the challenges of potential inflationary pressure on expenses and a medical professional liability loss environment where we are seeing upward pressure on claims severity.”
Due to the increase in interest rates and the resulting improvement in investment income, our consolidated operating ratio improved nearly 2 points to 96.0% for the year.
Net investment income showed substantial growth this quarter, increasing by 53% to $29 million. This continues a trend of higher investment income as a result of rising interest rates. We expect this to continue, as reinvestment rates are now considerably higher than the average book yield of maturing investments.
Our book value per share of $20.46 increased by 3.6% in the quarter. Adjusted book value per share, which excludes Accumulated Other Comprehensive Income (AOCI), is $25.99 as of December 31, 2022 as compared to $25.75 as of September 30, 2022.
|
CONSOLIDATED INCOME STATEMENT HIGHLIGHTS |
|||||||||||||||||||||
|
Selected consolidated financial data for each period is summarized in the table below. |
|||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands, except per share data) |
|
2022 |
|
|
|
2021 |
|
Change |
|
|
2022 |
|
|
|
2021 |
|
Change |
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Gross premiums written(1) |
$ |
224,481 |
|
|
$ |
218,141 |
|
|
2.9 |
% |
|
$ |
1,103,993 |
|
|
$ |
960,024 |
|
|
15.0 |
% |
|
Net premiums written |
$ |
211,082 |
|
|
$ |
205,194 |
|
|
2.9 |
% |
|
$ |
1,014,137 |
|
|
$ |
882,721 |
|
|
14.9 |
% |
|
Net premiums earned |
$ |
258,243 |
|
|
$ |
273,070 |
|
|
(5.4 |
%) |
|
$ |
1,029,581 |
|
|
$ |
971,668 |
|
|
6.0 |
% |
|
Net investment income |
|
28,840 |
|
|
|
18,810 |
|
|
53.3 |
% |
|
|
95,972 |
|
|
|
70,522 |
|
|
36.1 |
% |
|
Equity in earnings (loss) of unconsolidated subsidiaries |
|
(1,059 |
) |
|
|
15,015 |
|
|
(107.1 |
%) |
|
|
4,888 |
|
|
|
48,974 |
|
|
(90.0 |
%) |
|
Net investment gains (losses)(2) |
|
12,495 |
|
|
|
4,097 |
|
|
205.0 |
% |
|
|
(33,157 |
) |
|
|
24,310 |
|
|
(236.4 |
%) |
|
Other income (loss)(1) |
|
(3,812 |
) |
|
|
2,074 |
|
|
(283.8 |
%) |
|
|
9,404 |
|
|
|
8,936 |
|
|
5.2 |
% |
|
Total revenues(1) |
|
294,707 |
|
|
|
313,066 |
|
|
(5.9 |
%) |
|
|
1,106,688 |
|
|
|
1,124,410 |
|
|
(1.6 |
%) |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net losses and loss adjustment expenses |
|
191,596 |
|
|
|
197,220 |
|
|
(2.9 |
%) |
|
|
776,762 |
|
|
|
752,249 |
|
|
3.3 |
% |
|
Underwriting, policy acquisition and operating expenses(1) |
|
77,550 |
|
|
|
67,795 |
|
|
14.4 |
% |
|
|
307,338 |
|
|
|
268,246 |
|
|
14.6 |
% |
|
SPC U.S. federal income tax expense |
|
335 |
|
|
|
656 |
|
|
(48.9 |
%) |
|
|
1,759 |
|
|
|
1,947 |
|
|
(9.7 |
%) |
|
SPC dividend expense (income) |
|
4,976 |
|
|
|
4,124 |
|
|
20.7 |
% |
|
|
6,673 |
|
|
|
10,050 |
|
|
(33.6 |
%) |
|
Interest expense |
|
5,499 |
|
|
|
5,516 |
|
|
(0.3 |
%) |
|
|
20,372 |
|
|
|
19,719 |
|
|
3.3 |
% |
|
Total expenses(1) |
|
279,956 |
|
|
|
275,311 |
|
|
1.7 |
% |
|
|
1,112,904 |
|
|
|
1,052,211 |
|
|
5.8 |
% |
|
Gain on bargain purchase |
|
— |
|
|
|
— |
|
|
— |
% |
|
|
— |
|
|
|
74,408 |
|
nm |
||
|
Income (loss) before income taxes |
|
14,751 |
|
|
|
37,755 |
|
|
(60.9 |
%) |
|
|
(6,216 |
) |
|
|
146,607 |
|
|
(104.2 |
%) |
|
Income tax expense (benefit) |
|
809 |
|
|
|
5,615 |
|
|
(85.6 |
%) |
|
|
(5,814 |
) |
|
|
2,483 |
|
|
(334.2 |
%) |
|
Net income (loss) |
$ |
13,942 |
|
|
$ |
32,140 |
|
|
(56.6 |
%) |
|
$ |
(402 |
) |
|
$ |
144,124 |
|
|
(100.3 |
%) |
|
Non-GAAP operating income (loss) |
$ |
3,477 |
|
|
$ |
33,439 |
|
|
(89.6 |
%) |
|
$ |
24,509 |
|
|
$ |
75,892 |
|
|
(67.7 |
%) |
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Basic |
|
53,963 |
|
|
|
53,984 |
|
|
|
|
54,008 |
|
|
|
53,962 |
|
|
||||
|
Diluted |
|
54,108 |
|
|
|
54,107 |
|
|
|
|
54,140 |
|
|
|
54,058 |
|
|
||||
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Net income (loss) per diluted share |
$ |
0.26 |
|
|
$ |
0.59 |
|
$ |
(0.33 |
) |
|
$ |
(0.01 |
) |
|
$ |
2.67 |
|
$ |
(2.68 |
) |
|
Non-GAAP operating income (loss) per diluted share |
$ |
0.06 |
|
|
$ |
0.62 |
|
$ |
(0.56 |
) |
|
$ |
0.45 |
|
|
$ |
1.40 |
|
$ |
(0.95 |
) |
|
(1) |
Consolidated totals include inter-segment eliminations. The eliminations affect individual line items only and have no effect on net income (loss). See Note 16 of the Notes to Consolidated Financial Statements in our December 31, 2022 report on Form 10-K for amounts by line item. |
|
|
(2) |
This line item typically includes both realized and unrealized investment gains and losses, investment impairments, and, for the current period, the change in the fair value of the contingent consideration in relation to the NORCAL acquisition. Detailed information regarding the components of net investment gains (losses) are included in Note 4 of the Notes to Consolidated Financial Statements in our December 31, 2022 report on Form 10-K. |
|
|
The abbreviation “nm” indicates that the information or the percentage change is not meaningful. |
||
|
BALANCE SHEET HIGHLIGHTS |
|||||||
|
($ in thousands, except per share data) |
December 31, 2022 |
|
December 31, 2021 |
||||
|
Total investments |
$ |
4,387,683 |
|
|
$ |
4,828,323 |
|
|
Total assets |
$ |
5,699,999 |
|
|
$ |
6,191,477 |
|
|
Total liabilities |
$ |
4,595,981 |
|
|
$ |
4,763,090 |
|
|
Common shares (par value $0.01) |
$ |
634 |
|
|
$ |
633 |
|
|
Retained earnings |
$ |
1,423,286 |
|
|
$ |
1,434,491 |
|
|
Treasury shares |
$ |
(419,214 |
) |
|
$ |
(415,962 |
) |
|
Shareholders’ equity |
$ |
1,104,018 |
|
|
$ |
1,428,387 |
|
|
Book value per share |
$ |
20.46 |
|
|
$ |
26.46 |
|
|
Non-GAAP adjusted book value per share(1) |
$ |
25.99 |
|
|
$ |
26.16 |
|
|
(1) |
Adjusted book value per share is a Non-GAAP financial measure. See a reconciliation of book value per share to Non-GAAP adjusted book value per share under the heading “Non-GAAP Financial Measures” that follows. |
|
CONSOLIDATED KEY RATIOS |
|||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Current accident year net loss ratio |
76.2% |
|
78.9% |
|
79.0% |
|
82.1% |
|
Effect of prior accident years’ reserve development |
(2.0%) |
|
(6.7%) |
|
(3.6%) |
|
(4.7%) |
|
Net loss ratio |
74.2% |
|
72.2% |
|
75.4% |
|
77.4% |
|
Underwriting expense ratio(2) |
30.0% |
|
24.8% |
|
29.9% |
|
27.6% |
|
Combined ratio |
104.2% |
|
97.0% |
|
105.3% |
|
105.0% |
|
Operating ratio |
93.0% |
|
90.1% |
|
96.0% |
|
97.7% |
|
Return on equity(1) |
2.7% |
|
10.5% |
|
—% |
|
5.3% |
|
Non-GAAP operating return on equity(1)(2) |
1.3% |
|
9.9% |
|
1.9% |
|
5.6% |
|
|
|
|
|
|
|
|
|
|
Combined ratio, excluding transaction-related costs(3) |
104.2% |
|
96.5% |
|
105.1% |
|
102.4% |
|
(1) |
Quarterly amounts are annualized. Refer to our December 31, 2022 report on Form 10-Q under the heading “Non-GAAP Operating ROE” in the Executive Summary of Operations section for details on our calculation. |
|
|
(2) |
See a reconciliation of ROE to Non-GAAP operating ROE under the heading “Non-GAAP Financial Measures” that follows. |
|
|
(3) |
Our consolidated underwriting expense ratio for the year ended December 31, 2022 includes $1.9 million of transaction-related costs included in consolidated operating expenses associated with our acquisition of NORCAL as compared to $1.4 million and $25.0 million for the three months and year ended December 31, 2021. These costs do not reflect normal operating results. |
SPECIALTY P&C SEGMENT RESULTS
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
||
|
Gross premiums written |
$ |
173,152 |
|
|
$ |
166,095 |
|
|
4.2 |
% |
|
$ |
836,628 |
|
|
$ |
681,509 |
|
|
22.8 |
% |
|
Net premiums written |
$ |
164,461 |
|
|
$ |
158,763 |
|
|
3.6 |
% |
|
$ |
765,444 |
|
|
$ |
626,147 |
|
|
22.2 |
% |
|
Net premiums earned |
$ |
195,496 |
|
|
$ |
207,046 |
|
|
(5.6 |
%) |
|
$ |
769,773 |
|
|
$ |
695,008 |
|
|
10.8 |
% |
|
Other income |
|
1,245 |
|
|
|
572 |
|
|
117.7 |
% |
|
|
5,003 |
|
|
|
3,370 |
|
|
48.5 |
% |
|
Total revenues |
|
196,741 |
|
|
|
207,618 |
|
|
(5.2 |
%) |
|
|
774,776 |
|
|
|
698,378 |
|
|
10.9 |
% |
|
Net losses and loss adjustment expenses |
|
(152,592 |
) |
|
|
(157,275 |
) |
|
(3.0 |
%) |
|
|
(609,915 |
) |
|
|
(575,164 |
) |
|
6.0 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(50,143 |
) |
|
|
(36,342 |
) |
|
38.0 |
% |
|
|
(192,397 |
) |
|
|
(127,709 |
) |
|
50.7 |
% |
|
Total expenses |
|
(202,735 |
) |
|
|
(193,617 |
) |
|
4.7 |
% |
|
|
(802,312 |
) |
|
|
(702,873 |
) |
|
(14.1 |
%) |
|
Segment results |
$ |
(5,994 |
) |
|
$ |
14,001 |
|
|
(142.8 |
%) |
|
$ |
(27,536 |
) |
|
$ |
(4,495 |
) |
|
(512.6 |
%) |
|
SPECIALTY P&C SEGMENT KEY RATIOS |
|||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Current accident year net loss ratio |
79.6% |
|
82.2% |
|
83.1% |
|
87.5% |
|
Effect of prior accident years’ reserve development |
(1.5%) |
|
(6.2%) |
|
(3.9%) |
|
(4.7%) |
|
Net loss ratio |
78.1% |
|
76.0% |
|
79.2% |
|
82.8% |
|
Underwriting expense ratio |
25.6% |
|
17.6% |
|
25.0% |
|
18.4% |
|
Combined ratio |
103.7% |
|
93.6% |
|
104.2% |
|
101.2% |
The fourth quarter and full year results for the Specialty P&C segment reflect increased gross written premium and improved accident year loss ratios. Exclusive of 2.7 percentage points from purchase accounting and one-time expenses in the year, the 2022 combined ratio was relatively flat compared to 2021. Overall, the results were positively impacted by improved premium retention across the segment, price increases in all product lines, and solid new business writings. The NORCAL acquisition continues to deliver strategic value to the organization.
Gross written premiums increased to $173 million in the quarter and $837 million for the full year. The 23% increase in top line premium for the year was primarily due to the NORCAL acquisition. Net earned premium decreased 6% for the quarter which reflects the impact of underwriting efforts. Net earned premium increased 11% for the year.
Premium retention in the segment was 85% for the quarter and 84% for the year, representing improvements of 12 and 4 percentage points, respectively, compared to the same periods in 2021. This was driven by 90% retention in our Standard Physician business for the quarter and 88% for the year, and also reflects strong results in our Medical Technology Liability and Small Business Unit which delivered premium retention of 90% and 91%, respectively, for the year.
We achieved renewal pricing increases of 7% in both the quarter and full year along with continued improvements in terms, conditions, and product structure in our Specialty Healthcare business. New business for the segment was $10 million for the quarter and $37 million for the year, reflecting continued competitive pressures in the market.
The segment accident year loss ratio for the quarter was relatively flat and the full year improved 1.4 percentage points compared to 2021, exclusive of 2.6 and 3.0 percentage point decreases in the quarter and year, respectively, from purchase accounting and the change in ULAE. The NORCAL book contributed 2.2 points of improvement to the full year accident year loss ratio, resulting from the recognition of lower claim frequency and execution of our re-underwriting efforts. This was offset by higher than anticipated loss severity trends in a couple of states within our Standard Physician line of business, which emerged primarily in the fourth quarter of 2022.
We recognized net favorable prior year reserve development of $3 million for the quarter and $30 million for the year. This included favorable development related to the beneficial amortization of purchase accounting adjustments on NORCAL’s reserves of $11 million for the year. The $30 million of favorable development for the year decreased as compared to $33 million booked in 2021. Development was impacted by the previously stated higher than anticipated loss trends seen in the fourth quarter. The loss environment continues to be challenging as a result of social inflation and claims severity trends.
The expense ratio was 25.6% in the fourth quarter and 25.0% for the full year. Compared to 2021, excluding the impact from NORCAL purchase accounting, one-time expenses and the change in ULAE, the expense ratio increased 3.4 and 0.9 percentage points in the quarter and year, respectively. The increase was primarily driven by lower earned premium in the quarter due to underwriting efforts, and higher DPAC amortization. For the year, the expense ratio increase is driven by a higher volume of commissionable premium in our NORCAL book and higher costs related to technology initiatives and travel. This was partially offset by the benefits of organizational restructuring and expense synergies from the NORCAL acquisition.
Refer to our December 31, 2022 report on Form 10-K for additional details on items impacting our Specialty P&C segment’s current accident year net loss ratio and underwriting expense ratio.
WORKERS’ COMPENSATION INSURANCE SEGMENT RESULTS
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
||
|
Gross premiums written |
$ |
47,837 |
|
|
$ |
45,779 |
|
|
4.5 |
% |
|
$ |
247,132 |
|
|
$ |
240,546 |
|
|
2.7 |
% |
|
Net premiums written |
$ |
28,964 |
|
|
$ |
27,496 |
|
|
5.3 |
% |
|
$ |
160,760 |
|
|
$ |
161,865 |
|
|
(0.7 |
%) |
|
Net premiums earned |
$ |
41,916 |
|
|
$ |
41,728 |
|
|
0.5 |
% |
|
$ |
166,371 |
|
|
$ |
164,600 |
|
|
1.1 |
% |
|
Other income |
|
449 |
|
|
|
481 |
|
|
(6.7 |
%) |
|
|
2,201 |
|
|
|
2,211 |
|
|
(0.5 |
%) |
|
Total revenues |
|
42,365 |
|
|
|
42,209 |
|
|
0.4 |
% |
|
|
168,572 |
|
|
|
166,811 |
|
|
1.1 |
% |
|
Net losses and loss adjustment expenses |
|
(28,102 |
) |
|
|
(29,381 |
) |
|
(4.4 |
%) |
|
|
(111,407 |
) |
|
|
(114,704 |
) |
|
(2.9 |
%) |
|
Underwriting, policy acquisition and operating expenses |
|
(13,923 |
) |
|
|
(13,899 |
) |
|
0.2 |
% |
|
|
(54,737 |
) |
|
|
(52,418 |
) |
|
4.4 |
% |
|
Total expenses |
|
(42,025 |
) |
|
|
(43,280 |
) |
|
(2.9 |
%) |
|
|
(166,144 |
) |
|
|
(167,122 |
) |
|
(0.6 |
%) |
|
Segment results |
$ |
340 |
|
|
$ |
(1,071 |
) |
|
131.7 |
% |
|
$ |
2,428 |
|
|
$ |
(311 |
) |
|
880.7 |
% |
|
WORKERS’ COMPENSATION INSURANCE SEGMENT KEY RATIOS |
|||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Current accident year net loss ratio |
71.8% |
|
74.0% |
|
71.8% |
|
74.0% |
|
Effect of prior accident years’ reserve development |
(4.8%) |
|
(3.6%) |
|
(4.8%) |
|
(4.3%) |
|
Net loss ratio |
67.0% |
|
70.4% |
|
67.0% |
|
69.7% |
|
Underwriting expense ratio |
33.2% |
|
33.3% |
|
32.9% |
|
31.8% |
|
Combined ratio |
100.2% |
|
103.7% |
|
99.9% |
|
101.5% |
The Workers’ Compensation Insurance segment underwriting results improved in the fourth quarter and full year of 2022, compared to the same periods in 2021, primarily reflecting a lower net loss ratio and higher audit premium.
Gross premiums increased by $2.1 million and $6.6 million in the quarter and full year, compared to the same periods of 2021, reflecting higher audit premium, partially offset by the continuation of very competitive workers’ compensation market conditions. In our traditional business, audit premium increased to $3.3 million in the fourth quarter of 2022, compared to $0.4 million for the same period in 2021. Renewal rate changes, new business and renewal retention in the fourth quarter of 2022 reflect the competitive market conditions. Renewal rates in our traditional business decreased 7% during the quarter. Renewal retention was 73% in our traditional business for the quarter, compared to 82% for the same period in 2021, reflecting the loss of several large accounts during the quarter. New business writings in our traditional business were $4.0 million in the fourth quarter of 2022, an increase of $1.8 million compared to the same period in 2021.
The current accident year net loss ratio improved 2.2 percentage points, primarily reflecting an improvement in claim trends. We recognized favorable prior accident year reserve development of $2.0 million and $1.5 million in the 2022 and 2021 fourth quarters, respectively. Favorable development for the year was $8.0 million in 2022 compared to $7.1 million in 2021.
Underwriting expenses and the underwriting expense ratio were relatively flat in the fourth quarter of 2022, compared to the same period in 2021. The increase in the full year expense ratio primarily reflects higher costs related to compensation, business-related travel and marketing costs related to advertising and website-related activities.
|
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT RESULTS |
|||||||||||||||||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
||
|
Gross premiums written |
$ |
16,055 |
|
|
$ |
15,395 |
|
|
4.3 |
% |
|
$ |
78,937 |
|
|
$ |
71,850 |
|
|
9.9 |
% |
|
Net premiums written |
$ |
13,952 |
|
|
$ |
13,386 |
|
|
4.2 |
% |
|
$ |
69,357 |
|
|
$ |
63,042 |
|
|
10.0 |
% |
|
Net premiums earned |
$ |
16,463 |
|
|
$ |
16,188 |
|
|
1.7 |
% |
|
$ |
69,810 |
|
|
$ |
63,688 |
|
|
9.6 |
% |
|
Net investment income |
|
412 |
|
|
|
194 |
|
|
112.4 |
% |
|
|
1,029 |
|
|
|
814 |
|
|
26.4 |
% |
|
Net investment gains (losses) |
|
1,159 |
|
|
|
1,308 |
|
|
(11.4 |
%) |
|
|
(3,067 |
) |
|
|
4,080 |
|
|
(175.2 |
%) |
|
Other income |
|
1 |
|
|
|
— |
|
|
nm |
|
|
2 |
|
|
|
3 |
|
|
(33.3 |
%) |
|
|
Net losses and loss adjustment expenses |
|
(7,141 |
) |
|
|
(6,009 |
) |
|
18.8 |
% |
|
|
(39,310 |
) |
|
|
(32,569 |
) |
|
20.7 |
% |
|
Underwriting, policy acquisition and operating expenses |
|
(5,114 |
) |
|
|
(6,556 |
) |
|
(22.0 |
%) |
|
|
(20,316 |
) |
|
|
(21,635 |
) |
|
(6.1 |
%) |
|
SPC U.S. federal income tax expense(1) |
|
(335 |
) |
|
|
(656 |
) |
|
(48.9 |
%) |
|
|
(1,759 |
) |
|
|
(1,947 |
) |
|
(9.7 |
%) |
|
SPC net results |
|
5,445 |
|
|
|
4,469 |
|
|
21.8 |
% |
|
|
6,389 |
|
|
|
12,434 |
|
|
(48.6 |
%) |
|
SPC dividend (expense) income (2) |
|
(4,976 |
) |
|
|
(4,124 |
) |
|
20.7 |
% |
|
|
(6,673 |
) |
|
|
(10,050 |
) |
|
(33.6 |
%) |
|
Segment results (3) |
$ |
469 |
|
|
$ |
345 |
|
|
35.9 |
% |
|
$ |
(284 |
) |
|
$ |
2,384 |
|
|
(111.9 |
%) |
|
(1) |
Represents the provision for U.S. federal income taxes for SPCs at Inova Re, which have elected to be taxed as a U.S. corporation under Section 953(d) of the Internal Revenue Code. U.S. federal income taxes are included in the total SPC net results and are paid by the individual SPCs. |
|
|
(2) |
Represents the net (profit) loss attributable to external cell participants. |
|
|
(3) |
Represents our share of the net profit (loss) and OCI of the SPCs in which we participate. |
|
SEGREGATED PORTFOLIO CELL REINSURANCE SEGMENT KEY RATIOS |
|||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Current accident year net loss ratio |
58.2% |
|
69.5% |
|
65.3% |
|
67.1% |
|
Effect of prior accident years’ reserve development |
(14.8%) |
|
(32.4%) |
|
(9.0%) |
|
(16.0%) |
|
Net loss ratio |
43.4% |
|
37.1% |
|
56.3% |
|
51.1% |
|
Underwriting expense ratio |
31.1% |
|
40.5% |
|
29.1% |
|
34.0% |
|
Combined ratio |
74.5% |
|
77.6% |
|
85.4% |
|
85.1% |
The Segregated Portfolio Cell Reinsurance segment for the fourth quarter of 2022, compared to the same period of 2021, primarily reflects improved underwriting results in the segregated portfolio cells in which we participate. The segment result decreased for the full year of 2022 compared to 2021, primarily reflecting the decline in the equity and fixed income markets.
Gross premiums written increased for both the 2022 fourth quarter and full year, compared to the same periods in 2021, reflecting higher workers’ compensation audit premium, partially offset by lower renewal premium. Gross premiums written for the 2022 full year also reflect higher healthcare professional liability premium related to the issuance of tail policies under one program, in which we do not participate.
Consistent with the workers’ compensation insurance segment, renewal and new business premium reflect the competitive workers’ compensation market conditions. Renewal rate decreases were 3.4% during the 2022 fourth quarter and 3.9% for the full year. Renewal retention was 83.4% in 2022, compared to 86.4% for the same period in 2021. New business writings in our workers’ compensation programs were $0.8 million in the fourth quarter of 2022, compared to $1.0 million for the same period in 2021.
The net loss ratio increased, reflecting lower prior accident year reserve development in the healthcare professional liability business, partially offset by a lower current accident year loss ratio in the workers’ compensation business. The improvement in the workers’ compensation current accident year loss ratio reflects improved claim trends.
We recognized net favorable prior accident year reserve development of $2.4 million and $5.2 million during the fourth quarters of 2022 and 2021, respectively. The 2021 favorable reserve development included $2.5 million related to the healthcare professional liability business. We recognized net favorable prior accident year reserve development of $6.3 million and $10.2 million during the full years of 2022 and 2021, respectively.
The underwriting expense ratio improved to 31.1% in 2022 from 40.5% in 2021. The 2021 expense ratio reflected an increase in the allowance for credit losses related to an overdue balance of a large customer, which was subsequently collected. Underwriting expenses primarily reflect commissions and other expenses charged by the Workers’ Compensation Insurance and Specialty P&C segments.
LLOYD’S SYNDICATES SEGMENT RESULTS
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||||||||||||||||
|
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
||
|
Gross premiums written |
$ |
3,492 |
|
|
$ |
6,267 |
|
|
(44.3 |
%) |
|
$ |
20,233 |
|
|
$ |
37,969 |
|
|
(46.7 |
%) |
|
Net premiums written |
$ |
3,705 |
|
|
$ |
5,549 |
|
|
(33.2 |
%) |
|
$ |
18,576 |
|
|
$ |
31,667 |
|
|
(41.3 |
%) |
|
Net premiums earned |
$ |
4,368 |
|
|
$ |
8,108 |
|
|
(46.1 |
%) |
|
$ |
23,627 |
|
|
$ |
48,372 |
|
|
(51.2 |
%) |
|
Net investment income |
|
115 |
|
|
|
284 |
|
|
(59.5 |
%) |
|
|
568 |
|
|
|
1,961 |
|
|
(71.0 |
%) |
|
Net investment gains (losses) |
|
51 |
|
|
|
240 |
|
|
(78.8 |
%) |
|
|
(964 |
) |
|
|
249 |
|
|
(487.1 |
%) |
|
Other income (loss) |
|
(311 |
) |
|
|
47 |
|
|
(761.7 |
%) |
|
|
119 |
|
|
|
912 |
|
|
(87.0 |
%) |
|
Net losses and loss adjustment expenses |
|
(3,761 |
) |
|
|
(4,555 |
) |
|
(17.4 |
%) |
|
|
(16,130 |
) |
|
|
(29,812 |
) |
|
(45.9 |
%) |
|
Underwriting, policy acquisition and operating expenses |
|
(1,323 |
) |
|
|
(2,736 |
) |
|
(51.6 |
%) |
|
|
(7,412 |
) |
|
|
(17,957 |
) |
|
(58.7 |
%) |
|
Segment results |
$ |
(861 |
) |
|
$ |
1,388 |
|
|
(162.0 |
%) |
|
$ |
(192 |
) |
|
$ |
3,725 |
|
|
(105.2 |
%) |
|
LLOYD’S SYNDICATES SEGMENT KEY RATIOS |
|||||||
|
|
Three Months Ended December 31 |
|
Year Ended December 31 |
||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Current accident year net loss ratio |
35.0% |
|
38.7% |
|
37.2% |
|
51.9% |
|
Effect of prior accident years’ reserve development |
51.1% |
|
17.5% |
|
31.1% |
|
9.7% |
|
Net loss ratio |
86.1% |
|
56.2% |
|
68.3% |
|
61.6% |
|
Underwriting expense ratio |
30.3% |
|
33.7% |
|
31.4% |
|
37.1% |
|
Combined ratio |
116.4% |
|
89.9% |
|
99.7% |
|
98.7% |
Results of our Lloyd’s Syndicates segment are generally reported on a one-quarter lag and include the results from our current participation in Lloyd’s of London Syndicate 1729 (5% participation for 2022 underwriting year) and our former participation in Syndicate 6131 (50% participation for 2021 underwriting year).
Contacts
Jason Gingerich
[email protected]
512-879-5101
