ProSight Global (PROS) 25 Feb 202019 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the ProSight Specialty Insurance Q4 Earnings Conference Call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions] And please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Dean Evans, Head of Investor Relations. you. Thank ahead. go Please

Hannon; Welcome ProSight fourth in Global, Chief Risk President; today Chris. and Buddy conference Underwriting Chief the XXXX call are, and Larry and Officer for Inc. Bob Executive Finance to you, Officer; quarter Piszel; Bailey. the Officer; earnings room Chief Thank With me

opening Buddy's and will Larry the call be open Following remarks, for questions.

website our release, which on our Yesterday earnings is XXXX afternoon, at fourth we quarter issued investors.prosightspecialty.com. available

website will In XX, until addition, our replay available a February call be this XXXX. on of

Before started, the me comments everyone course beliefs, future. remind of their make the and reflect we may let get that expectations for this through call, that intentions, management

Such forward-looking or outcomes, plan, may those similar guarantees terms call. statements estimate, of differ performance words seek, statements believe, on of We from or future words discussed anticipate, expect, forward-looking target, suggested you caution and are in forward-looking meaning. intend, performance outcomes statements materially not by in this the that such continue use and as should, and actual that made other

afternoon. limited Exchange and For in including of period captions our with and could Form that for the December factors on our results XX-K the Securities factors condition, our some the uncertainties ended future U.S. included and a under important XXXX affect and not filings risks risks but financial yesterday discussion to risk of the see Commission, filed the Annual Report XX,

we undertake future as otherwise. by obligation events Except whether information, a any law, as new statements, publicly of required no to update result forward-looking or

of measures accordance as evaluating in we discuss our measures, a not be or in considered believe with useful call, substitute such today's will should we which during non-GAAP GAAP. in for information Additionally, performance. U.S. prepared The presentation isolation, are certain

comparable can website. of the also are release, these SEC's measures reconciliation found to relations on XX-K our section earnings our available investor measures and available GAAP be on which in and the most the A of non-GAAP website

I'd and that, to like our CEO With presentation the Hannon. over Larry President, to turn

Dean, you, Thank everyone. and good morning,

to and how with how brief to near-term, like today's perform company, customers begin a objectives. touch of on I'd long-term to expect our our the overview During in we call, against we provide and value then

at that ProSight, and in niches. underwriting specific As profit-first, focused a property an casualty we're agile, specializes reminder, insurer industry

innovative, offer execution to for management. party We lines writing closely customers, our a coverage deliver limits network, product we finally, services through particular our distribution We and customer. differentiated, a purposeful and through solutions third managed multiple offerings and risk strong selection, our limited and niche select often

with clear, over double are to maintaining goals seek to profit. entire gross double generate can double Our an to growth any aligned we book underwriting only ROE, period, do in so, digit and emphasize we in profit written is will given our To by per digits value share. be a along when and organization grow digit premium growth while

I enter. both believe we to the that current existing in that and our price market niches seek those us conditions get opportunity and to terms, appropriate offer

the foreseeable expect to we our future. growth such, written objectives, for As meet gross comfortably premium longer-term

concerns publicly to or manufacturers like to or And regards not do I'd auto. product early With distributors. med-mal commercial reemphasize inflation, we're We exposure opioid not write actions traded social to we have that take do to lines. identify corrective in DNO and

fact gross the less. books, have policies how XX% of and workers' on focused been always approximately we've we of that $X comp, limits, our excluding addition, surety only manage million In evidenced limits by or our

results. our will turn now to I

XX.X%. an an investment $XX.X a pleased operating adjusted XX%, income. we're and ratio year full profit combined with performance, levels record having the adjusted We of full for generated of and For year, with XXXX, underwriting operating produced the income operating ROE of of premium, gross million produced net our written

annualized was quarter prior on continuing in ROE period as and fourth development from our XX.X%. the XX.X%. highlighted of our operating fronts strong operations, No topline by customer well, adjusted multiple segments growth of The

during and During X.X% excluding for at XXXX, excess $X rate rate comp And year. workers we we for across X% added the five and for premium achieved of gross the written the X.X% modestly million the our year. full the million $XX quarter, we X.X% for believe in needs. increases quarter, quarter, fourth and that niches new Rates in our year, contributed was of the or book of increased fourth

of that our strategic evolution all address Additionally, This providing customers, decision offerings we natural are business solutions have few their with announced may of with capabilities, seen weeks, as challenges. the ProSight's in product which the the designed unique purpose marks Captive into you market. and many expansion Insurance past the of of

As creatively seek find require in customers market do we current best, to or those efficiently and meet environment, the alternative what profitably, do will our solutions ways we needs.

like on about our ratio. to a I'd think spend now combined how moment we

annual current points since predictable it growth of continue XX%. each We year business XX% will that, you and new few our side, believe our is perform XX% therefore our believe higher be than our renewal we will or When ratio appropriately prudent. approximately well-known as for better renewal. rate, we not to as plan to but is loss is new, our factor in a the be target our On business

continuing yearend reduced invest to expense expect and and compared in we more to markets XXXX, will front, XXXX we enter ratio In progress points as technology. expense add basis our our XX ratio in by new XXXX, talent, the beyond. while and On expense lower we

third by which I XXXX. shared I would our to yearend XXX basis reiterate, like the achieve guidance to call, we plan improvement point quarter that in

year year a this full improvement. in to XX XXX point come the we XX.X%, point is will our improvement three XX would point XXXX, baseline not expense while XXXX basis for basis expect basis over adjusted in ratio evenly the Our improvement of period,

the like our growing thank company our business a In their efforts, able was for employees and in that results of our beginning new all the to discussed our our support profitably written us. grateful ROE and and growth, publicly for preparing being I metrics, at would the transition solid while gross for my year sum, a committed XXXX value profitable for I were the and success. share We to of I'm and book comments. with to to Board traded per shareholders, premium future delivering

ahead, Looking good to ProSight. I expect be year a for XXXX

stay focused both will differentiated We matters niches. customers, our offering from to existing come expect niches our and on finding growth our where and new to

to in achieve for enhance continue invest and efficiencies and distribution will experience technology operational partners. We customers and the to to prioritize our

talent I'm awesome to driven committed and us our shareholders. experience are customers, as providing our to and partners, see as will embody individuals for adding add an organization, unique who performance top You culture employees ProSight's

and results position. now call will hand will the I to further discuss Buddy, who over financial our

Larry. Thanks,

diluted the costs. million income quarter quarter $XX per adjusted income, or our income $X.XX adjusted XXXX, of XXXX, per of for Fourth diluted For operating to the was or million fourth compared same $XX.X operating excludes XXXX. share, certain operating of nonrecurring share $X.XX as adjusted quarter

$X.X during adjusted which and there $X.X operating of expenses, for were income. million gains $X.X our all are former vesting quarter, realized IPO of related investment of excluded CEO, of onetime the from Specifically, million million costs transition

million the XX Going of forward, we over IPO next unvested quarters. to be remaining $XX expensed the approximately related cost expect

was or per quarter share, same or to XXXX. premium, was net representing as operations $XX.X for gross diluted which the segments, the million, fourth per premium For Gross includes 'XX. which of quarter for compared customer excludes totaled includes $X.XX $XXX our XXXX, income niches, million, from continuing share, $XXX.X quarter of from our me, XX.X% Including written the other was fourth for million diluted increase of $X.XX quarter of exited an total exited XX.X% $XX.X niches, written million, premium, an increase premium the of gross XXXX. over excuse

where increased increased customer Growth segments generally market and we our and quarter and quarter consumer across estate was premium services written largest all continue Gross see to favorable the real in opportunities the conditions. in in year-to-date. segments,

in unpredictable niches premium from $XX fourth during year-to-date. and contributed I'd often of again niches New written quarter, $X is that and added the lumpy note, new million premium in nature. XXXX, million gross

results, In cause me ratios between I terminated fourth filed reclassification ratio, expense quarterly all periods. details the numbers meaningful the of of more quota of to quote, provide note SEC. related will WAQS loss to the the in the points and with which order into the percentage does XX-K prior insight exclude X.X on WAQS, we early as to impact a that touch was and the results, I the our and quarter of disclosed refer account is whole underwriting the our Before underwriting the in will XXXX, comparative share, impact press release let fully And WAQS.

our operations. Loss and million no the quarter $X XX.X%, of last XX.X% and loss company XX.X%, to quarter XX.X% ratio continuing and The quarter a the points was included was period million, fourth from of X.X XXXX, of net of million, for the in for fourth combined underwriting net of which XXXX year. generated XXXX fourth fourth compared $X.X year of income ratio in quarter The prior ratio favorable the of $X.X or development. included prior development

was loss quarter due business ratio our of comp. workers' fourth lower, Our expectations. mix exit in underlying XXXX to largely any is excess line of fourth quarter The XXXX with

quarter as which of As non-recurring premium of $XX workers' will results we first premium strategic XXXX, of exit excess in our in XXXX. a into our the the reminder, million move written decision base first to comp, quarter impact

There quarter. by losses of cat the in quarter expect 'XX, wildfires. activity compared of X% $X.X cat fourth to which no cat were was XXXX, the per California of quarter losses fourth normally We the approximately in of million driven

reportable during no threshold However, that the quarter. met losses current

ratio. to move I'll Next, the expense

to For we basis by expense benefits compared point the XX ratio and was the fourth discipline the XXXX. grow management expense of our driven scale, improvement the quarter primarily XX.X%, quarter for The fourth premium of continued as base. of was XXXX, XX.X%

as The Our average XX.X% XXXX attributable partnerships. third our growth down investment portfolio, fourth was $XX.X limited income small well portfolio reflecting in the X.XX%. from the yield our X.XX%, on increased of yield of to lower the primarily million, quarter our decline quarter assets of XXXX, The limited the as yield XXXX of improved fourth in over performance net from partnerships. investment quarter book for by was

was yearend remains portfolio $XXX or X million, XXXX. Our an of during of third had in and years, million. portfolio the book of $XX XX% our up end XXXX, quarter, gain position is The of in investment the portfolio increase at the billion, value of of a duration quality net the The credit unrealized A. at from at $X.X and average X.X stood in as years approximately portfolio end

fourth We January XXXX. X, We in a follow strengthen to through several investment multi-manager shift actions our model, to the strategic on the effective quarter to significant plan portfolio management took positioning. investment

reallocating One, away floating fourth began these the extension, the rate corporate three, spread securitized of also in resilient modest more securities and in quarter accomplish portfolio and tactical percentage credit; portfolio. positioning actions conditions. the two, and making slight in tactical shifts enhancement, were from a duration to the portfolio [ph], the including: We able credit persistent credit reducing improve of current the assets rates low the to to environment, a We with

Turning to ratio XX.X% yearend, our to flexibility. financial at us was capital debt our capital provides position, which

sheet as Our the grew of during million remained stockholder strong, fourth $XXX balance XXXX. equity $XX.X quarter to million

net the on the reserves, the from of our net million operations value. related the UK reserves. $X.X million our the was deep UK The these operations. fourth $X.X was Our review of of runoff income driver million quarter book. book this $X.X loss was from largest during loss This reinsurance of Net a followed increase dive annual strengthening discontinued of discontinued due our largely to our in income to XXXX, in quarter

ago, are reserves writing and Recall, the in since down remaining million, end we three XX% approximately runoff stopped last year. the years Lloyd's business of $XX nearly

years. committed our be resources runoff duration to increased which the area, this for three we and have We of estimate the in about

excluding XX.X% IPO, Our value an December the raised grew from XXXX. share book end XX, quarter, per value at was impact through the from increase by December of diluted XX, the of XX.X% the $XX.XX, book XXXX, capital of

the by the for IPO. year, non-recurring Our full related quarter to ROE 'XX, charges, fourth the I mentioned for both of X.X% was previously XX% depressed and

adjusted full quarter XXXX year adjusted Our the operating XX.X%, for of XXXX ROE ROE was was XX.X%. while

open to And for with operator, questions. the that, I'll the line turn it over to up

first you. Mark Instructions] [Operator from Thank The is SunTrust. with Hughes question

open. is line Your

amount $XX first Good consistent is Yes, to the in in in other, thank that was you The much. written the morning. very premium entirely quarter earned XXXX, and that mid-XXs? with million

Correct.

quarter. million all excess in first the February, of So book the was our year. The $XX it's but of in March January, all comp February number, biggest last that work impact is

other with XX%, loss was And that ratio? pretty see do ratio loss I the right associated so high

where from Mark, I you that are don’t - getting Mark?

is K, Page of on out XX. a the table It's there

a I that's a to of related of small related small That’s earned. to amount think earned. amount Mark,

as Relative estate In you had same of you to about that? Can using the on losses. looks growth, that you be average segment, the above being loss. talk lap that. good point that'll end the likewise market, XX. off got estate I like XX% running of guess, table the kind It real loss the real very just

that you difference obviously, ahead have The go Bob. Sure.

obviously, what net much It's the Yes. a On you're to now. already estate around a million.] is in gross cat up Unfortunately, up a end spike tornado at loss. basis, [ph] a apartment it's seeing that that pretty by that's building But that real limit three probably [$X the $XX we in loss very million. segment, took on basis on large will specific

not Mark, Yes. them a net to able We're report are net. gross, those not all basis. remember on disclosures

is big roof, accurate. the it a it quarter, second pretty Dayton net in on million. loss, a only But was tornado But, a point gross was was we basis, Bob's huge. again, and $X on loss in took So, the that

you XXXX, that? tax for on The Fair did give rate enough. guidance

but quarter XX%. around going in tax didn't on will don't year meaningful have We a either be full We that to in guidance, a items a really lot generally ways, give basis. rate it's fluctuate any of the

Thank you.

KBW. [Operator Sean Reitenbach next Instructions]. question from The is with

Your line is open.

Good morning.

morning. Good

the year-over-year? the excess impact termination workers' does of and comp expense the ratios loss How

ran ratio the lower overall loss the for Well, general book. the excess book comp than

increasing ratio, as loss write-off. of are impact the the those have premiums did it in So,

substantially. ratio, the earned expense they On pretty reduced premium the

But until, started getting biggest grow little are to a to portfolio those we're factors. So finding we that down. the headwind a expense of again, related bit ratio the

compared basis, yearly the at without the point. a was X.X we are of it. to excess the it's comp percentage where On worth book, When about you look

loss by the about So, it adjusted X.X would ratio have point.

loss helpful. broader carrier lot from hearing the about the a That's kind different loss you. of the the the a in costs of terms trend thank Okay, have, Does guys casualty market. we're broader you then what than focus accelerating And hearing we're - in niche market? have stick

Bob so. is obviously, believe We Bailey. This

that these high a aren't the will Larry by is the really niche the just in trends sort pointed out, which think addition I niche to by lines. I important niche of most issue, most think what approach, vary again med-mal niche, those point is lines, we important in excess

order I XX, of premium mentioned our think under you on [Indiscernible]. the was something

so things of these massive So I jury that, feature verdicts and insulating has us niche niche an niche like would more than patterns, argue niche. trend own the strategy. by of certainly its a for much But that’s strategy

be niches We that as materialize. we If those would still then closely we're had to watch surprise anything subject individual the we be simply us. But on going selected had that to very becoming our those niches seeing causes, There thing point. have individual seen decades. primary going always exposed same inside at what's things same that things. were consistently [Indiscernible] on that trend cases to the a haven't the We not this book has as we basis, been for an are case it will

Thank Okay. very much. you

[Operator Instructions] further time. the over to I'm closing this for Hannon, at showing call any I'll questions no turn Mr. remarks. back

your you, you, thank joining Chris, interest us and everyone, today for and in ProSight. Thank for

other and near open events investors. an I our be all for meeting time at forward with much future. to look having Thanks today. with in to many you very the conferences expect of of We the dialogue

participating. Thank and this conference gentlemen, call. today's you Ladies concludes for

disconnect. now may You