ProSight Global (PROS) 12 May 202020 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the ProSight Specialty Insurance First Quarter Earnings Call and Webcast. 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]

I'll now like to hand the conference over to your speaker today, Dean Evans. you. Thank ahead. go Please

Officer; to Nico Global, quarter the Inc. and and Chief are, Welcome Risk Underwriting call Bob Officer; call earnings for CEO Bailey Finance Hannon; Larry ProSight With Investment President; Piszel; the you. Chief XXXX and Officer, first Chief conference today Buddy Santini. Thank me on

our remarks, the questions. prepared call for Following will be open

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

make during We actual that of reflect this forward-looking everyone comments remind those may expectations future. that and results intentions, management the statements me from materially caution forward-looking and beliefs, that Let differ future results guarantees their call, statements. such may are for not that

and important condition, law, events our whether results sections statements reports result our looking risk factors that For see filings statements of please new in under Except as a regarding the discussion could no SEC. update and yesterday's otherwise. future and some forward publicly forward future financial factors cautionary information, risks undertake of to of of we required language any the with by release looking or a made earnings as affect obligation the

believe in be found discuss in will non-GAAP during call, comparable can measures non-GAAP most today's GAAP of Additionally, we measures our evaluating A these release. measures, are which reconciliation certain performance. we useful our to the earnings

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

for wish in against and behalf all everyone to I Thank providers, responders the the who at of you, safety. health and On like everyone sacrifice amazing healthcare you start I'd to take Dean, good and recognize COVID-XX. others a the moment To thank and of morning, day good everyone. first ProSight fight every those efforts

recently the CFO Biondich of XX business, Anne has I in at at veteran years start stockholders having and been nominated more our North members nominee, new a board to Specialty Maxum our by former our of to our and year to end team. than Waleski, our to like us a roles at welcoming for joined hired Chief election would June. American three the experience leadership Risk to meeting Colony regard With executive Markel senior claims at as and annual ProSight of Donna and Services. Specialty, held Claims Officer, XX bringing XXXX board

joins last already and these Head I having nearly board company. us at decades have Arricale England Abbett them Chief additions Santini the two New Lord T. Jeff Investment the worked strong to having Markets, XX And tremendous Asset of are of Chief and teams our us our excited to leadership Price. as of Officer, as Capital spent believe for joins last years plus as part Management. and Staff my and Nico Rowe our of at individuals each

As our select solutions risks unlimited strong customers, coverage customer. network. differentiated a specific finally, multiple and purposeful our manage distribution focused particular closely writing for third through a first, and often casualty deliver management. reminder party at innovative, niche lines and services And insurer in We limits products, offer through a we property ProSight, we underwriting offerings execution selection, specializes niches. We to are an industry agile, our that profit

our to cancellation, has not responders. publicly minimal that, or write or highlight do hardship not medical We exposure. health. and do hospitals our and economic and I far, nursing the COVID-XX opioid claim it's remind event of We first an think work Given selection inflation workers write stakeholders DNO, this our faced do opportunistic we risk malpractice, where millions hospitals Americans, to accident and mortgage to traded social by homes. exposure and manufacturers not important have distributors, insurance, Further comp

our workers of which or our limits excluding entails also $X approach XX% represents our management approximately XX% less. to about risk gross Our comp our of have of XX% net book limits, policies managing million and premium, gross

with shared and double XXXX and share. goals growth in along a to I've in continued the a digit the on that As past, months first XXXX our per double premium note, are few to book of over value long-term groceries and COVID-XX strength We ROE, for digit the prior the ended dislocations. strong generate

over will in goals impact these remain our ongoing deploy confident not business the to to Given given of and risk very an ability opportunity selection our capital XXXX. favorable niche terms. COVID-XX, execute We meet the in long-term our approach, we at

holds, feel do the unique into bottom our company the so our us that forecasts unusual better evaluate circumstances XXXX, for granular very this up insight a what approach during latest we to you time. sharing warrant While no take we and can future have business our

Gross in for expected impact second to customer decline XX% written the could most the from XXXX, premium with segments significant COVID-XX XX% quarter.

COVID Our ratio expenses related claims net and point from the year. one accident current in for loss three has the increase to potential a

expense bad collections the On debt of the lower premiums negatively given the of state could deferrals higher mandated expense potentially from provisioning written impact ratio. front, impact costs and

ratio And does our objectives know net over income appropriate and core based remain ratio yield for of next remainder longer Net limited finally, possible to investments. That a XXXX. on what the term X% approximately basis investment the XX% portfolio remain volatility reduction today. excluding partnerships investment XXXX fixed said, income, XXX income for years three expect point we expense partnership limited from loss on our have our we

execute to these metrics activities continues team underpin Our evidenced that operating QX all the our by on results.

is our a line. we We determine have impact top COVID-XX will to going on objectives our longer term as revisit accordingly that

exclusive execute forward, strategy, as leave growth will backdrop. exposure well believe for our positioned and favorable I profitable arrangements management niche us look exit distribution a and we XXXX As I careful against

the Risk call and Bailey. to over Bob would I like Chief to our now Officer, turn Underwriting

Each the impact you take to the niche from that such market see like and surface. of organization that niches recognize limited Many dynamics orientation this through is about and sour talk run very from how purpose outside and underwriting with clearly approach different. Larry. to working us is through we time distribution is of a that ProSight distribution lens. can single our heard very and We Thanks limited differently have dedicated a see some our partnership

two us company, better things our This underwriting to for execution. important an enables discipline insurance really do streamline maintain and

and directly over We needs, feels and others. this are and than change, able a like there would streamlined in effect execution is is those of significant highlight cumulative to better examples anticipate underwriting capacity one are a times approach to Today, react to these of few maintaining respond a our our demonstrating from it outcomes. customer for faster approach time. advantages resulting when a our I way. discipline advantage very little We like just tangible in where think

largest niche. touring not but entertainers the among for written We which is cancellation line of in world, are we product the event that a insurers have significant

has for or the rate that years risk team felt XX significantly more, was Our this underpriced. long

crisis, focus that you severely. our have and So line discipline have affected the standing which long avoid as helped to know current us

a the underwriting period, and end expanded largest access spectrum, over used to one self-insured We year increasing the result. the On business this writers deliver retention of we rate workers in be great opposite States. comp to XX United combining of the

were was their of Market conditions, responders and streamlined. discipline were Obviously underwriting business it specifically, XXXX. exposure finding our by severely niche in of about due that And increasing. an and couple We occur, of Taxi ourselves a were and quarter importantly, concerned sentiment. pricing we past. impacted however, to in light ago, surrounded. first in first anti-police operators the catastrophic COVID insurers started to in as Many economic years that not to more example growing not were exited here's immediately COVID-XX strong shift claims maintaining the where in our of that this bus safety, to expecting potentially execution shutdown but well the of positioned and recent

flights, we're literally focus customers. Within our directly hearing taxi on of bans from the hours, international

to to schools close, and very to work were these able As operators, thousands emerge. we before wade in cases, were indeed reduced to and in through were immediately premiums did of to they before have exposures. from We to and, to weeks problems these contact hearing be regulators Did charter respond able school not will working long customers and, already and premium operators mean some other We not new these tons agents. and data bus adjust started were approach through We have regulatory of actions. regulators to a these the long see niche of with with order I to maybe when need align rapid to before our first leverage in response.

business talk about let's Now, interruption.

specifically, The were XX business X,XXX but which to We not interruption policies exclusions. civil virus policies, do have This damage or not of exclusions. remaining have so or direct entirely or roughly have coverage. which approximately by specific and require contain a authority. buildings, pollutant apartment XXX% exclusions are X% closed trigger XX% contamination any of shuttered X% do these property virus

As as rate execute business, level. across the at rate loss our and far we trends next

the Our rate in calls. needs that and we've past talked earnings niche, about vary by

acceleration quarter of execution quarter. with is an This we the including versus of the very and excluding rate basis X.X% fourth of first achieved in an rate points quarter X% than workers satisfied were This comp our workers overall XXXX. more XXX comp,

ultimate year pointed see XX, based seasoning as throughout the of increase newer continue assessment reflecting out handling of niches at the with associated loss and initial expenses COVID-XX. claims Larry We loss picks the and ongoing on to may

I our will results will financial in to now greater Buddy discuss detail. hand Piszel, the call who off

color call underwriting Santini, portfolio off discuss the Thank you, Investment capital Officer Bob. investment will position, who provide Chief hand the expense our its to I then will operating performance. and during and quarter, ratio, results Nico the and our address our on

or million due $XX first our gross compensation. first workers Gross declined quarter written of XX.X% the the premium to XXXX. exit million or of Total segments X.X% XXXX, for customer premium excess for $XX quarter, written over quarter from of increased the

written of results $XX excess million a XXXX. non-recurring approximately in reminder, premium our comp from As exit first the quarter of of

except executed where a in Gross increased all for we written quarter targeted reduction. customer premium transportation, segments across the

a period by XX%, with development. It results not also underwriting or Our expectations reflect was impacted expense losses in loss management. prior cap reflects of line ratio disciplined which

include ratio point was did XX.X%, about expense items. Our half a from benefit a non-recurring

underwriting quarter of potential income of our and $X.X of expense results first strong challenge We from quarter in on the Premium a ratio first year. underwriting expense it of COVID-XX in We ratio income debt to underwriting $X.X and ratio XX.X%. bad progress XX.X% and combined a to the million, balance That declines with compares do XXXX. of had of for million the the combined the

million on March. limited quarter Net investment $X.X income mark-to-market was in impacted month partnerships negatively $X.X of by the million, the adjustment an during

for account was quarter partnerships, last on limited effects a loss results. we reflected not in limited the the unrealized to are investment partnerships I that on this want in portfolio net and March Excluding note year. first downturn economic our of of income our leg flat to investment do fully compared the

Our commenced gains. as million stood the realized of modest quarter of end investment was during increase repositioning was The end, continued early from The quarter at quarter. net of $XX year of in $X.X a through the March year, X.X X.X at last change the portfolio quarter in from loss negative $XX years, million in years fourth billion, the The position first at of of of portfolio duration up portfolio unrealized X.X% end of the and portfolio year. the tactical a the resulted end. the of an

the operating adjusted and crisis. credit of by was the in the COVID-XX the income to net attributed markets net income, were income emerging response adversely affected which to Our reduction

Our million $X.XX operating for same diluted ROE operating income operating income adjusted quarter adjusted an share, X.X%. operating ROE per share, XX.X% $XX.X of representing or the or million year. adjusted of of This $X.XX diluted $X per compares last of to representing adjusted

as $X.XX share, Net continuing diluted to $X.XX million or compared per $XX.X million, was quarter year. share for income last or operations from $X.X same per the diluted

Chairman. adjusted As final for related compensation CEO transition $XXX,XXX operating specifically former the stock excludes costs certain of million a in and reminder, income and $X.X our IPO expense our Executive non-recurring costs,

by the credit of valuation occurred liquidity pre-tax March. book XX.X% year of unrealized diluted unrealized a quarter the the $XX increased diluted has end $XX.XX, recovered our value net share fully value share have quarter end is a the of and tightened, decrease markets set was first per book at per This the during decrease On of spreads driven at the change improved, largely in end. quarter, end approximately million. position have Since the that from

we So XX of an million as portfolio. in XX, April realized have approximately gain the

re-fi. and with commentary debt our overall I'll close on liquidity

delays collection we've lower premium flow liquidity, our on stressed lies for ahead. state regulatory for feel and from and positioned First, well cash actions what

$XX on not facility. We also million drawn credit have our

are with on of of to engaged the sooner. Expect options refinance this topic are maturity number by pursuing this its have and or year. quarter a next We our November we prior to markets debt credit in actively updates

I'll Chief Investment Nico now hand off to Officer, our Santini.

an Nico year. this is As to join ProSight has insights will thrilled experience believe so and his We chosen aside, Nico? his timing our we team that earlier are And management well. serve perfect,

end net exposure the our 'XX. our of QX QX end Buddy. Triple-B selling quality we Thank from Triple-B some Double-A rated Probably municipal was of the XX% 'XX at of the of in fourth you, quarter, and and program upgrade result preferred in corporate began credits to bonds Single-A the some as securities. The XX% buying taxable an at and decreased credit

at it the the since XX. recovered of XX approximately XX of Our end has gain April million unrealized as to was million and position quarter, negative unrealized

There this unrealized hit limited and million April. our statement. flow of been unrealized income loss approximately losses statement income unrealized our QX, Of partnerships. of has fixed income in million through through portion million recovered X on was loss also that X the gains X And

total hold partnerships, limited in not quarter-to-quarter. We any from there in that could and currently do income stocks XX volatility fixed keep of common P&L be mind some have we a our Please million these portfolio. in continued investments

portfolio, the you. in approximately XX% analysis approximately to Triple-B we may Boeing and in rating of resulted inclusion $XXX,XXX securities XX% Within the million X% We holdings. below want downgrades. our X our QX This some the XX of for these represent Marriott securities completed which exposed analysis. which identified highlights the of identified of for quarter a and million that represents our share I a grade in holdings, allocation, of to represents comprehensive allowance of allocation, of portfolio investment we the be with the quarter. Within CECL

which the allocation no hold below our portfolio, our securities and represents which allocation below Double-A. average Double-A. of X% the our securities of represents X% CLO Within average no we our and single-A rating Within Single-A is we rating portfolio, is rated rated CMBS hold

comfortable we very with of result positioning. analysis a As portfolio the feel our

rate Turning toward of of floating securities from end the rate floating portfolio were QX, XX% of allocation, at our down XXXX. the end XX% at the

as the reclassification year better accounting XX% our difference portfolio investment rate allocation underlying that Management England results floating our the The securities. recall was may You identified provider, by New new a securities represents of at Asset of in end. from and the nature

are step For fixed upon securities example, the coupon in a of some provisions. rate securities up reclassified contingent with call

portfolio. with holdings floating of allowing mature are or out and called are We comfortable to them be rate the our naturally

rate, our progresses. So comfortable and in liquidity market a year likely portfolio this gain. and to the loss has as will we feel unrealized Overall, an positioning. handle In interest allocation returned modest had positioned we the conclusion, relatively the decline quarter, the with to unrealized well while further dislocations credit

will it Larry. back I turn and to now Thanks

Thanks Nico.

challenges, uncertainty to of face, to thus did levels not extremely proud handle I our all am we're far. of dealing ability with we them and While heightened expect

the the I results forward. well our first Beyond impact to continue our our quarter positioned business strong fundamentals believe we and COVID-XX, going of are delivering of value stakeholders to reflect

With lineup operator that, the the to over open for questions. I'll turn it

Goldman of ahead. Sachs. comes first Kinar [Operator Please Instructions] the Yaron of question from line Your go

open. line Your is

my question for remainder you good ratio I everybody. XXXX. Thank maybe on the the and first morning, loss thought for the guidance of focused was

Maybe about potentially highlighted in so point not a kind the you you why you of loss increase have of do talk three ratio. see where can the You exposures. several lines would

then to stable going on We little uncertainty that context in a and lot of assume of its Sure. to a it thought over too. it of uncertainty was to see we that quarter automatically turn bit being and were the But Bob Yaron, about that losses. would prudent Larry, Good could the have I'll it those thinking first didn't kind from actually forward be. and what that about think and anything going we where comment morning we that there's

on monitor presumptive first if we responders extending for either then example, indicated don't that of extending that an could an with other lines where activity and see you kind to ratio. be losses think work that as are watch business various to good have kind an that have side, Bob increased the And of presumptive loss a impact. that feel and interruption unknown for niches other on could in we daily really appreciation basis comp or and states on in might where side. we beyond a So obviously evolving a that just to negative potentially yet into bleed basis responders, loss that impact of on parts that have on of become We what the other the first

our you happen of reservation So going think other of it that? really from add we perspective any would it Bob, were kind pinpoint on to anywhere. line comp was the to color if a what prudent we could

No, Larry.

I think the and around pieces remains uncertainty seen is happens largely around lot well. comp in you line what legislation. and said moving it workers to regulation with The of a be

various want presumptive follow-up to contemplates expansion one The I maybe potential understand correct? already I essential three So loss make of points states. all fully into this. Is sure employees that. across that on just

right, in states. all obviously is comp we The that my have writings the a or across because don't lot is comp Yaron of question part only mark, significant one

relates it could But would – seen in the it, obviously, significant we of when we're point have is this that, happened to evolve. example that. just it states what what overall We So big about we're haven't in Again, the estimate think watching California, perfect California state. it evolve as particular depend do our as the it that's on the best comp at so our of book book. in to portion a seeing

than in but our and where with three you, focused. up to just So if it, sure that's don't that kind anyone could I affects not that's take it's that. why where as – particular, first that how materialize. that seeing that up know. we we're saying when right. where it's position future we came please of that just and we're watching we're going on didn't potentially for to quarter, in we the the at But comp that the wanted recognize, It line points, we're am is We we it's make looking And

any Understood, the workers percentage the comp employees? exposed and sense what essential of of to book that's

all on where define depends employees it comes It right, essential they every so into how in play. state, that's

small. is Our very traditional piece

roughly, in million we been numbers responder first So When to what of of written like, $XXX think million I before, is write we so XX% our it those less what natural look the call premiums, would of bucket. thought as about XX we roughly XX% shared let's of comp. the kind than that have

I Friday, different so just significantly this might with as the forward. not that point. that we And had uncertainty So a Yaron, you at we go definition. we have much have There's by but out again, to conversation trying are we concern That's figure today. that

Okay, Thanks. the color I thank on appreciate XQ. you.

Sure.

ahead. Hughes next of from Your the comes Please question of Mark line go SunTrust.

is line Your open.

thank Yeah, morning. Good you.

Good morning.

on existing – versus just lower outlook a How is the with your in little that with new your much challenges there? impact of business, guidance, for XQ. customers XX down to XX exposures Talk more more in about just

have for the start right. then going miss I'll it I'll and Bob. It really to the to three where Sure, in business areas and at be over the comes biggest can look you're new hand us part, you Mark.

do what You our are. guys what with we growth are normal and familiar results

impacted and that every business New severely are about others that year our obviously XX% of think can't certain there coming niches are from write we about you than So where more new.

the miss So that's in quarter. a

You'll have don't right it, renewal make that some businesses base. from your

some written premiums in second That's have us. exposure. quarter, the So the it bucket impacts then particularly you'll smallest for And as from actually reduced the of comes that due actually biggest that part to well.

the don't Bob, exposure why those piece? start reduced So buckets with three on and you elaborate

it next much of exposures. the of look off sort what it's to as And do month-over-month try earned. bleeding we tried through could. of impact can tried do Yeah, bring bring as forward delayed we at before you to is and that okay, reduced quarter will this to think what the just We deal be of as much with

segment those So deal And that sizing basis. with while far by an still hardest. my right particularly they're try around to that that's commentary transportation was in unearned what exposures the – was that

a $XXX niches that the as that weren't hard hit, will $XX as For that or linger something there like it's as about to shortfall used renews renewal be be that some will well.

see renewal about just took the we've ahead right months, early. sort basis the of the We business new as of we of after shortfall up in As it the shortfall we to care problem, look in sized. in the recognized bulk sort brought sort of of equal it smaller

However though, could could. into bring as those we other two quickly factors, as this is April not something we

time. linger So those will over

the this Mark, piece in come thing other is that sizing the when, add, through but and that's comes that the don't right, you is back, just element. right does I know right, the would unknown place, this right,

that be, something recoup look that those back. XX%, The that So when think be quarter ultimately somewhere we when XX% miss come or will businesses is do XXXX, around back at our would could eventually question of and get new as we us. whatever example, that ask we do I would second business that that. just for opportunity late is look we it to again, The rates, have to – XXXX, going opportunities for an have for at

and point, most be is quarters see that the evolves. long-term on of companies how more and get we of that out at to coming we'll non-recurring an claiming unknown successive that's it report those So this be that would the significant obviously, don't make able out element in particular

that. for you Thank

ratio? on gave you On to three You can about the loss ratio. sizing the any up expense points give us? expense ratio, us the How

we yet, have don't that Yeah, Mark.

that right top to great yet. share going in a line. for we But So watch quarters. don't to now, that we're I'll future that be feel with have happy the really

the that it's A is to very thing ratio – thing all I add expense premiums. with We've related the only would with been The disruption. likely diligent in expense add I levers we managing would have these than the Mark debt if P/E more only bad is the coming deferred up,

constrained. Our been headcount growth has

is T&E down. Our

lot saving of ratio and our that there's reason. advancing. things potentially we're be we if a we're But going debt and going to primarily is exposed So up expense bad are to the expense that's

had you liquidity liquidity, analysis kind or of of liquidity. did a your mentioned about stress a the specifics The you Could on test share and good some feel maybe you that?

stress a took we we regulations think did which the I basically fairly where draconian test New York postponed.

for you of of great there was bill a proportion then XX overall follows nonpayment, installment an we kind basis. couldn't that to the you had You a no And direction. days, on wait book cancel assumed pay. could that If

where premium we out, pay. started quarter most defer of was. until rate to the we second of annual But is know payment Now, assumed play the see we really what take up XX% book won't usually the

the So extreme. to a even portfolio operating of And fairly it's sell cash we see where we're scenario to flow meet needs. any don't with having investment that,

we So pretty We it ways it. about seven Sunday. good feel stressed to

you. Thank

Shields comes line question of the Please of KBW. ahead. go next from Meyer Your

Your is line open.

morning you. all. Great, thank Good

morning. Good

the a actual quarter little fuzzy, in in off A or the you saw? transportation was written without drop that there premium

issue big you return the we the the do was particular quarter association want non-renewed. we to There was Bob, premium to that first not The that to had that's in on quarter. we in a chose non-renew? give second so that, details affect quarter of some a going the

timeframe subset notice. of a our made we back was – December, sent decision year the was actually, it November, Yeah, kind last in book. It intermodal December maybe

kind was worth believe that is date I $X was it of think March the master a like And I premium. X. policy about of million of expiration

So impact – that's you there. the see saw we largely

that usually quarters we quarter have we would at projected niche was that since level, Obviously, four don't level, have things. level, segment the with them normalized pre-COVID. the disclose at segment the drop quarter But There real do the inside – the after off, obviously, the over we the would

sense. because I sounds don't misinterpret makes framing plan okay, liquidity that any is that it aren't this, I reduction short-term to aggressive okay, it, – Got sounds there It like but expense properly? want am

correct. That's

and rates need you a Okay, sense rise how cancellation? to become us to finally, would in a give as interested then can much to

take underpriced Bob. appreciate I that That was laughter. Bob, one. multifold much. We to you very so I that appreciate before ahead this, it the want thought do go was good.

that Yeah. specifically amount – underwriting price it was would I I and of you looking our And say say we were was hand this that mean, COVID I a change this COVID, in entertainer part mean, allowing sort for of but you not were don't double I price half. – know heart, of paradigm. least much not underpriced if what as on I for honestly guys of that's would double, double, uncertainty of need prior would touring part that that the change well, to specifically as for. I that's part at why at would more. for – we looking tell our and they in opinion massively to event. necessarily

helpful. very is much. Thank that so Okay, you

the remarks. closing over are [Operator back time. at further Hannon for call turn this Instructions] Larry questions no I There to

spending could very obviously of you and because much. put quality – as there Thank be time press the you're both questions we appreciate you and we what possible, Hopefully done us as that the sure with to the you of transparent time that from asking we we've energy and into wanted benefited today. the our make the and release expansion

you very stay and and safe. thank healthy much So everybody Thank you.

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

disconnect. now may You