State Auto Financial (STFC) 4 Nov 192019 Q3 Earnings call transcript

Welcome and thank you for standing by. [Operator Instructions] Today’s call is being recorded.

If you have any objections, please disconnect at this time. I would now like to turn the call over to State Auto Financial Corporation’s Director of Investor Relations, Natalie Schoolcraft.

Thank you, Latinia. Halloween Happy and morning everyone. Good third Welcome earnings call. XXXX to our conference quarter

Director Personal President of our Auto am lines remarks, and prepared and Steve Lines Matt President open I Garland; the joined Officer, questions. Lab, we Chairman, Vice Chief CFO, our and Managing Berkey; of Vice Vice Senior Today, Commercial by and English; President Jones. Chief After Kim Senior Actuarial President for Lines, Senior Jason LaRocco; CEO, Mike Rubik; Investment of State Officer, Scott will

Our measures, of our nature our factors projections press of and comments Commission. in to results affect under release factors Financial end risk forward-looking schedules the or on of discussed uncertainties, and financial our as annual today by may risk the press part are stateauto.com, include forward-looking and types non-GAAP the with our at actual as as reconciliations Securities release filings may involve factors with information, differ statements. statements, are These which section. materially which future Exchange along available our their containing Such cause of financial from Investors included website, performance. a other supplemental those of number may in and well quarterly contained certain

turn STFC’s Now Chairman, President the to will call over LaRocco. I and CEO, Mike

of is validation, quarter The expanding this and focus. Nat story Thanks, and Hallow’s Eve everyone. Happy success

X transformation ago, to decision our Let’s single the a made began years become When begin carrier. validation. with was we the digital-only biggest

It the personal of years, not that credit or card? accept a it After within allow agency signature, last within years have new of did commercial, work system, but In was BOP. agents proven question Lines to earliest a the approach the it a unique was clearly raised to was risk. we clear. book acceptance and was work this insurance. or that both checks required small would Will commercial? paper, year, our days checking built for as The about is account platform, use answer personal declining a cash industry, the last insurance, growing this that thing not or again. poor Personal X our the results, think and Within of new one that one electronic platform was across volume and again will we auto distribution question commercial an For what

growth longer However, is this was across consecutive there quarter question. quarter record lines, a the no fourth and of these

not This an success. into become traditional commercial only to BOP and significant from innovation but emerging built step carrier as decision innovative another achievement rebuild that and long-term and critical property Our State is a Auto as in carrier been validated regional insurance casualty for we a and personal has auto insurance, well. digital-only is a and carrier

another bold our which this know smaller of who E&S and call were for as in be a Commercial commercial too are. our exceptional even time a have goal large well Lines. Personal part of reinsurance. Early decisions this in Specialty the is But lines decision. in to results and hard and business, a to second quarter’s market programs and soon story business, I shrinking to make Auto, was exit when always commercial, expanding we number to as rates Lines personal commercial, State trucking, is The have success. watched small in large At across the made we company. decide It’s will as competitors we middle approach on, And work. property. difficult casualty It’s we of that

our initial some paying that indicator off. our book, while quarter of causing is This focus, key was a shrinking now

and force That growing also personal to the We entire noted policies I in rapidly insurance. above, are as in we is story. auto. grow commercial in not And continue BOP

Our middle improvement is new The this not have digital market a launched line our we business to platform. changes. and and in culture yet grow, result continues commercial of leadership

underwriters our agents. an to and effectively partnership built that in with talented our choose efficiently have risk We and evaluate environment allows

which launch will our platform will impact efficiency. our more growth, We new but next only we year, believe critically, not

Commercial This to small quarter, expanding Lines, has our demonstrate growth and across middle success. market, both allowed us

commercial. of both farm a now ranch. are and continue We note also successful to I’d writer personal grow and we

are importantly, important we these lines. market seen More for as an

must part workers’ this I compensation. Before the of I mention close with story,

to year, at fact This challenging of is a easy; profitability strength continue the indicative Growing not. this feel unacceptable. business. that slower is and growth But shrink without a is We growing albeit this our this is in pace. profitably, slot I is

this we both. billion remember, point, pass on And this premium gross. will do in the are $X that’s to pace At We year.

piece ratio, personal part of This focus. continue As add scale, story this across can our is begin soon to expense story our especially be expanding both part we final was The of quarter’s of in story. seen to and which auto. success will our show third quarter major in the our expenses a

the begin to product This was brought with first we Let’s auto. XXXX. market in

impacted platform well, with we were sales, very business that a issued faced that needs. meet service retention. technology in and not portal weakness the While that The our ultimately, did worked quarter

own internal build So our portal. we decided to

large as improving take needed rate In have returned be our profitability. adjusting of models addition, this pricing certainly and and line we will to been

This effort the challenges to make quarter, clean model. updates the we our technology and to latest focused began a remaining up

can efficiency. auto, Commercial and slowed not critical as those felt has initially our we portal. own are improve in within new is we our was issues execution growth this focus Lines felt While to launched it on business with These outstanding that experience our so products our we customers’

at I’m more line, very it’s one the auto to that and and X finalize degree that the adjust growth. policyholder comfortable our fully we I slowdown modest efficiently least customer. I’d we way, both our we agent, in technology do is accelerate While the by to decision. short-term of If issues. the in be are the the again aggressively, place, will product like profitably, once service fixes these of with And growing so imperative and growth growth X result we highest at focus Once as longest, with estimate expect in months this customer to

on piece focus of final our expenses. is The

There’s major in above, work our our ability our technology, be can are done, track I more in effectively. to ongoing forward and be well the we years. for There could focus quarter the I the as work but in and efficiency, P&C note be which but As on carrier. coming drive see was grow now investment to much done, and pleased is much in positioned effective efficiency to to we we resulting is a not improvement our last still progress date. unique piece truly this another step build our quarters with to

As infrastructure innovation sell the continues to of investments emerges implementation change the service have embraces to and change. price, finally made will the allow and our new industry as for industry, long-term winners that true will technology our

the With to Steve. call I will over that, turn

Thanks, morning everyone. Mike and good

per income quarter STFC the net compares of $X.XX with For to XXXX the income per same the operating third share. $X.XX reported and $X.XX quarter, net $X.XX share income operating for diluted per income share, of on This basis. diluted

per on of of and basis diluted diluted net income XXXX. quarter-over-quarter unrealized For gain. diluted reported months income compares One over securities fluctuation and net change share year-to-date and share gain factor X X and income for year-to-date and of months, investment equity of gains per or operating operating reported the loss STFC per share $X.XX on net first the investment This invested in to $X.XX. a in net or $X.XX income losses loss assets. other is income the $X.XX Net reflects

For STFC on in million $X.X quarter, net reported of unrealized income the losses a net investments. pretax

$XX.X of of net unrealized third STFC XXXX, the in gains. million reported While quarter

For the XXXX, STFC net the $XX.X XX, unrealized compared of gains period same ago. gains year X $XX.X months investments million a ended reported for of to million on September

reminder, As the The results year loss. net to from quarter exclude expense was of higher while non-GAAP tax, up, gain The operating cat ratio compared loss combined non-cat of XX.X% ratio or The loss third improved. ALAE net GAAP down. ratio ago. was investment the XX.X% and ratio quarterly a was a

months same and XXX.X% loss quarter X.X and of third up to losses was an first the X non-cat X.X for XX.X% XXXX, GAAP expense ratio and and year improvement the for the ratio of of compares X.X ratio the the cat XXXX XXX.X% The X XX.X%, point a GAAP ago. point. in compared higher ratio XX% points ALAE reflecting of expense For to and respectively, XXXX, for period first combined XX.X% months,

balance and year-to-date Commercial During categories. than build variable half that, more revised of to of consulting was Similar XXXX, spend and compensation, technology with estimates variable of quarter-over-quarter with drove reduced the primarily coming improvement by reduced the driven products. Lines, several improvement, we associate compensation. roll IT-related factors more improvement said across continue out the estimates other Having and from

ago, same statutory period XXX.X% a basis, the quarter to a XXXX months a for and third and commercial to a the to of a a quarter quarter reported XXXX. combined On personal XX.X% basis, compared On in personal ratio of the year-to-date for the compared reported XX.X% ratio statutory a combined commercial X.X% months X first year-to-date while third X cat for compared the basis, of X.X% year ago. were of the ratio of for on first Catastrophe lower is the than losses year during XXXX. XXX.X%

amounts, lower to was prior reserves which unexpected. year of but at not overall, develop Our estimates continue favorably

personal quarter in $XX.X For losses the and to lines ALAE the $XX.X quarter, non-catastrophe in compared million was of XXXX. million to relating in commercial reported third

XX.X% months XX.X% the $XX.X months first quarter third ALAE the Personal And X favorable months, accident year points, for of through months X ratio ended $XX.X of months increased quarter XXXX. non-cat in the up and was the the of X first quarter ‘XX. current compared X.X in September and of for totaled loss to for development loss XX.X% compared non-cat X.X the X year XXXX, current ‘XX to Commercial’s compared to for ratio accident XX.X% the point, For first the million XXXX of ALAE XX, million X third XXXX.

expense mentioned statutory specific factors. on quarter third based the improved to year-to-date to the the loss quarter reserve relative given additionally, The year’s year from third factors X.X prepared – I XXXX have can ratio discussed impacted ratio quarters more the and year detail points their and we compared X.X pick, from on for the be earlier a into expense same improvements. book volatile get of be of will remarks. to and regards And drove as commercial ratios accident Kim of third As Jason second, fourth the basis, previously, that estimates earlier and personal in quarters. point any product reassessment GAAP can quarter-to-quarter by many

place the of a lower money million of on specialty written impact the for which for impact for second current a first increase our quarter, reinsurance quarter we net smaller out reinstatement X.X the some and year-to-date, took X $XXX,XXX compared for our development Net specialty prior of fixed securities, lower $X.X year. has runoff, months non-cat reflect was the loss to regarding rates points point point that lower the of this months year new the statutory stands of year and income X.X quarter, income in notes to to premiums quarter fallen of to of X first ratio overall with the as refinancing $X.X yields, related on favorable XXXX the slightly of in partners, on the expense investment the net our portfolio million to XXXX. to Items due mortgage-backed ceded company, earned which and premium, prior now an at the reserves loss

to I over call with the will And Jason. that, turn

in compared for in third same of with and Thanks, of in auto The shorter Personal is as higher morning in tenure quarter due book to ratio the the of XX% development the homeowners. loss of for the XXX.X% increase and The third XXXX. LAE XX% loss and the non-cat Steve was XX.X% ratio auto the weather last combined the average in quarter losses quarter a compared everyone. lower large personal impact Lines favorable and year. good and a to finished Lines Personal homeowners levels ratio quarter well to as

auto reflecting ratio quarter higher expense Net premiums ‘XX, quarter was for homeowners decline in compared quarter of our personal the time, Lines premium. XX.X% the third written is Lines At and other by the in X.X% a same Personal Personal up business, to for XX.X% levels offset new versus ‘XX. third

and quarter personal in statutory and a favorable third to with along quarter of Looking ratio specifically multiple auto auto, LAE impacted bodily decrease development a statutory including injury, at UM/UIM. adverse ratio expect by the favorable. trend coverages, earned respectively, XX.X%, books loss to XX.X%, our be in was from The pressure across the personal the development retention loss XX.X% and loss a ‘XX. LAE our product, exceeds The overall average combined with XXX.X% auto and were ratio compared results increases. in legacy legacy now to and we our of frequency until premium some our Connect premium tenure earned product on continues shorter ratio our continue from Connect on from see to Connect The BI X.X-point policyholder

XXXX Connect are, however, We by UIM an we the the in frequency model trend an years. newer to increase increase higher our the RUM damage our in on At physical driven year accident same auto in in repair book. severity seeing costs have Connect due higher time, claims, losses experienced and

reflecting than our have begun aggressive in retention our moderation both BI of increases legacy Connect to our rate XXXX, loss see recent auto rate trends, result. targeted a in actions more Our auto actions and more been as we retentions the have and personal

Overall, XX% auto roughly of retention in was ‘XX. quarter third

with finished We than to ‘XX. greater third non-renew. have policies premium X,XXX X% rate quarter quarter auto increase our improve advancements legacy net force auto changes fewer down the auto personal left and quarter see profitable competitiveness third the well segmentation out ‘XX. of versus less our quarter rolling rate in below down to written of level quarter business In enhancements ‘XX over expect ‘XX, our as in was ease system stability new to X.X% renewal for use Policies as accounts growth, we with third to rate Georgia our as restore the improve ongoing for rate third we product. are and auto rolling were out auto Connect To XX.X% retention

The and this large quarter Moving ratio homeowners higher same results, a loss was on levels than activity. of points the higher product was ago. driven ALAE loss to our weather increase by and X.X the homeowners quarter year non-cat

quarter third quarter XX.X%, of ‘XX. homeowners third X.X was ‘XX ratio ratio ratio Our homeowners was and loss loss is ALAE XX.X% XX.X% combined homeowners loss of than quarter third and X.X ratio the points the ‘XX with in ‘XX a cat points, for LAE which and compared third to ALAE XX.X%, lower The XX.X%. and respectively, cat quarter

XX.X% development and XX.X by higher in quarter ‘XX. The third non-cat than quarter higher loss in favorable again, of less third was ‘XX points and third with ‘XX, ratio ALAE losses, driven the quarter weather large XX.X% non-cat

anticipate We product as continue auto Connect see to with being the growth our opportunity for well. our enhancements on profitable benefit homeowners homeowners digital will product and made

policies In ‘XX. XX.X% third our quarter quarter by ‘XX, over third increased homeowners in force

net counts XX.X% and the quarter versus business written ‘XX, XX.X% third New premium quarter third up ‘XX. over in were homeowners quarter increased

retention In quarter homeowners home at terms of the roughly ended XX%. retention, with

In of our our and conclusion, auto to activity homeowners with changes We our recent retention actions in prior to close the have made renewal are to we rate structure business as to storyline business. rate for enhancements to Connect summarized changes Connect book improvements relative and into in see Lines taken ongoing years, renew we have our rate increase stability, improve those expect first, aggressive implemented quarter targeted along growth. new ratio the system can drive be more our rate as: being Personal

non-cat ratio. operational by large losses. as combined retention versus weather improvement our higher underwriting last, efforts of impacted in well tenure the third as the targeting increase actions loss ratios in in actions to quarter auto was quarter shorter and a for impact ratio the Second, auto Ongoing ‘XX. the and book resulted claims in are And homeowners average quarter loss our higher

focusing can that to what core we on as better plenty initiatives continue of have in the improve, fourth with confidence room and in the focus and on results, we drive achieve business we are We to quarter beyond fundamentals.

the turn call that, Kim. I’ll to With over

commercial of written Thanks, premium XQ are versus third ‘XX in ratio Jason. a of increase XQ results as ‘XX combined The XQ ‘XX. and quarter versus XX.X% ‘XX XXX.X% XX.X% follows:

whole, XQ ALAE auto, versus commercial than ALAE the higher loss ‘XX ratio good which X.X QX was the commercial lower was except loss For story lines commercial in the with points at XQ ‘XX, the ratio X.X ‘XX. statutory as ‘XX points non-cat non-cat lower XX.X% being is XQ a and and in all business and was product

from Commercial expense where XQ are ratio. generally see ‘XX loss biggest ratios the build expense was on profitability. and quarter ratios organization. commercial positive XX.X% commercial them ratio lower points XQ and to on we But associates compensation starting not both than the be continue of in are to need are be we commercial expense ‘XX more commercial variable ratio expense still impact our of to signs the overall progress statutory our to efficient to The due X.X for to and a lower inhibitor efforts

auto record Lines for strengthen comp is to X% with in XXX% versus growth is new written QX business total XX% ‘XX ‘XX. ‘XX written new ‘XX what business XQ at Average middle BOP. down ‘XX. is written commercial for continues or QX Farm a commercial to has versus commercial premium ‘XX. ‘XX XQ up counts was up premium Commercial middle versus BOP and premium total of only business. they Commercial around BOP growth premium compared new This quarter XQ versus BOP the was pre-Connect, ‘XX had XX% in up business was that started XX% Ranch new were XQ XQ quarter XQ XQ ‘XX. premium versus and row our up are is business our Commercial up XQ Workers’ new X% market Growth auto was business ‘XX ‘XX. quarter XX% versus up solid was fourth a XX% premium of ‘XX, XQ XX% auto versus Connect and at XQ Connect, BOP total QX premiums consecutive higher and XX% were seventh of up new stabilize ‘XX. business Middle premium market to & premium X.X%. ‘XX. market growth XQ of written

to Lines. is significantly on update expense Commercial path improved the a Here ratio for an

XX.X%. our progress. is In expense XX.X%. than better XQ ‘XX ‘XX, of ratio our year-to-date better than expense commercial year-to-date current of our of X.X commercial commercial ratio ‘XX Here’s points XX.X% ratio our And points XQ of expense the X.X commercial is expense XX.X% ‘XX ratio XQ XQ

unit significantly improved across our previously have a economics different X business are that will We unit that Commercial the tasks done things: achieve to require discussed Lines in expense more better and economics, commercial ratio within unit Improved percentage scale. and as auto Pre-Connect BOP from X% new we straight-through Connect to piece economics. of us better business continues manually touched every give business. processing new had commercial a

achieving business versus Connect the In written around in more commercial more year and XXX% a fewer and in premium processing more direct of the platform. with written XQ get versus these commercial products new straight-through XQ handling commercial XQ With efficiency division ago. other XQ percentage. associates need ‘XX, is ‘XX Connect on more We a world, ‘XX to total gains, XX% premium ‘XX are efficient direct XX% premium a this than

Commercial it X.X%. been all all for the of Lines, Connect, was XXXX, For on of has premium of percentage a following

For ‘XX, was it XQ X.X%.

it X.X%, is QX was it and ‘XX, XQ ‘XX, For X.X%. for

should early to XXXX Middle in accelerate XXXX CPP, really this Market Ranch Connect, is when scale. and rollout the with of Farm & start Connect metric

rate rate XXXX Connect to X.X% to with growth to Connect ranch ‘XX to & & written small see ‘XX provides of X% enter more states the launch will really the ensure auto, increase launches the to the be commercial new is to XQ increase a a premium the become farm BOPs to small premium grow, Farm solved: Workers’ be written have middle-market written The early it to come. as Market versus deteriorate a scheduled growth this driver; first still state QX allow in impact effective but X time minus growth that new premium premium underwriters with not second the Ranch to focus key work XXXX; platform we risks. significant is is business premium are to and Farm rate. commercial will rate; as freed count Ranch, us from written at to items. growth growth on in commercial for middle for we continue rate. this As Connect XX% X% issue growth This from Middle commercial, both ‘XX in XX% the Connect XX% Connect previously growth growth in impact up and being & larger to written X unit do order we launch likely on Connect will Connect rate. XQ not rate, starting these market, main scale again, mentioned, until loss plan a XXXX. occur compensation, ratios And counts at

which acquisition is product versus quarter drivers of year ago, XX.X%, The following: ‘XX. this each X.X ratio are ULAE follows. expense point ratios The and come ratio higher cat results are XQ commercial deterioration quarter XQ the auto the points focus QX noted. Commercial line auto, line business I’ll deterioration from the LAE as ratio results from X.X this and loss a in X.X this higher operating a product previously versus ‘XX. loss loss on product a points versus ‘XX by is LAE for an and the poor, line every as are as for commercial

the the XQ of auto auto address ratio. of segments, profitability in need on The of Connect or version package in as these week loss XX% up businesses model. a we points point commercial is implemented XX-point LAE profitability total X.X again a commercial and last X loss not which points ‘XX ‘XX auto newer XX ‘XX. on legacy. commercial, first have model states, segments couple commercial Smaller have that auto on of achieved. book XX% in X our we book rate identified commercial in This the our is are was and the overall segments. legacy Version businesses pricing of our a of examples still these have segments. commercial few pricing Auto X.X We auto book about should additional under-priced these are small lower versus written is worth auto versus Commercial written about X.X X% middle-market worth X commercial XX%, commercial was commercial LAE statutory Middle-market ‘XX. lack XQ loss these is premium segments Small the package, XQ of the of ratio than points is XQ XQ improvement up package XX.X%, which premium in ‘XX. XQ ‘XX versus and small statutory which ‘XX, XQ XQ ‘XX commercial was in ratio is And

As watch in high. premium with XX% auto, middle-market was written keeping XQ are the since commercial are premium we on the Workers’ market workers’ previous XQ rates compensation ‘XX. compensation ratio ratio extra decline started to loss our is loss which lower an close growth XX.X XQ is LAE than have discussed compensation, stabilize. Middle XQ up versus statutory so XX.X%, ‘XX in ‘XX points workers’ and in ’XX, quarters

following: the tale by Our ‘XX rate versus is down XX%; been versus growth have this down stabilization ‘XX, compensation a X%. stories. ‘XX, versus XX.X%; ‘XX, XQ down XQ year growth of The our workers’ ‘XX quarter rates workers’ XQ QX XQ two compensation of ‘XX XQ

which in mod as could in written to renewal ‘XX down prices our renewal at margins premium these down For were ‘XX. written renewals willing not We workers’ away debit at competitors ‘XX, walked XQ large from XQ significantly, at the hit write our XQ we premium, still believe we is risks. did comp versus XX.X% some profit

disciplined this underwriting committed rate to part during discussed, the previously be cycle. to continue maintaining and we of As

our ‘XX workers’ business compensation of with commercial premium a ‘XX, new part New improve comp commercial driving new increased volumes, by ‘XX. business improvement, quarter and consecutive workers’ the business is the This and XX.X% increase new is for package written total versus QX in driven new written business to combined workers’ premium being business. up continuing this XQ it in increase sale, we in premium, increase overall our was XQ how general compensation in as second integrate the

volume in the ratio the important Connect XQ & the of LAE worker’s and which Farm Ranch significant is comp not comp Farm by & in half likely loss & Ranch are planning launch up of Connect in XQ XQ Ranch X.X% written Lines another in happen workers’ the in building ‘XX XQ now ‘XX for the but at accomplishment XQ State Commercial & Farm launch see lower is XX.X%, premium XQ important Auto. stabilizing until growth X.X an but We better for expecting been in ‘XX. team. Ranch, points versus premium compensation launched will this We ‘XX. than XXXX, in ‘XX. workers’ a is step to ‘XX in statutory XX% ‘XX, XQ second is the Farm was had future was

on to Connect thrilled over Connect me last years business is growth. be of from are the producing sweat ratio another Lines and couple that ahead to of with I’m into incredibly combined this continue team. occurred from our couple Commercial A starting set commercial XX.X% our team our quarter’s straight both went the years. early their wanted and the that the of of new team our in of the to the quarter of XX.X% see and business results last work work lot records fourth best ratio in for fruits let proud middle-market new days impact I small the commercial of the We you labor, expense us. still know quarter. The the success they But business, believe we equity of saw quarter of

for questions. the With line open that, we will

from of Greenberg. your [Operator the comes line question Instructions] Larry first And

and morning you. thank Good

of But tenure is next that an impact. the both just a auto year. we generally, in maybe having little color this I about is auto it perception lower detail underlying months? a given, profitability So lines? appears XX but you an And how that thinking know bit standpoint both lines in lot that profitability have more personal, be should from was are deteriorating experiencing an And appropriate on just lost the

So fault, I’ll observation, it I is is some our start think truth probably to Lines. your with of too. some there own And but Commercial

we are – needed legacy take about on really X the when X have to XX-ish. around points on taken think book, rate to year, this we track I to take Larry, of we

have adequate sort in our need they And so with get that rate to we make that sure commercial of the underwriters message reinforced they auto.

aware are, combination And kind we And XX-year up want sort we marketplace. of need so And in on sort part, – in that with you reduction are should the business accomplish. to might think the deterioration of you’re is rate penalty managing sort and new rate biggest you that average I need auto sort at that to keeping of of of of is be commercial we probably us the aware the trends when of we the growing have. of that whatever

The book, to is, to me, next a I smaller Connect it’s not while piece our or changes. is at to don’t couple dial set of least needed second of much rate think we – that segments the a found piece unexpected in of with

people, launch need house. we as on Pretty of So that up and the states in that to with Connect the insurance keep making are confident overall the next week. will the how side last also of hard the address were overstate excited XX those sure we it’s to version model rate we

some that. and the retention very profitability actions really we started on are certainly needs a the there. our from now. look Larry, quite really we we actually our behind the book. that don’t When come this the mid to legacy aggressive are some bit just see but point, reduce for It get at the we of waiting book. needs Connect increase. pressure And in Connect, Lines to anticipate continuing not profitable seeing retention XXs the At back; has any to up to are to it’s we Personal seeing book, low rate great challenges that side, on tenure, on stable, But us are a I

system also really is We portfolio underwriting are including quarter get there taking that actions first we seen our a management challenges. ongoing on some we’ve execution. enhancements activity by actions management loss of areas year, latest the focus ratio few end of at improve in this some underwriting And the kind that will rather that agency

mainly. personal, absolutely comments but of everything And build Mike. us, talked I is have we A quick a is Yes. before an on Larry, excuse, about product. me this this couple and not from brand-new on it’s

like you so and new you didn’t anything that product, do again, old one. it And as look a the launch

in at work in high You of mentioned as getting commentary severity. tiers vendor a ongoing about through that the of, issues. some and we challenges. was of right, caused It BI go additional as But the the we all face through the fairly this of model exacerbated did I series that a time, a fixing of that, course, of level my through

to interpret this high to probably easiest up mean is first I of always guys low-severity by is is And I if lines you this again, model-driven. it all, majority of mean that But the vast all to that So of is all and frequency, the stuff. not it’s what auto fix. it’s line it

reasonably business believe well And so retention better I expect, the of mix but Connect Connect some putting the better The as pressure is of is of performing that on of business, legacy loss is actually process the this new business would business. ratio. we retention the a just

doing now. the maybe But where right things. about of at act appreciate got the do to we’re question. bit think, right I urgency. So we’re directionally, more We’ve with kind But a good I feel I actually little

you. Thank

KBW. question comes Slicer next of the from Your Freddie line with

sort I your ratio. states are severity and there if just he of core loss I wondering loss in are is that frequency is currently seeing and the on right terms was trend assumption what commercial wanted with any and just start underperforming of what to trends cost specific now? auto

stand the, our what other regions. our southern out, particular region than we more regionally of would So call, probably states probably say, needs I no rate sort

to working sure that, there with that underwriters make happens. we’re the So

combined loss I or trend perspective frequency, of think sort severity the a cost from trends.

I think in we around are pricing XX%.

So would we think, Natalie general, and But pretty do need frequency give may between have again, this in think pretty, that. to I clean we up And more that is I and specifics. it’s split evenly severity. say, to

think your the I of but if auto quarter? this what increases in and enterprise some much total rate the, up X% business under-priced sure then business are And the make seeing take missed I’m of needed additional Connect now currently? rate not commercial How on then premiums you platform. did And on also it, does I you mentioned Okay. you

took we needed that. top on quarter X – and another X of on think So, of X between points I we and rate this

we XX% for. what needed So were between is XX% probably we and aiming

segments the the sort think, So under-priced I was of that Connect, on On businesses and... difference there. think newer were I

vast The legacy. majority on of our book on is Connect,

Yes.

of about need loss point of our is and book rate that the is on Connect Connect – was XX% ratio. impact the or XX% X legacy So of our the book,

commercial were Okay. year-over-year. XX% with premiums just And auto, then sticking up

should how this level So of growth? loss that sort the rate deterioration? as growth run-rate the ratio a next core of thinking of despite be few of quarters exposure was over much we And versus

Yes.

been commercial of growth. XX%, mean, the we have single-digits auto, it comfortable the rate of with. I taking of and growth was plans high we it’s most I if the to So trajectory have unit rest are probably is you we growth, unit believe are get on, that

And so go for a I think little that bit. will sort on of to continue

– lastly ahead. sorry, go just And Okay.

Yes.

you if those think side. see think think rate our of I you’ll around of about I the auto, activity most on commercial most

think end approvals. There rollout most first the XX of So, should risks we year, get of we model I states. states one reinforcing on new by as that said, a other the stragglers state based the the to I need for be the the on rate and larger get then rolled couple to underwriters the that just out of need of we we will

the the we just as comfortable it model was new Connect. the about it states, XX And out latest And the rate regarding was most on remember in need talk to are legacy with when book, launched growth that the Kim on and business is coming rate rest. you Connect our need, will on mentioned, roll we rate of

business new modeling confidence on not on much lot in risk-based the So, built. coming been the rate to per model-driven. of there, rate only the but that’s have the Connect And we is more a

daringly necessarily much. base add not reminds always does me, small XX% a on Mike as And

Great.

on just like segments you good in which drive most do you then most expect thinking And the expense Okay. do which the and about Commercial the But products progress. to expect – we further are ratios Lines expense improvement? how of ‘XX? In seems be XXXX it modeling products should making ratio, commercial of

I think in you think, as I ways. think about X So them think you can which about products,

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you put I that premiums number I targeted Personal great. of how increases budgets, wondering taking Jason, and on Okay, rate in are then Thank personal rate order Lines, mentioned you the you switching impacting? it think much is could a heard to your you. if just And increases

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be of that might more there So that. book rate the would than significantly get increase areas

Right.

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just quarter-over-quarter. then it on a bit And year-over-year and down Great. income, quite was lastly, investment

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structural real terms to anything or portfolio like of changes the that. no duration So in

answers. the Thank you Alright, great. for

Freddie. you, Thank

the question Newsome of comes next from of line Paul Your Sandler O’Neill.

the understand Good couple am Great. of on ratio first I I someone through opposed issue usually learn lessons. But Personal was that business colleague tenure. But expense that if premium accounting written asking the for my more to have questions, a First, expense other then as KBW on and the thinking stuff I thank the and business. there guys of line? morning is there’s that’s the I And I understand auto Lines, question tenure correctly? needs the underneath side issue on I my would is to Or the side. the an XXX affecting the see, new with only more to accounting have want the penalty a come the points. a side tenure’s not to of expected just loss And the that

Paul, is Well. Steve. this

versus terms In year the in the commission the think in first rate. primarily impact would expense of tenure be commissions renewal side, on I

all Connect year commission to business, it is the higher when first year renewals. was X rate than new are So right, if you

expense only the I is penalty X the has that’s and points one ratio very more it’s new can you time types of come of marches lower ratio regards down on in a as business mean of a commission, than on personal although will to course, of rate, that of, therefore, other But get and that I more and terms similar from the on that thing, seasoning. effect in auto that work business. your of on commission the percentage think of renewal a side, side, seasoning So you expense in see book loss the at

business I I’ll that’s as optimistic So new facility. a But think little to react that well. on others let

Yes.

I as little the modeling. is higher. be our was really to want improvement in The you clear. a Again, I at the way bit look think ongoing product new and penalty the at the business you look built reason,

rate we number the penalty so of we are Telematics risk business. two, can new Our better match from Number reduce be our business we’re or to one, that telematics. to approximately expectation new now XX% that: going offering that is able is the job.

it’s of more because taking payment. for we that a anticipate of different type new of business risk penalty and do that actually people type the same getting of a not it. are that We’re different Telematics, on type the business

around bit business – one, as continue think a business continue because made penalty to continue as important about kind as we is penalty versus for modeling that new improve this this, points. and mean have the is modeling to So trickier. to grow about to very of going get going process. some as that’s number said, the little we think and you the is Steve to you hard But the I you typically traditionally it be guys that really to is than number model points for to will, of new we through X business, new you one, we legacy go the the to business of closer any I may Connect assumptions amount XX XX

increase technology that months mistakes retention XX our consistent in an or tweaked our believe have our expectation that billing the will mix we segmentation, been we’ve couple be seeing the do. done because going legacy as in last are We’ve to new the been will retention excluding our that of some improve through in problems positive to it’s right very we at risk fixed our getting Secondly, self-imposed not so. and increase we continue of issues. see of some legacy some of the – over to to type is Georgia, our Those retention, of And thing and business improved business decided retention is business, expect a to obviously, where and come and issues, then the third, things will we next we renew months. that the speak the model as knowingly which we retention also a

that’s about quarter, – we when fourth of quarter. all things So, I third are to together that had talk in why the focus those you the continuing in

we change why terms right see and year both be will next we all pieces growth fairly importantly and you that the around is quickly. together those direction of in profitability, auto are efficiency in are this We bringing will more and that trending personal the our believe are component optimistic our we

it. appreciate I you. Thank

no you, call questions. any [Operator I’ll closing Instructions] There turn are over the for Natalie, back to further remarks.

XX, our earnings for State fourth Financial look Thanks wonderful scheduled to everyone you for Auto in speaking quarter your and Thank currently Thursday, interest participating with and is forward We questions a which for call have again for continued our XXXX. on of you support and February conference in call, your day. Corporation.

third today’s earnings Thank conference XXXX you concludes That you. for Thank call. quarter participating.

disconnect at You may time. this