ProAssurance Corporation

Good morning, everyone. Welcome to ProAssurance's conference call to discuss the company's first quarter 2024 results. I would like to remind you that the call is being recorded and there will be a time for questions after the conclusion of prepared remarks. Now, I will turn the call over to Heather Wetzel.

Good morning, everyone. It's a pleasure to be here today. ProAssurance issued both its news release and report on Form 10-Q and first quarter results yesterday, May 6, 2024. Included in those documents were cautionary statements about the significant risks, uncertainties, and other factors that are out of the company's control and could affect ProAssurance's business and alter expected results. Please review those statements. This morning, our management team will discuss selected aspects of the results on this call, and investors should review the 10Q and news release for full and complete information. We expect to make statements on this call dealing with projections, estimates, and expectations. and explicitly identify these as forward-looking statements within the meaning of the U.S. federal securities laws and subject to applicable safe harbor protections. The content of this call is accurate only on May 7, 2024 and is an except as required by law or regulation. ProAssurance will not undertake and expressly disclaim any obligation to update or alter information disclosed as part of these forward-looking statements. We also expect to reference non-GAAP items during today's call. Company's recent news release provides a reconciliation of these non-GAAP numbers to their GAAP counterparts. On the call with me today are Ned Rand, president and CEO, and Dana Hendricks, chief financial officer. Also joining on the call today are executive leadership team members Rob Francis, Kevin Shook, and Karen Murphy. Now I'll turn the call over to Ned.

Thank you. And I'd like to start by welcoming everyone to our call and welcoming Heather to ProAssurance. We reported operating earnings in the first quarter of $0.08 per share, benefiting from a six-point improvement in the calendar year loss ratio and a 12% increase in investment income. We remain focused on driving underwriting improvement, which can be seen in the three-point improvement in our current accident year loss ratio. The markets we operate in continue to be challenging, and we remain cautious about both the risks we underwrite and loss-cost trends. We are focused on achieving pricing levels that help move us toward our long-term profitability goals and believe we are continuing to get rate beyond lost cost trends. We saw solid progress toward our objectives in the quarter with strong retention of existing insureds. We continue to forego new and non-renew existing business that does not meet our underwriting criteria. The lost environment in the medical professional liability market continues to be challenging in many jurisdictions. With the resumption in the fourth quarter of 2022, of the pressure on claims costs from social inflation and higher than anticipated severity trends. These had initially emerged in 2019 and 2020, but abated during the pandemic. We continue to monitor the impact that these trends could have on our open case reserves and prior year development, but are confident in the actions we're taking to address market conditions. Reinforcing the importance of our underwriting stance, We are continuing to see the impact of higher medical costs per claim in current workers' compensation claims trends, a trend we believe the broader workers' comp market must ultimately address. Despite continued moderation of claim frequency, the average medical cost per claim is still rising due to healthcare wage inflation, higher utilization, and rising costs as new treatments and technologies are applied to patient care. Confirming our view in a study published in December 2023, The Workers' Compensation Research Institute described the impact on payments per claim of vertically integrated providers, which represents an ever-growing share of the market. The study noted that workers treated by these providers received more medical care and saw more providers increasing payments per claim by more than 10% at 12 months of maturity without meaningfully changing outcomes. Since we close cases on average 40% faster than the industry, We can observe and respond to trends more quickly in our book of business. We're using the insights we've gained under, we've gained, we're gaining to underwrite accordingly. We're convinced the impact of higher medical utilization will be seen industry-wide in the coming quarters. The bottom line is that our long history in both medical professional liability and workers' compensation has taught us that these cyclical lines of insurance will respond to our focused efforts. We remain confident in our ability to ultimately achieve underwriting profitability in both businesses. However, as I said last quarter, the current market conditions are a headwind keeping us from achieving that goal as quickly as we would like. These conditions will likely require us to shrink our book in some markets while we wait for conditions to improve and we can turn our focus to growth. But we will not compromise to achieve a short-term fix at the expense of protecting our balance sheet and our insureds over the long term. We know that maintaining our discipline will be key to delivering the positive long-term results we believe we can achieve. I think you'll see signs of our progress in Dana's remarks as she takes a closer look at the segments.