PRA

• Ned's Comments: Welcomed everyone, highlighted fifth consecutive quarter of improved operating earnings, progress in medical professional liability business (part of Specialty P&C), ongoing core operations focus. Specialty P&C combined ratio 101% in Q4, full-year 104% with favorable development. Facing challenging legal environment but achieved rate levels in MPL outpacing severity trends, 20+ points improvement in accident year loss and LAE ratio since 2019. Forgoes renewal/new business not meeting rate adequacy. Renewal premium increases in Q4: 10% for standard MPL, 8% for specialty MPL.
• Dana's Comments: Excluded Lloyd's results from operating earnings as business in runoff; accelerated reporting of IBNR reserve from aviation risks for Syndicate 6131, reducing Q4 net income by $5.3M. Specialty P&C core ongoing operations combined ratio improved full year due to favorable development. Workers' compensation renewal rate change reflects rate adequacy focus, net written premiums up due to higher audit premiums, full-year combined ratio 114%, current net loss ratio 77% (4 points below 2023). Headcount declined 6% in 2024, but incentive-based compensation costs increased expense ratios. Investment results: net investment income up 9% Q4, 12% year, new purchase yields ~5.8% in Q4, fixed maturity portfolio high quality (93% investment-grade), investments in limited partnerships added $5M to Q4 earnings, full-year $22M. Book value per share rose to $23.49, adjusted book value per share to $26.86.

• Ned mentioned ongoing progress in operations and expects continued progress in coming quarters. Dana discussed capital management considerations, balancing operating subsidiary needs, maintaining capital efficiency, prioritizing A.M. Best rating, and considering capital allocation for investment portfolio diversification while keeping RBCs solidly stable.

Specialty P&C Segment

• Fourth quarter combined ratio: 101%, benefiting from almost nine points of favorable prior accident year reserve development. Full-year combined ratio improved sequentially by nearly five points to 104%, including almost six points of favorable development. Net written premiums declined due to disciplined pricing strategies. Core ongoing operations had a net loss ratio of 76.9% for the full year, with current accident year loss ratio for medical professional liability business improving by around a half point in full year but impacted in fourth quarter by loss severity trends in some jurisdictions. Renewal premium increases in fourth quarter: 10% for standard MPL business and 8% for specialty MPL book, cumulative renewal premium increases since 2018 in MPL line ~70%.

• Workers' Compensation Segment

• Net written premiums up $4M for the year (higher audit premiums), new business in traditional book ~$4M below last year. Combined ratio improved for quarter and year. Leveraging integrated policy, claims, risk management, and billing system implemented in early 2024, using AI tools and data analytics to enhance profitability, productivity, efficiency. Partnering with Clari Analytics for medical outcomes, case reserve estimation, and administrative burdens. Ramping up tools to optimize network and medical management partners, investing in proprietary underwriting tools for small account market.

• Social inflation and eroding tort reform leading to challenging legal environment, exacerbated by legal system abuse.
• Lloyd's business: Significant fourth-quarter increase in IBNR reserve from aviation risks for Syndicate 6131, impacting Q4 net income and Specialty P&C combined ratio.

Q: How would you characterize the competition in the fourth quarter and trajectory for 2025?

A: Ned said market continues to be awash with capital, excess capital causing aggression, profitability over growth is mantra, will look for growth opportunities but rate and underwriting appetite priority.

Q: What accident years did reserve development in Specialty come from?

A: Ned said spread out, some from more recent years like NorCal and some from 2020 and prior for legacy business.

Q: Early thoughts on current accident year loss pick in Specialty for 2025?

A: Ned said will continue to push rate as hard as possible in marketplace.

Q: Additional color on pushing rate in Workers' Comp business?

A: Ned said rating bureaus have sway in rates, loss cost indications from rating groups going down (led by claim frequency decline, but severity concerns), individual account underwriting to get adequate rates.

Q: Difference in frequency trend vs severity in Workers' Comp?

A: Ned said more on severity side, frequency declines in line with market, but severity concerns more prominent.

Q: Thoughts on capital management?

A: Dana said considering operating subsidiary needs, capital efficiency, A.M. Best rating, RBCs stability, balancing capital allocation with investment portfolio diversification, and considering repurchase in context of other capital uses.

Q: Update on RBC ratio and capital management target zone?

A: Ned said RBCs for insurance group are solidly stable but specific 2024 vs 2023 RBC ratio data not provided on call.