Donegal Group Inc (DGICB) 2017 Q4 法說會逐字稿

Good morning, my name is Tanya, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donegal Group, Inc's. Q4 2017 Earnings Conference Call. (Operator Instructions) Thank you. Mr. Kevin Miller, Chief Financial Officer, you may begin your conference.

Thank you very much. This is Jeff Miller, Chief Financial Officer. Good morning, everyone, and welcome to the Donegal Group conference call for the fourth quarter and year ended December 31, 2017. This morning we issued a news release outlining our quarterly and full year results. For a copy of that release, please visit the Investor Relations section of our website at donegalgroup.com. I will begin today's call with commentary on our financial results. Kevin Burke, President and Chief Executive Officer, will then provide his comments on the quarter and discuss our current business developments and initiatives. After our prepared comments, we will open the line for any questions you may have. Before we get started, you should be aware that certain statements made in our news release and in this conference call are forward-looking in nature and involve a number of risks and uncertainties. Please refer to our news release for more information about forward-looking statements. Further information on risk factors that could cause actual results to differ materially from those projected in the forward-looking statements is available in the 2016 report on Form 10-K that we submitted to the SEC. You can access our Form 10-K through the Investors section of our website under the SEC Filings link. We plan to file our 2017 Form 10-K on or around March 9. We provided a reconciliation of non-GAAP information, as required by SEC Regulation G, in the news release we issued this morning.

With that, let's move to a discussion of our quarterly operating results. While our results reflected a number of challenges that we experienced throughout the fourth quarter of 2017, we did see a number of positive trends that we believe will improve our operating performance going forward. There were a lot of moving parts during the quarter and I will attempt to clarify the impact as we go along. Our fourth quarter was highlighted by strong organic growth across our regional markets as evidenced by higher premiums for the period in both our commercial and personal lines business segments. Net premiums earned of $181.1 million for the fourth quarter of 2017 increased 7.2% compared to the fourth quarter 2016. Net premiums written of $171.4 million for the fourth quarter 2017 increased 5.9% compared to the fourth quarter 2016. We expect our 2018 growth to shift towards more profitable lines of business as a result of a number of measures that we are continuing to implement. Kevin will provide more details about those measures in a few minutes.

Turning to the impact of the Tax Cuts and Jobs Act that was enacted in December 2017, we reported additional income tax expense for the fourth quarter of 2017 of $4.8 million or $0.17 per diluted Class A share. This impact represented the effect of applying the reduced 2018 corporate income tax rate to our net deferred tax assets. Beginning in 2018, we expect the tax law changes to be beneficial reducing our effective tax rate and income tax expense.

Net income excluding the tax impact was $2 million or $0.07 per diluted Class A share for the fourth quarter 2017, compared to $5.6 million or $0.21 per diluted Class A share for the fourth quarter 2016. Our combined ratio was 104.8% for the fourth quarter 2017 compared to 100.5% for the prior year quarter. The increase related primarily to an increase in our loss ratio to 72% compared to 67.1% for the fourth quarter 2016. I'll provide some additional details with respect to our loss -- our fourth quarter loss experience. Weather-related losses totaled approximately $5.4 million or 3 percentage points of our loss ratio, decreasing from the $7.4 million of weather-related losses or 4.3 percentage points of our loss ratio for the fourth quarter of 2016. Weather-related losses were generally in line with our 5-year average for the fourth quarter. Large fire losses, which we define as individual fire losses exceeding $50,000, were $7.7 million or 4.3 percentage points of our loss ratio for the fourth quarter 2017 compared to $7.4 million or 4.4 percentage points for the fourth quarter 2016.

In total, net development of reserves for losses incurred in prior accident years did not have a material impact on our loss ratios for the fourth quarters and full years of either 2017 or 2016. However, favorable development of workers' compensation loss reserves largely offset unfavorable development of commercial multi-peril, personal auto, and commercial auto loss reserves. So the impact of weather, fires and reserve development was fairly consistent with our experience to the prior year quarter. The increase in our loss ratio is primarily related to higher frequency and severity in casualty losses. You may recall from prior calls that we had an unusually low loss severity in our workers' compensation line of business for the first 9 months of 2017. In the fourth quarter, workers' compensation losses exceeding $50,000 spiked to $10.5 million far in excess of any quarter during last 2 years. We attribute the increase to timing variations and the occurrence of large loss activity. Favorable prior year loss reserve development partially offset the severity increase netting to 80.7% fourth quarter 2017 workers' compensation combined ratio. And for the full year, we achieved an excellent 79% combined ratio in that line.

Similar to our experience in the fourth quarters of the past several years, we noted a significant impact from seasonality in the frequency and severity of personal auto and commercial auto losses. We primarily attribute this seasonality to increased driving activity around the holidays and the outset of winter weather conditions in several of our regions during the fourth quarter. Our loss ratios in both of these lines also reflected prior year reserve development and additional IBNR reserves to mitigate the adverse development trends we've experienced in recent years. During the full year 2017, we increased our bulk IBNR reserves by 15%. That compares to an increase of 11% during 2016. The 2017 reserve increases were heavily concentrated in commercial multi-peril, personal auto and commercial auto, which were the lines where we experienced adverse reserve development in 2017. We expect our actions to strengthen reserves in these lines during the year, will improve our loss experience in 2018.

Our expense ratio was 31.9% for the fourth quarter 2017 compared to 32.4% for the fourth quarter 2016, with the decrease attributable to lower underwriting-based incentive cost.

Turning briefly to the balance sheet and investment portfolio. Donegal Group continues to operate from a position of financial strength adhering to a relatively conservative investment strategy intended to limit the impact of market volatility on our investment income and portfolio value.

Our fourth quarter 2017 net investment income was relatively consistent with the fourth quarter 2016. Net realized investment gains were $1.5 million for the fourth quarter 2017 compared to $321,000 for the fourth quarter 2016.

Our total investments exceed $1 billion with 90% invested in high-quality fixed security investments. At December 31, 2017, our book value per share was $15.95, compared to $16.21 at December 31, 2016. The decrease was primarily attributable to the impact of the December 2017 tax law change, which reduced our book value per share by $0.17. We expect to recoup that impact quickly through reduced income tax expense beginning in 2018.

At this point, I'll turn the call over to Kevin for his comments on our quarterly results and business development Kevin?

Thank you, Jeff. During 2017 we made progress on a number of our core objectives while dealing with a difficult set of challenges, many of which apply to our industry as a whole. The long-term goal of Donegal Group has always been to outperform the property and casualty insurance industry in terms of service, profitability and book value growth. We are working diligently towards that goal. Our thanks goes out to our independent agents and employees for helping Donegal to respond to these challenges, including the many losses our policyholders experienced due to number of severe weather events throughout our regions in 2017. While the weather-related claims prevented us from achieving our profit objectives, we expect the fulfillment of our promise to our policyholders to be there when it matters most, to generate benefits for us in the future. Unlike the first half of 2017, weather-related losses were fairly low during the fourth quarter of 2017. So I'll begin with a few comments on the increase in casualty losses.

Jeff covered the spike in workers' compensation losses, and mentioned that throughout the quarter we continue to experience elevated loss activity within our personal and commercial automobile lines of business. The underlying causes or issues that our entire industry have been confronted with over the past several years. Factors such as higher cost of vehicle repairs, increased accident activity due to distracted driving, and driving activity related to positive economic growth have all cited -- been reasons for the sharp increase in loss cost over the multi-year period. All of those factors have so far more than offset improvements in vehicle safety and expanding implementation of accident avoidance technologies. Our number one priority is to take every available action to address our automobile challenges and bring our loss ratios down to acceptable levels. The first step in that process is restoring rate adequacy. We have historically taken a measured approach in rate increases, seeking to provide a stable market for our agents and policyholders. However, we have become increasingly aware that our rate increases over the past several years have not been sufficient to keep pace with loss cost increases as a result of the factors I mentioned earlier.

Further, our auto new business growth rates in several regions far exceeded our targeted goals for 2017, and clearly indicate to us that our rates are too competitive in some of those markets. We are using every tool available to us to improve our auto profitability. We are aggressively implementing rate increases and have expanded our utilization of predictive analytical tools in all of our auto lines in all of the states in which we conduct business. A fresh round of commercial auto rate increases will begin to take effect in the second quarter of 2018. Rate increases for personal auto are subject to regulatory approval, and while we are being more aggressive in the rate increases we have filed within the past several months with a number of filed increases well into the double-digit percentages, it will take some time before those actions will begin to positively impact our loss ratios. We have been implementing changes in our underwriting guidelines and taking a more definitive marketing actions to slow growth in lines that are not achieving our profitability targets and ultimately to enhance our overall profitability.

An example is we have placed a moratorium on writing of new personal lines policies in certain Midwestern states where that business has generated consistent underwriting losses for us, and many of our peers. This underperformance is largely due to the pervasive need for more rate in light of the propensity for extreme weather in those states. We will keep the new business moratorium in place while we file additional rate increases and evaluate whether those markets present a viable opportunity for us to write personal lines business profitably in the future. In spite of the challenges we face in our automobile lines and the impact of unusually frequent and severe weather events, we achieved net income for the full year of 2017 of $11.9 million, excluding the onetime impact of the December tax law change. We are pleased with the performance and the potential of our commercial lines business. For the full year of 2017, our commercial lines combined ratio was in 93.6%. Our workers' compensation results were excellent despite a handful of large losses in the fourth quarter. Commercial multi-peril also performed to expectations when normalized for the unusual weather impact earlier in the year. And we are continuing to see opportunities to obtain modest renewal premium increases, although there is increased competition for quality commercial accounts. And a number of our competitors are aggressively pursuing workers' compensation business.

Our renewal premium increases during the fourth quarter generally range in the 3% to 6%, which is consistent with the past several quarters. Throughout 2017 our commercial policy retention held firmly in the mid-80% range, and we believe we are in excellent position within the marketplace to continue to profitably grow our commercial lines.

Before we open it up for questions, let me conclude by reporting that we have begun to conduct our annual agency sales meetings that will continue over the next several months. And based on feedback from those meetings, we see clear opportunities to achieve commercial market share gains, as we continue to strive to shift the mix of our overall business more towards commercial lines. We have a very solid management team within the home office and our field operations and they are fully engaged and ready to do the hard work necessary to achieve our business goals. With that, we'll ask the operator to open the line for any questions that you may have. Thank you.

(Operator Instructions) Your first question comes from the line of Christopher Campbell from KBW.

I guess my first question is just kind of on the underwriting results. So clearly personal and commercial auto aren't going in the -- at least in 2017 aren't going in the right direction but you are going to take some rate increases in '18. And then homeowners and CMP, it sounds like they're softening a little bit based on the underwriting we saw. And I know workers' comp remained strong. But how much longer are you thinking that the workers' compensation, like that strength, will be able to subsidize the deteriorating underwriting in the other lines?

Well, Chris, we wish we knew the answer to that. We have taken aggressive steps to make sure that we retain the workers' comp business that we have. As you've said, it's performed very positively. It's profitable. We've increased some commission pieces for the workers' comp because we understand what some of our competitors are doing. But you raised an excellent point, we're very much aware that the workers' comp business is only going to sustain that level of profitability for a period of time. And that is why we have taken such aggressive steps as it relates to private passenger auto and our commercial auto lines. We have tremendous focus on those 2 lines of business because we recognize at some point in time we're not going to be able to rely on the overall profitability of the workers' comp line. And when we see how aggressive other carriers are being with it. There is some erosion in terms of price. We recognize that that's an industry issue. Now the timeframe of that, Chris, I simply don't know. Is it going to last another year? Is it 2 years? For us it's not necessarily the time period. It is what we are doing with these core lines of business to ensure that we're in a position to sustain if workers' comp becomes less profitable at some point in the future.

Got it. That's really helpful. And then just digging in a little bit more on workers' comp. I know in the press release there was a couple of large losses. Are you seeing anything on the severity side that could be giving you concerns, like increasing settlement amounts? And then just in terms of your workers' comp loss trends, like, how do they compare with what you're seeing in pricing in terms and conditions? Because you did mention they were getting a little bit -- the terms and conditions were getting a little bit weaker.

Sure, this is Jeff. On the large losses in the fourth quarter, as an example the one loss related to a workplace violence event where a number of people were fatally injured and others were injured. So that was a very unusual loss. We did incur the annual aggregate deductible that applies on our workers' comp reinsurance. So the overall impact of that one loss was close to $2 million. There were few other more severe workers' comp claims that were presented to us in the fourth quarter. But nothing there indicated to us that there was some change in trends or any underwriting efficiencies. As we've said in the third quarter, we were surprised at how low the severity of losses was in workers' comp. And so it -- we really think of it as just more of a timing anomaly. And if you kind of look at the year as a whole, the experience has been very good. There are few states where pricing is certainly an issue where we have seen some runoff of our workers' comp business. Michigan would be a prime example of that where the market has become very competitive for workers' comp. And as Kevin said, we are not necessarily changing terms and conditions of our policy coverage issues there. It's more tweaking of the rates, the loss cost multipliers and doing some commission changes to try to make our products as attractive to the agents and it is price competitive as possible.

Great. Well, that additional color -- that was definitely helpful. And Jeff, just a few numbers ones. Could you impact the reserve movements by products in the quarter? Do you have those numbers available?

I do. As far as workers' comp, I think we had it in the release, so there was a $4 million benefit from reserve development. And that partially offset -- almost completely offset the CMP, which was $2.3 million; commercial auto, which is $1.6 million; and personal auto, which is $1.5 million.

Got it. Okay. And then just in terms of the tax rate, how should we be thinking about that going forward post tax reform?

Sure. Obviously, it really depends on our level of pretax income. But if you kind of normalize our results and let's say, just for example, we had a $40 million pretax income amount, after you account for tax-exempt interest, we would expect that our projected effective tax rate would drop in the 9% to 10% range. So we expect somewhere in the 9% to 10% reduction of our overall tax rate at that level of pretax income. So it would vary, obviously, if our income is higher or lower than that number.

Okay. And that's from the old statutory 35% or what would be your baseline?

Yes, from the 35% to the 21%, that would be the difference.

Okay. Got it. So 35% to 21%, you would be looking somewhere in that 25%, 26% range? Is that visibility?

Well, the effective tax at 35% statutory rate would have been somewhere in the 27%, 28% range. Under a 21%, tax rate we would be closer to 17% effective tax rate. And I'm not necessarily providing that as guidance. I'm just saying as an example that's the impact if we were able to produce a $40 million pretax income.

Okay. Great. And then just one more. Could we get an update on Mountain States? I think everything was supposed to move over. I think in the last call you had mentioned everything was supposed to -- new business and renewal business was supposed to move over on one-one. So just kind of thoughts on how that transition is progressing and any updated thoughts on when those could potentially be on the DGI pool?

Chris, this is Kevin. Yes, in fact, we did hit the January 1 date. So all new business and renewal business for New Mexico was effective and on the Donegal operating platform effective January 1. The additional states, as you know that there was some business in Texas, Utah and Colorado and the schedule for those, Chris, is on April 1. We will be writing the Texas business on the Donegal platform. June 1, would be Utah. And September 1, is Colorado. Those are still -- those are all on scheduled and we're making great progress. If you think about it, it was last May of 2017 when this was official and we merged them into Donegal Mutual. And of all the acquisitions and affiliations that we've had over the years, this was the one that was done very quickly. We took fairly aggressive steps to start to clean up the book of business. And so we are in a very good position as we sit here going into 2018. And we have just recently hired a couple of senior managers for that location as well. We have the Head of Marketing that actually just started 2 weeks ago. We have the Head of Claims Operations. And we have one of our Donegal home office commercial lines underwriting managers actually reallocating out to that location. So we have some reason for optimism that we're really infusing some talent. And we've got the platform now in place to hopefully continue to grow. We have taken very aggressive underwriting -- reunderwriting stance in Mountain States. We felt that it was necessary to make sure that for 2017, we did everything possible to sort of clean up the book and make sure that we're in good position going forward. And every claims file has also been reviewed. And so they've set reserves. And again, we've been very aggressive about it. So we're thinking 2018 is where we start to move forward with the organization. In terms of when we would start to include it in the pool, it would be something that would definitely not happen for 2018, probably not 2019. We would take a hard look at it at the end of this year. It is definitely an 18-month, 24-month time period where we would start to strongly consider that.

Okay. Yes, and just in terms of like the premium, so have you been taking underwriting actions, any like high-level thoughts on how much premium has from, I guess, from Mountain States statutory? Like how much premium has been lost? And have you seen any gains -- have you seen any underwriting improvement so far?

Well, we had approximately 30% of the overall direct premium has been nonrenewed. And so we've taken some aggressive steps. The January numbers actually looked pretty good where we are starting to win some quality accounts. They are Donegal type of accounts. And again we are doing this on an account-by-account basis. So we think that we're in pretty good shape going forward, but it was about 30%, Chris, from a direct written premium standpoint was nonrenewed.

Your next question comes from the line of Bob Farnam from Boenning and Scattergood.

I guess when you look at your overall book, personal plus commercial. Do you see that rate changes that you're getting in excess of loss cost trends? I understand it's not -- it's falling short in the auto side. But when you look at the overall book, how do you see -- I'm trying -- I guess, I'm trying to figure out how to model the kind of the core loss ratio going forward and you back off it all the catastrophes and development out?

Sure, Bob. This is Jeff, I'll take a shot and then Kevin can certainly chime in. We made the commentary about the auto where we are playing catch up somewhat there. On the other lines, I think, we expect that our loss ratios are keeping pace with the loss cost increases, especially in the other commercial lines. Workers' comp, of course, as we've already talked about is starting to soften and although we have some cushion in that line, that line has obviously subsidized or underperformance is another. So we would say that we expect to continue to be able to write workers' comp profitably. And as, I think, Kevin mentioned, that normalizing for weather and CMP, we haven't seen a significant increase in loss cost there and we are continuing to take renewal price increases. Homeowners is, I think, we are in good shape there. We believe that we're continuing to take some rate increases depending on the geography. Those areas where -- that have been hit harder by hail losses, we're taking a higher percentage increase. We're looking at some of the areas, some of the regions where we have gotten hit from a property loss perspective and tightening up on some underwriting criteria. So we think that, I mean, what we are doing will put us in good shape for 2018 and into 2019. On the auto side, this is going to take some time because until we can get those rate increases filed, make some other adjustments to our rating structure, et cetera, it takes a while for that to work its way through the earned premiums. But we have a clear path and we're hitting it hard.

Right. Okay. And the increased use of the predictive analytical tools, maybe you can provide more color into that as what you're expecting from these tools to be able to do for your underwriting?

Absolutely. One of the items that we very aggressively implemented third, fourth quarter of last year, Bob, was looking and applying our risk index scores. And we've got a model that we have used. The good news is that there is a lot of confidence in this model because we have seen the results of it as we piloted it and there is a lot of confidence in it. The challenge for us is we just simply can't seem to get it implemented quick enough. We're aggressively doing it. And so what's going to be happening is, and I'm going to give you an example as it relates particularly is private passenger auto. That entire book of business for all new private passenger auto business that's coming in is getting scored. And basically it's getting scored from 1 to 10. The scoring of it isn't necessarily the fact that it is bad business if you score in the 8, 9 or 10. It's really a pricing sensitivity tool. So it may not be a bad risk, but it's underpriced. And so what we have done is we've taken a very aggressive approach by region that all new business that's coming in and getting scored in the, let's say, in the 8s, 9s and 10s, that it is deferred into the underwriter and the underwriter then has to take a deeper dive and really look at the risk and apply appropriate rate. Now that's the most simplistic example that I have. On the commercial lines side all new business for commercial auto is being scored as well, as well as the current book of business. And by mid-April, we will have the entire commercial lines auto book scored. And again, what it's doing is it's really refining our ability to price this business. We have regulatory guidelines that we have to follow, as you know, by state and they vary. And we are pushing in terms of what we can do with those various scores of 9s and 10s. And I think the aggressive approach that we're taking with it will definitely start to yield some results. At our core, when you look at our core book of business, it performs relatively well. It's this remaining 12% or 13% of our private passenger auto book where we are winning accounts and -- but we're winning big. We're winning in terms of its underpriced business. And the fact that we've got this predictive analytics program in place and the fact that we are accurately scoring this business and then taking action on it, I feel as though that's going to definitely provide some benefits for us in the coming months and quarters.

Right. Do you see that -- do you see your retention ratio dropping a bit just because of the, kind of, the rate increase is going to some accounts that may not have realized that they were underpriced?

Yes, we are definitely seeing that especially as it relates to the 9s and 10s. We're seeing a significant drop in the policies that we are writing that are in those scores. And we're pushing a lot of those depending on the states, but most states we're pushing those higher-rated are higher scored business into our most highest priced tier, which we would -- it's almost like a nonstandard tier. When recording any new business it automatically goes into those tiers and we're not winning a lot of that business because of the higher price. So we believe that we're going to see some decline in our overall retention, which we view as a good thing because we want to make sure that we're doing everything to keep the business that is appropriately priced, but to do everything we can to shed business that is underpriced and to not write anymore of it especially in states where we've just had very poor loss experience.

And we have built that into our business plan for 2018 knowing that we would definitely have some retention pieces there. And we are hoping to augment that with the commercial business, which again we've been winning a lot of those accounts and we've had, overall, some very good results.

Right. And when you -- it sounds like the kind of the underwriting criterion that you're looking forward particularly in the Midwest as you reunderwrite that book or call some of those risks you see, is it meaningful enough to actually have a benefit to your kind of expected catastrophe losses or weather-related losses?

Yes, I think that that's an ancillary result of doing what we've done by putting that moratorium on all new business. As you could imagine, Bob, we sit back and we look at rate indications. We look at what our competitors are doing before we actually file any rates per state. And when we got to a particular number of Midwest states, Jeff and I and others realized that for the time being in order to really get to an area where we may achieve rate adequacy, we cannot add any additional policies to the book of business. We need to take aggressive rate, continue to monitor it. And those are the sorts of aggressive steps, I think, that we haven't necessarily done in the past. We absolutely think it's the right thing to do at this particular time as we sort of refine the overall book of business.

And, Bob, this is Jeff, just to add to that, your question is right on point because the one state that I'm thinking of in the Midwest we had significant cat losses that drove up the reinsurance costs for the other states in that Midwest region. We do have a separate reinsurance program for cat losses in that region. And our pricing went up in 2018 as a result of that activity. So it's not just the performance in that one state that's impacted, it's actually the cost of doing business in the other states. So that's really what drove our decision to really cut back.

All right. Okay. And how have the independent agents been taking this news that you're going to be raising rates more aggressively than you have maybe in the past?

Bob, they have heard it, I think, from every other carrier. We had -- we just had one of our agency sales meetings, one of the largest ones that we have yesterday, last evening, and I was there. And we talked in detail about what we need to do as an organization relating to private passenger auto. And there were many, many agents, we had over 100 agents at that meeting, that was sort of hearing me and nodding their head as we were going through the presentation. So they understand. It truly is an industrywide issue and it's not an excuse for us internally. We need to do some very aggressive things to get our private passenger auto and commercial auto back in line. And we're going to do that. But as an industry, I just looked at some results from 2016, I'll be curious as to what 2017 shows. But just on the private passenger auto, the average combined ratio was at 105.9%. I will be curious to see what 2007 (sic) [2017] as an industry shows up. And so the agents are not surprised by any of these actions.

Your next question comes from the line of Jamie Inglis from Philo Smith.

I'm trying to get some additional information on what we were just talking about. I mean, if you look at sort of Donegal's traditional approach and you talked about it 1 minute ago or before about certain measure, rate increases steady as you will and juxtapose against the growth rates which you've seen, which is too high. And I'm wondering what -- what's the genesis of all that, I mean, is it a few agents pushing business towards Donegal? Is it a few markets that are bumping up rate increases substantially, therefore, driving business towards Donegal? Or is it sort of general market position that you find yourselves to be in?

It's probably a couple of items and, Jeff, please feel free to chime in on that. We've got things like the comparative rater, which is a good example. Automation in our industry particularly in personal lines is a wonderful thing. But it could also harm you because the more automated you become and if you use a comparative rater and you have a particular product that is in this case underpriced that we do not have rate adequacy, what it does is it really creates a very quick way for an agent to place business with you based on rate right away. And sometimes that's very difficult to get a handle on. So the automation piece is -- in this particular example has not been helpful. It is where we find ourselves, one of your last comments was, is it where you find yourself in the marketplace? We have built a very, very solid agency base. A very loyal agency base. And they really do look to place business with us, whether it's commercial lines or personal lines. And when they see that we have in some cases very, very competitive rates, those agents are really motivated to send business our way. At one point, we were incentivizing agents on the personal lines side of the business. We do not do that in 2018. There are no incentives in terms of continuing to bolster that book of business until we take these corrective measures. So it's really a combination of a number of items. And that's why the marketing piece of this, it's not just taking rate. The marketing piece of this is that our field marketing representatives are working with the independent agents directly per agency to look at the number of policies that are coming in private passenger auto. Are they rounded accounts in terms of making sure they're matched with the homeowners policy? And if we have runaway growth in any particular agency that those marketing reps are handling that at the agency level. All those corrective measures that we have put in place, we're sure that they're going to provide some benefit towards this year.

The only thing I would add to that, Jamie, is that this is not a problem as pervasive throughout our book. There are pockets of either regions or particular products in certain areas where our loss experience is not good. That's not to say that there are -- we have a lot of very good performing personal lines accounts. And if we -- it's one of those 80/20 rules where 20% of the business that's providing 80% of the losses. It maybe not quite exactly that percentage, but the point is that there is the small percentage of our overall book that's really contributing to those losses. And so if we are able and successful to manage that 20% of the business or 15%, 20% that is underperforming, the remainder of the book is performing extremely well, is appropriately priced, and we're trying as we're taking these rate actions to make sure that we're protecting the portion of our book that is actually performing well and priced perfectly.

Okay. And there are no further questions at this time, I'll turn the call back over to the presenters.

Thank you. We thank, everyone, for joining the call today. We look forward to speaking to you again in April after the release of our first quarter results. Thank you, everyone.

Thank you.

This concludes today's conference call. You may now disconnect.