Robert Farnam: Are there geographic areas that you’re in that you see some progress in those regards?
Edward Rand: I would say that there are geographic areas that we think are more stable and predictable and there are those that are less stable and predictable. But I think that, that delineation is harder to see today than it was 10 years ago. 10 years ago, I think you could say here that 10 really bad jurisdictions. And if you were to kind of see where large verdicts were coming from, it was highly probable that they were coming from one of those 10 jurisdictions, and that’s not the case today. There’s — it’s a little more haphazard and a little more unpredictable. But there certainly are markets that we feel better about. We feel better about where our pricing is and better about the litigation environment and there are others that we are much more cautious about.
Operator: Our next question today is from the line of Mark Hughes of Truist Securities. Mark, please go ahead. Your line is open.
Mark Hughes: Yeah. Thank you. Good morning, Ned, do you think the mutuals — are they doing cash flow underwriting, just I think with their positions generally over capitalized, are they just taking advantage of the higher interest rates and maybe we need a little turn in the Fed in order for them to be less competitive. What do you think about that?
Edward Rand: Yes. I think it’s really investment income driven. As Rob mentioned, they can write to a higher combined ratio and still turn in underwriting or an operating profit and they’re very focused on that operating profit. I think a challenge though for them will come in that if you consistently under-price the market year-over-year-over-year, that gap to good pricing compounds every year, and so if you’re not keeping up with trends and if you’re running well below trends, when you finally have to get back to adequate pricing, the jump you have to make can be quite considerable. And I think that will present a challenge for them at some point. But for right now, yes, they are able to generate a lot of investment income to offset underwriting losses.
Mark Hughes: And then I’m sorry if I missed this in the earlier commentary, but when you think about the improvement in the current accident year loss ratio in the health care business. Can you kind of break apart what were the components of that improvement, price, terms and conditions, claims they experienced?
Edward Rand: Yes. I would say it’s — so when you’re looking at kind of earned premium in the quarter, you don’t have a lot of claims there — detail — you know the number of claims that you’ve received, but you don’t have a lot of detail around those claims. So this is more driven — it’s driven in part by that, right? So the experience we’re seeing in the first quarter, but it’s also driven by the pricing gains that we made when we wrote that business 12 months ago. And our belief is that pricing trend — that the pricing gains we’ve got are in excess of the severity trends that we’re seeing. And so we give ourselves credit for that and the loss pick that we’re making for the current year. We also take a look at the business that we’ve non-renewed and kind of the mix of business that we currently have when establishing that loss ratio.
Mark Hughes: Yes. And again, I apologize if you already touched on this, but the NCCI loss cost trajectory, still — it continues to be down and not abating. Are you seeing any kind of a sign that there might be some stabilization there just in terms of the industry loss experience or the NCCI’s analysis of their loss cost recommendations?
Edward Rand: And Kevin, you can jump in when I’m done. I would say that our focus right now is not so much on what NCCI thinks is what we think. And focusing how we drive rate as an individual account underwriter in a pretty challenging market where the whole market seems to want to drive price down. Again, as I said earlier, I think the frequency trends can’t continue forever and the severity trends are very, very real. And so I think there has to be a response. NCCI is backwards looking and often with the delay and that kind of backwards look, and then we think that perhaps is influencing where they sit. We think the tide does need to turn. Just can’t say when it will for the industry. So we’re going to control it on our own. Anything you’d add to that, Kevin?
Kevin Shook: No, I agree with everything you said. I will say that NCCI is acknowledging that industry leaders are extremely worried about medical inflation. And I think generally, people were surprised to see continued loss cost decreases. So I do think on the part of work comp company executives and working with NCCI, to try to build the medical more in instead of having it be largely frequency-based, is something that we want to look forward to in 2025.
Operator: Thank you. This will conclude our Q&A session for today, and I’d like to hand back at this time to Heather Wietzel.
Heather Wietzel: Thank you, everyone, who’s joined us today. Please feel free to reach out if you would like to talk further. We look forward to speaking with you again on next quarter’s conference call, at the least. So thank you. Have a great day.
Operator: This will conclude today’s conference call. Thank you all for joining. You may now disconnect your lines.
