Cna Financial Corp Q3 FY2022 Earnings Call

International gross written premiums increased by 4% and 12% when excluding currency fluctuations. Net written premiums rose by 1% or 8% without considering currency changes. The renewal premium change in the international sector was up 12%, with both rate and exposure increasing by 6%. Retention rates remained robust at 82%. We are very satisfied with our international operations as they are playing an increasingly important role in the overall success of the company. Now, I will hand it over to Scott.

Thank you, Dino, and good morning, everyone. As Dino mentioned, we are satisfied with our third quarter results, marked by a 95.8% combined ratio and strong underlying fundamentals, along with a 9% increase in gross written premiums excluding captives. Before we delve into the financial details, I will first address the Life & Group segment. Each year, in the third quarter, we conduct our annual reserve reviews for this segment, which include evaluating the assumptions behind our long-term care active life reserves, also known as gross premium valuation, as well as our long-term care and structured settlements claim reserves. I encourage you to refer to Slides 12 through 14 in our earnings presentation. Slide 12 presents crucial demographic data about our individual and group long-term care blocks. It’s worth noting that both blocks are closed, with no new individual policies issued since 2004 and no new group certificates since 2016. Consequently, the average age for the individual block is 81 years and 68 for the group block. Although the group block is younger, the benefits in that block are generally narrower than in the individual block, as shown in the table on Slide 12. As previously discussed, we have proactively managed risk in both blocks over the years while successfully implementing meaningful rate increases and taking a careful approach to our reserve assumptions for both active life and claim reserves. A clear outcome of our efforts is the 38% reduction in policy count since 2015, illustrated in the bottom left graph on Slide 12. While we continue to seek rate increases, we also provide benefit reduction options for our policyholders to mitigate the impact of these increases, ultimately reducing future claim costs. Starting with the GPV analysis displayed on Slide 13, we thoroughly reviewed all reserving assumptions, including economic factors, morbidity, persistency, and rate increase expectations. The key finding is that we did not encounter an unlocking event and we increased the margin on our GAAP-carried reserves from $72 million in 2021 to $125 million by the end of the third quarter. Our economic assumptions include discount rates and cost of care inflation. Our method for setting discount rates remains consistent, with the rate reflecting current long-term care investment portfolio yields and anticipated future yields. In determining future yield expectations, we adjust to a normative risk-free rate over a 10-year span following the forward curve for the first three years. Our normative assumption for the 10-year treasury rate is 2.75%, consistent with the previous year. Actions taken with our investment portfolio earlier this year, along with a higher forward curve, positively affected the reserve margin. We revised our cost of care inflation assumptions to reflect the current inflation environment, guided by the personal consumption expenditures inflation index, leading to an increase in near-term inflation expectations. We believe that current high inflation levels are temporary, and over the long run, inflation will return to its historical norms. This belief aligns with the Federal Reserve's objectives and actions and is supported by a roughly 2.5% 10-year breakeven inflation rate from the Federal Reserve Bank of St. Louis, suggesting the expected average inflation rate over the next decade. Overall, changes to our economic assumptions resulted in a margin deterioration of $130 million. I would describe our adjustments to morbidity and persistency as relatively neutral. In morbidity, we refined our claim frequency and severity assumptions related to utilization rates and the mix between home and facility care, leading to a $30 million margin decrease. On persistency, a small adjustment in healthy life mortality resulted in a $40 million margin improvement. Regarding future premium rate gains, our actual accomplishments over the past year surpassed last year's expectations, contributing $190 million to the favorable margin increase. As you recall, our prudent strategy includes approved rate increases, those filed but not yet approved, and those we plan to file soon as part of our ongoing rate increase program. Consequently, the average duration of expected future rate increase approvals in our reserves is less than two years. As seen on Slide 13, the cumulative result of these changes, including a slight margin deterioration of $17 million from operating expenses, led to a reserve margin of $125 million in our carried reserves while maintaining a prudent set of reserve assumptions. This outcome confirmed that there was no unlocking event, and we are confident in the adequacy of these reserves. In addition to the GPV, we completed our annual review of long-term care claims reserves regarding the sufficiency of our reserves for current claims. This review resulted in a $25 million pretax reduction in long-term care reserves, driven by a favorable $107 million impact from releasing remaining IBNR reserves set up during 2020 and 2021 in response to the COVID-19 pandemic, somewhat countered by an $82 million unfavorable impact from higher-than-expected claim severity, including utilization and cost of care inflation. Additionally, there was a $5 million pretax reduction in structured settlement claim reserves due to changes in discount rate assumptions. While discussing Life & Group, I want to briefly update you on the upcoming change in GAAP accounting methodology concerning long-duration targeted improvements, known as LDTI, which will apply to our long-term care business. We will adopt this change effective January 1, 2023, but it will be applied as of January 1, 2021. Thus, two years of adjusted financial results will be included in our 2023 financial statements. We estimate that adopting LDTI will result in a $2.3 billion decrease in stockholders' equity as of the transition date. Assuming the interest rates from September 30, 2022, were in effect on January 1, 2021, we anticipate an immaterial transition impact on stockholders' equity, as corporate single A rates were significantly higher on September 30, 2022, than on January 1, 2021. It’s crucial to note that under LDTI, there is still an obligation to review and, if needed, update cash flow assumptions at least annually, with any updates expected to alter the pattern of recognized earnings. Under the current accounting guidance, our third quarter 2022 gross premium valuation assessment indicated a pretax reserve margin of $125 million with no unlocking event. However, under the new guidance, adjustments in cash flow assumptions from our assessment would impact the company's operational results, except for discount rate changes which will be reported quarterly as accumulated other comprehensive income. As we have stated in previous calls, I want to reaffirm that this accounting change will not affect the underlying economics of CNA's business. Turning to Slide 14, our Life & Group segment recorded a core loss of $22 million in the third quarter, compared to a $41 million income in the same quarter last year. Limited partnership results for Q3 2022 were $54 million unfavorable compared to the prior year, adjusting for the favorable impact from the annual LTC claims review mentioned earlier. Regarding investments, total pretax net investment income for the third quarter was $422 million, down from $513 million in the same quarter last year. This decline was attributed to our limited partnership and common stock results, which experienced a loss of $44 million this quarter, compared to a $77 million gain the prior year. The losses stemmed from $36 million in private equity limited partnerships and $9 million in common stock portfolios, reflecting recent equity market trends. Our hedge fund portfolio remained stable for the quarter, while the prior year showed exceptional results from our private equity investments. It’s important to remember that private equity funds, which constitute 75% of our limited partnership portfolio, typically report with a three-month lag, meaning that this quarter's results primarily reflect Q2 2022 performance. Given the ongoing challenges in public equity markets over the last three quarters, we anticipate continued pressure on private equity valuations into the next quarter. Hedge funds comprise less than 25% of our limited partnership portfolio and generally provide real-time results. You can find further details regarding our limited partnership holdings and income by private equity and hedge fund strategies on Pages 10 through 14 of our financial supplement. Our fixed income portfolio continues to yield steady net investment income, which has been on an upward trend for several quarters. We benefit from a higher invested asset base due to robust P&C underwriting outcomes. Our average book value has risen by $1 billion compared to the prior year quarter. We are also pleased that the average effective income yield in our P&C portfolio was 3.8% in the third quarter, up from 3.7% in the second quarter and 3.6% in the first. The consolidated CNA portfolio yield reached 4.4% for the third quarter, compared to 4.3% for the previous two quarters, reflecting higher yields in the P&C segment, while the Life & Group portfolio yield remained nearly unchanged in the current quarter compared to the first two quarters. By the end of the third quarter, reinvestment rates were about 125 to 150 basis points above our P&C effective yield and have increased further in the fourth quarter. Current reinvestment rates for Life & Group are roughly on par with our effective yield due to the long-duration nature of this portfolio. Effective durations of fixed income invested assets supporting P&C liabilities and Life & Group liabilities were 4.8 years and 9.8 years, respectively, at quarter end. The increase in Life & Group duration from 8.9 to 9.8 years over the past two quarters reflects strategic measures taken to reduce reinvestment risk while extending duration by reinvesting into longer-dated, high-quality securities at yields exceeding our long-term expectations. Over the last two quarters, we acquired more than $2.7 billion of long-dated fixed income securities in the Life & Group portfolio, with an average yield of 4.9% and an average rating of A+. Meanwhile, the $2.6 billion in mostly tax-exempt securities sold during this period as part of our repositioning resulted in $26 million of pretax investment gains. Although higher rates are positively affecting our investment income outlook, they have negatively impacted our net unrealized investment position, which ended the quarter at a $4.1 billion loss, down from a $4.4 billion gain at the start of the year. The investment portfolio’s credit quality remains strong, with a weighted average rating of A and minimal credit impairments. Accordingly, we generally disregard interest rate-driven fluctuations in market values as we usually intend to hold our fixed income securities to maturity. Despite the decrease in our net unrealized position, our balance sheet remains robust. At the end of the quarter, stockholders' equity, including accumulated other comprehensive income, stood at $12.2 billion or $45.16 per share, marking a 5% increase from year-end after dividends. Stockholders' equity, including accumulated other comprehensive income—which reflects our investment portfolio moving further into a net unrealized loss during the quarter—was $8.1 billion or $29.88 per share. We continue to uphold a conservative capital structure with a leverage ratio of 19% excluding accumulated other comprehensive income, and our financial strength remains solid with ratings of A from A.M. Best and A+ from Fitch, both reaffirmed during the third quarter with stable outlooks. Lastly, we reported net investment losses of $85 million in the third quarter, contrasted with net investment gains of $19 million in the prior year. The current quarter figures include $41 million of after-tax net losses from our fixed maturity security portfolio, due to portfolio repositioning, as well as a $35 million noneconomic loss linked to the anticipated novation of a coinsurance agreement in our Life & Group segment. Operating cash flow was strong yet again this past quarter at $737 million, stemming from solid underwriting and investment cash flows. In addition to robust operating cash flows, we are maintaining liquidity in the form of cash and short-term investments, ensuring adequate liquidity to meet obligations and manage significant business variability. We are also happy to declare our regular quarterly dividend of $0.40 per share, payable on December 1 to shareholders of record on November 15. With that, I will turn it back to Dino.

Hello. We understand there were some technical difficulties for those who are joining via the webcast. So to make sure that you are all able to hear Dino's remarks, he will repeat his opening remarks now.

Thank you, Ralitza and good morning, all. Take two. So before beginning my remarks on our third quarter results, I'd like to take a moment to acknowledge the terrible impact of Hurricane Ian on so many lives and businesses. All of us at CNA are saddened by the devastation and our thoughts are with those that lost loved ones in the communities that suffered and are working to recover. Turning to results; despite the elevated industry catastrophes, including the effects of Ian and pressure on equity markets, CNA recorded impressive third quarter results. The P&C all-in combined ratio improved to 95.8% from 100% in the third quarter of last year and we achieved continued strong production performance, including 9% gross written premium ex-captives growth and 10% excluding currency fluctuations. Our core income declined by $24 million to $213 million. On a pretax basis in the quarter, limited partnerships and common equity returns were lower by $121 million year-over-year which was largely offset by an increase in the P&C underwriting gain of $85 million and an increase in income from fixed income portfolio of $28 million due to an increase in yield and a higher asset base. In the third quarter, the P&C all-in combined ratio of 95.8% is 4.2 points lower year-over-year, reflecting a stable underlying combined ratio, lower catastrophe losses and increased favorable prior period development. Pretax catastrophe losses were $114 million or 5.5 points of the combined ratio compared to $178 million or 9.2 points in the prior year period. Hurricane Ian pretax catastrophe losses were $87 million of the total. Our disciplined re-underwriting and portfolio management strategies that we have referenced over the last several years helped mitigate our losses from yet another elevated industry cat quarter. For P&C overall, prior period development was favorable 0.8 points compared to 0.3 points favorable in the third quarter of 2021. Our P&C underlying combined ratio of 91.1% continues to perform in line with record levels over the last six quarters. The underlying loss ratio of 59.9% was lower by 0.3 points compared to the prior year quarter and the expense ratio of 30.8% was in line with the third quarter of 2021 and the fifth consecutive quarter at or below 31%. In Life & Group, we conducted our annual gross premium valuation analysis. There was no unlocking of the assumptions and the GAAP margin on the active life reserves was strengthened by $53 million to $125 million. In addition, the annual claim reserve review resulted in favorable development of $30 million on a pretax basis. Scott went through the Life & Group reserve analysis just before. Drilling down on P&C production overall, net written premium growth was 8% and 9%, excluding currency fluctuation. New business grew by 12% this quarter and pricing as well as overall terms and conditions remain consistent with our renewals. Retention was 85% this quarter and is also 85% on a year-to-date basis which is three points greater than our nine-month results last year. The P&C renewal premium change in the third quarter was 8%, consistent with the second quarter, comprised of five points of rate increase and three points of exposure increase, of which half acting like rate. We are seeing stronger exposure premium from inflation-sensitive lines like work comp, property, and general liability. So we feel good about the renewal dynamics as we continued to cover our long run loss cost trends which remain stable at 6% in the third quarter. On an earned basis for P&C overall, rate in the quarter was 7% and earned rate is a little over 8% when we include the portion of exposure change that acts like rate. Now let me provide a little more detail on our three business units. The all-in combined ratio for Specialty was 88.7% in the third quarter which is now the ninth consecutive quarter below 90%. The underlying combined ratio was 90.4%, up 0.8 points compared to last year. The underlying loss ratio improved 0.7 points to a record low 58.4% as we have reflected some margin improvement. The expense ratio of 31.7% was higher by 1.1 points, largely due to higher underwriting expenses driven by investments in technology and talent. Gross written premium ex-captives and net written premium for Specialty each grew by 2% in the third quarter. Growth was lower this quarter due to less new business partially from fewer IPOs and M&A opportunities that impacted our D&O line and program growth, as well as a two-point moderation in price increases. We achieved rate increases of 5% and earned rate of 9% for the quarter. Within Specialty, rates were down in management liability lines where, in particular, cyber increases have come off of the almost triple-digit increases we experienced over the last year and now are more in the mid-double-digit range. At plus 6% written rate increase in the quarter, management liability is keeping pace with loss cost trends and earned rates continue to be well above. Specialty retention improved by 2 full points to 87%, the strongest level since 2019 and particularly benefited from higher retention in our health care segment as our underwriting actions over the last several years and cumulative rate increases have improved the performance of the portfolio. Turning to Commercial. The all-in combined ratio improved to 101.9% from 111.6% in the third quarter of last year with cats representing 10 points versus 18.6 points last year. The underlying combined ratio was a record 91.9% and 0.6 points lower than last year. The underlying loss ratio of 61.5% is consistent with the prior year quarter. The expense ratio improved by 0.5 points to 29.9%, which is our lowest level since 2008. Commercial gross written premiums ex-captives grew by 18% this quarter and the net written premium growth was 16%. In the quarter, Commercial renewal premium change was 8%, up 1 point from the second quarter which includes 4 points of exposure and 4 points of rate, about 0.5 points lower than the second quarter before rounding. This was primarily driven by work comp where rate was down 1 point from the second quarter but is still in the low single-digit negative range. In areas such as general liability and marine, rate was up slightly compared to the second quarter and national accounts property remained strong in the low double-digit range. Finally, earned rate in the quarter, inclusive of the portion of exposure change that acts like rate, is closer to 7%. Commercial retention was 84%, down from the second quarter but remains higher than the full year 2021 as the underwriters continue to effectively balance the rate retention dynamics in this favorable market environment. For International, the all-in combined ratio was 94.4% this quarter, a 1-point improvement over last year. The underlying combined ratio was 90.3%, the lowest on record, reflecting 0.7 points of improvement from the prior year quarter. The underlying loss ratio of 58.6% is lower by 0.3 points, reflecting some margin improvement. The expense ratio of 31.7% is down 0.4 points compared to last year. On a year-to-date basis, the underlying combined ratio of 90.7% is down 1.8 points compared to the prior year. International gross written premiums grew 4% and 12%, excluding currency fluctuation. Net written premiums grew 1% or 8%, excluding currency fluctuation. Renewal premium change in International was plus 12% with rate and exposure both up 6%. Retention was also strong at 82%. We are very pleased with our International operation as it increasingly contributes to the success of the overall company. So to recap, in the face of continued disruption in the equity markets and another quarter of elevated catastrophes for the industry, we are very pleased with our third quarter performance. We are confident that all the work we have done over the past several years has resulted in a high-performing core underlying portfolio. In addition, our disciplined cat management continues to meaningfully improve our all-in P&C performance which is evident in our third quarter results. Renewal premium change was stable at 8% as exposure growth continues to increase, benefiting from lines of business with inflation-sensitive rating basis. And we think we will see a new level of price hardening in the property lines based on early commentary from the reinsurers going into 2023. We believe these dynamics will allow us to continue to cover our loss cost trends, all else being equal, and to offer additional new business opportunities. Finally, as reflected in our third quarter results, we can already see the effect of the higher interest rate environment in our fixed income investment results and we expect this to be a meaningful tailwind for us going forward in 2023. And with that, we'll be happy to take your questions.

Just before addressing questions, I want to remind everyone that today's call may include forward-looking statements and references to non-GAAP financial measures. Any forward-looking statements carry risks and uncertainties that might lead to actual results differing significantly from what is discussed during this call. Information regarding those risks can be found in the earnings press release and in CNA's latest SEC filings. Additionally, these forward-looking statements are only applicable as of today, October 31, 2022. CNA does not commit to updating or revising any forward-looking statements made during this call. Concerning non-GAAP measures, reconciliations to the comparable GAAP measures and other relevant information are available in our earnings press release, financial supplement, and other SEC filings. This call is being recorded and will be available for replay on our website. If you are viewing a transcript of this call, please be aware that it may not have been reviewed for accuracy and could contain errors that might significantly alter the intent or meaning of the statements. Now, we are ready to take your questions.

The first question comes from Josh Shanker from Bank of America.

Well, I like the second time better, for what it’s worth.

Thank you, Josh. Greatly appreciate it.

Yes. Can you discuss your net catastrophe exposure compared to your gross catastrophe exposure in relation to the upcoming year of renewals? How might changes in reinsurance pricing impact you? You've been an effective catastrophe manager for several years. Is that due to your ability as a buyer of reinsurance or your effectiveness in managing risk at a gross level?

So I'd make a couple of observations, Josh. We're not going to go through the gross to net. I mean we got some benefit from our quota share relative to Hurricane Ian and so we benefited from some of that. But as we have highlighted in the past, we've also done a considerable amount of work on our cat management strategy. We started off, if you recall, with our syndicate Hardy that was principally a cat syndicate, both on primary and reinsurance. And whenever we would have large U.S. events, you would see a considerable contribution from the syndicate which you clearly did not see. We also, over the course of the last roughly 18 months, had exited from our property exposures on our aging services portfolio because that had a heavy coastal footprint and one that we just didn't think we could get the right returns on based on the terms and conditions that were out there. So honestly, I think it is a function of a lot of the discipline and we did get a little bit of benefit from our quota share treaty. Now our property treaties renew June 1. So we'll see how the 1/1s play out. But what I would say is that based on the discipline, I think it's fair to say that we and our reinsurers did well from a property standpoint and we expect that to be reflected in how they treat our renewal.

Okay. And then I'm not asking for a forecast for CNA in particular. But do you expect 1 year from today, given all the pressures in the market that ultimately, we're talking about a reacceleration of pricing from the current position we're in right now or that the rate of rate increases will hold somewhat steady?

I mean I can only go by what you're hearing also, Josh, right, from the reinsurers. And clearly, it would appear that we'll see some additional acceleration on the property lines. It's difficult to know how that affects the other lines. I guess I can intuit an argument that says they may take a much more broad-brush approach as they attempt to mitigate the fixed from the elevated cat activity over the last 5-plus years. But I don't know. We'll just have to wait and see how that plays out. But I think it's fair to assume you'll see an acceleration on the property side.

In terms of the company's positioning, there are both admitted and non-admitted papers along with regulations. For the Specialty book, I assume most of it operates in a non-admitted manner, allowing you to set prices that you deem effective right away. Is there any delay in implementing pricing through the commercial book to offset increased reinsurance costs?

So just to clarify, so some of our professional liability programs clearly are in the surplus lines. And we’ve also began to expand in E&S sort of from a more traditional property and casualty but still relatively modest volume. And I think like you’ve seen over the course of the hard market, we should be able to take advantage of what might be some additional acceleration in pricing through the course of the year.

The next question comes from the line of Gary Ransom from Dowling & Partners.

I wanted to ask about the investment income, the new money rate and how that is likely to progress. To assist us with our models, is there anything unusual about how the portfolio is rolling over? Is this a uniform roll, or is it more of a barbell? Is there anything we should consider regarding the 150 basis point increase that you mentioned?

Gary, it's Scott. Thanks for the question. So as I said in my remarks, on the P&C side, new money is about 125 to 150 basis points higher than book yield. It's actually higher now as we sit here today end of October and it's about flat with Life & Group. So I think the best thing I could point you to is really the average duration of our portfolio. The P&C is 4.8. Right now, Life & Group is considerably longer, in the high 9s right now. So that's going to be a much longer turn in that portfolio relative to the P&C. I don't really have anything to point you to as any particular lumpiness or barbell nature of our cash flows. I think that's probably the best guidance I could give you right now, is just looking at the durations.

You mentioned the increase in the expense ratio for Specialty, and I noted that you provided some details in your prepared remarks. Could you elaborate on the technology and talent you're adding in that area, or specify any particular sectors you are focusing on?

Sure, Gary. It's Scott again. I would say, as we've discussed for some time, we have been making significant investments in technology, which includes both overall infrastructure and specialized technology that improves our ability to underwrite profitable business, especially in the Specialty area. We're also making a major investment in analytics, allowing us to gather more detailed data to support our underwriting decisions. Additionally, we've been quite successful in attracting and retaining underwriting talent, which is definitely reflected in what you see in the Specialty expense ratio.

And that's why, Gary, just to add on Scott's point, we have said we are going to continue to make these investments. I think a fair estimate for the expense ratio is around 31%. Assuming we make the right investments, it should pay off for us in the future, similar to how it has driven down our expense ratio over the last several years.

All right. And then I do want to ask the bigger picture inflation question too and we've had this, call it, unexpected inflation for over a year. And it seems to be hitting different things at different times and I wanted to focus in on the medical trends that might have an impact on liability lines where there seems to be somewhat more of a lag and perhaps there's a risk that those costs might trend higher. And I know everyone thinks rate is ahead of loss trend but that might not be true in all cases. And I just wondered if there are areas or lines where you think there is a little bit greater risk that the loss cost trends might accelerate further.

When we examine the medical CPI, we see it's increasing. However, we should approach this cautiously. I mentioned previously that it doesn't serve as a reliable indicator for severity trends, particularly in comparison to compensation but for other areas. We need to focus on the subcomponents like physicians and hospital services, which are rising at a lower rate than the overall CPI. Also, when considering compensation in terms of fee schedules, reforms have reduced volatility, offering more predictability. This is something we'll keep monitoring closely. We have proactively managed various inflationary pressures before, both social and economic. If we see an escalation in components affecting our portfolio, we will take action. For now, the situation remains relatively manageable.

Yes. I am considering how the potential for an acceleration in property rates might also be influenced by other factors that could lead to a similar acceleration in casualty rates. I'm curious if you are contemplating that as well.

Social inflation is currently at about 6% for us, but it has doubled over the past three years. COVID has likely complicated the situation, and there may still be some unresolved issues. Thus, there's always a chance that it could rise further. This is a key factor in our cautious approach of maintaining margins above loss cost trends. So, our views may not be too different from yours.

The next question comes from the line of Meyer Shields from KBW.

Dino, this is, I guess, a follow-up on Josh’s question. I just want to understand sort of bottom line. What’s I’s appetite for expanding its exposure in catastrophe-exposed property if, as you expect and I expect, pricing improves fairly significantly?

Unfortunately, I didn't get that. So if one of you here...

Cat exposure is expanding, and if it could be repeated, it would just be a matter of doing so again.

Yes, can you repeat that? We're just trying to understand, and I apologize, Meyer.

I’m trying to understand the bottom line. If we see significant rate increases in catastrophe-exposed property, what is the company's plan for growing exposure there? Clearly, the conditions are favorable, but I believe there is potential to write a lot more.

I see, thank you, and I apologize for having you repeat that. You may remember that in the second quarter of 2021, I mentioned that property comprised about 20% of our portfolio, and we felt it was a good opportunity to increase it strategically when we also acquired our quota share treaty. Interestingly, the proportion is still around 20% today. This is largely due to our decision at that time to exit our entire aging services property exposure, which had significant coastal risks. Since the percentage remains roughly the same, we effectively made some strategic trades and replaced it with property that offered much better risk-return conditions. We intend to continue with these decisions, and we still believe, as we did in 2021, that there is room for us to grow the property portfolio given its size and contribution to the overall book.

Okay, fantastic. Also, a question for Scott. I'm just trying to put together the various pieces for rate filings in long-term care. So you've got higher interest rates and higher inflation. How does that impact regulatory responsiveness to file rate increases?

Thanks, Meyer. As I mentioned in my remarks, we addressed both our latest GPV and the trends we are observing, which will influence our rate indications as we submit filings to the insurance departments. I've noted that we've had considerable success with our filings and have exceeded our expectations over the past year. Generally, the regulators we've been working with have been receptive to the rate increases we've proposed, although there are some exceptions.

Okay. So the reason I’m asking is GPV doesn’t include sort of long-term expected rate increases and assumes that has been changed. So if I understand you correctly, you’re saying that just going forward, you’re not seeing any increasing friction?

I'm sorry, increasing what?

Friction.

No, not really. Not at all. And so just to remind you, our assumption is conservative. The weighted average duration of rate increases we've included is under 2 years. That's consistent with past years. So I would characterize that assumption as prudent and conservative.

We currently have no questions. There are no further questions. I will now hand you back to your host to conclude today's conference.

Great. Thank you very much and I appreciate all your patience in having to repeat the script twice. Thank you and we’ll talk to you next quarter.

Thank you for joining today's call. You may now disconnect your lines.