Good morning, all. I would like to welcome you to ProAssurance Q4 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, we will conduct the question and answer session. Thank you. I will now turn the conference over to your host, Jason Gingerich. Sir, please go ahead, Jason.

Thank you, Brica. Good morning, everyone. Welcome to ProAssurance's conference call to discuss the company's fourth quarter and year-end 2022 results. These results were reported in a news release issued on February 27, 2023, and in the company's annual report on Form 10-K, which was also filed on February 27, 2023. 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. Management expects to make statements on this call dealing with projections, estimates and expectations and explicitly identifies 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 February 28, 2023, and except as required by law or regulation, ProAssurance will not undertake and expressly disclaims any obligation to update or alter information disclosed as part of these forward-looking statements. The management team of ProAssurance also expects to reference non-GAAP items during today's call. The company's recent news release provides a reconciliation of these non-GAAP numbers to their GAAP counterparts. 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. This morning, we will discuss selected aspects of our results and remind investors that they should review our accompanying press release and filing on Form 10-K for full and complete information. On our call today, we have Ned Rand, President and CEO; Dana Hendricks, Chief Financial Officer; Mike Boguski, President of our Specialty Property and Casualty Lines; and Kevin Shook, President of our Workers' Compensation Insurance Operations. Ned?

Thank you, Jason. Good morning, everyone. Thanks for joining us today, and welcome to our fourth quarter and full year conference call. I continue to be optimistic about the future at ProAssurance. For the full year, we saw improvement in our operating ratio and our current accident year loss ratio, reflecting the steady efforts of the team members across our lines of business. Loss ratios are improving as we continue to see the results of reunderwriting in the health care line and prompt reaction to industry trends in the workers' compensation business. Our core markets continue to be competitive, offering us opportunities to differentiate ourselves from the competition by outstanding customer service in pursuit of our mission to protect others. The medical professional liability loss environment continues to be challenged in some jurisdictions as claim costs are pressured by social inflation and higher than anticipated severity trends. We do see below historical frequency in some parts of the country and we are carefully monitoring the impact that these trends have on our current loss trends and prior year development in the health care professional liability business. Our investment team did an admirable job in navigating the challenging markets last year as higher interest rates resulted in declining prices for core fixed income holdings and recession fears created volatility in broader markets as well. We've been adding to our cash and short-term position, which adjust quickly to the higher interest rates now available in fixed income markets. In addition, our floating rate holdings also benefit from the higher rates as they reset at higher coupon payments and increase our net investment income. As our core fixed income assets mature, they too benefit from higher returns, and we expect net investment income to be meaningfully higher in 2023 than in recent years. I'm now going to turn things over to Dana to provide insight into our high-level results as she shares the consolidated metrics for the company for the fourth quarter and the full year. Dana?

Thanks, Ned, and good morning, everyone. For the fourth quarter, we reported operating income of $3.5 million or $0.06 per diluted share. And for the full year, we reported operating income of $24.5 million or $0.45 per share. Consolidated gross premiums written grew $224 million during the quarter and with the addition of a full year of NORCAL's premiums grew to $1.1 billion for the year. Our core operating segments contributed $14 million and $55 million of new business in the quarter and the year, respectively. Strong retention and renewal pricing gains in the Specialty P&C segment helped to maintain premium levels in a competitive market environment. Excluding the impact of purchase accounting and transaction-related costs, our consolidated combined ratio increased about 6 points in the fourth quarter and about 1 point in the full year compared to the same periods in 2021. The higher combined ratio in the quarter primarily reflected lower prior accident year favorable development and a higher expense ratio, which I'll touch on shortly. Benefiting from higher investment income, our operating ratio improved by almost 1 point in the full year, also excluding the impact of purchase accounting and transaction-related costs. As mentioned on previous calls, our net loss and expense ratios for 2022 as compared to prior periods are impacted by offsetting amounts due to our change in process of allocating ULAE in our Specialty P&C segment. That change resulted in a decrease in our consolidated net loss ratio of about 3 points for the quarter and 2.5 points for the full year, with an equal and offsetting increase to our consolidated expense ratio. Excluding the change in ULAE and purchase accounting effects, our consolidated current accident year net loss ratio improved by almost 2 points in both the quarter and the full year. This improvement was driven by a reduction to some initial loss ratios in our standard physician business due to favorable frequency trends as well as favorable loss trends in our workers' compensation insurance and segregated portfolio sale reinsurance segments. This improvement was largely offset by our increase to initial loss ratios in some jurisdictions in our HCPL book due to higher-than-anticipated loss severity trends that emerged primarily during the current quarter. While we recognized net favorable prior accident year reserve development of $5 million and $37 million in the fourth quarter and full year, respectively, this level of favorable development was lower than the respective prior year periods, largely due to our response to the loss severity trends in our HCPL book in the quarter. Our consolidated expense ratio excluding the change in ULAE, purchase accounting impacts, transaction-related costs and one-time expenses increased about 2 points in the quarter and about half a point in the full year. The higher expense ratio in the quarter primarily reflected an increase in policy acquisition costs and lower earned premium in our Specialty P&C segment. Our consolidated net investment result was $28 million and $101 million for the fourth quarter and full year, respectively. We are currently reinvesting maturing bonds that yield approximately 225 basis points higher than the portfolio's average book yield, increasing investment income in future quarters. Our reported earnings from investments in LPs and LLCs declined in both the fourth quarter and full year as market valuations in 2022 have been lower than in 2021. Interest rate movements had a significant impact on the fair value of our fixed income holdings this year. Bond prices rallied during the fourth quarter, leading to after-tax unrealized holding gains of $26 million. Overall, we recognized $315 million of after-tax unrealized holding losses on our fixed income portfolio for the year. These unrealized gains and losses flow through our other comprehensive loss directly to equity. Along with dividends declared, these items account for substantially all of the decline in book value for the year. Since our investment approach holds the vast majority of these securities to maturity, we believe these changes in fair value to be temporary. As existing holdings moved closer to maturity with each passing quarter, the unrealized losses are naturally reduced over time. Additionally, each quarter that reinvestment rates remain at current levels provides continuing opportunity to increase the portfolio, book yield and future investment income. With that, I will hand the call back to Jason.

Thank you, Dana. Next, we would like to hear from Mike Boguski, some highlights of the progress made in the Specialty P&C segment. Go ahead, Mike.

Thank you, Jason. The Specialty P&C segment results for the quarter and the full year show notable top line premium growth, pricing increases, and enhancements in current accident year loss ratios, along with strong premium retention across the segment. After accounting for a 2.7 percentage point unfavorable effect from one-time expenses and purchase accounting adjustments due to the NORCAL acquisition, the full year combined ratio for 2022 was fairly steady compared to 2021. We are encouraged by the strategic advantages that the NORCAL acquisition has brought to our organization, including talent acquisition, premium growth, leveraged invested assets, operational expense synergies, and regional diversification. Gross written premium reached $173 million for the quarter and $807 million for the year, marking a top line growth of 23% for the year, primarily driven by the NORCAL acquisition. Premium retention for the segment was 85% this quarter and 84% for the year, both of which are improvements compared to the same time last year. The full year results were bolstered by an 88% retention rate in our standard physician business, with strong retention rates of 91% and 90% in our small business and medical technology units, respectively. Our specialty health care retention was 69% for the year, as we continue to maintain a disciplined underwriting strategy in that area. Renewal pricing increased by 7% for both the quarter and the full year. We were particularly pleased with a 9% price increase in the quarter and a 10% increase for the year in specialty health care. Furthermore, we are securing better terms, conditions, and product structures within the specialty business. Market conditions for this segment seem to be firming as we move into the fourth quarter and the beginning of 2023. New business for the segment amounted to $10 million for the quarter and $37 million for the year, reflecting competitive market circumstances. The accident year loss ratio for this segment was flat for the quarter and improved by 1.4 percentage points for the full year compared to 2021, excluding purchase accounting and changes in Unallocated Loss Adjustment Expenses. This improvement was driven by lower claim frequencies in our standard physician segment in specific areas, offset by unexpectedly high loss severity in a few states. We noted $3 million in net favorable prior accident year development for the quarter and $30 million for the year, compared to $13 million and $33 million for the same period in 2021. As Ned mentioned earlier, we are navigating a claims environment challenged by social inflation and severity trends. We encountered higher-than-expected severity in select states within our standard physician business, and to a lesser extent, our specialty business, which resulted in less favorable developments compared to the same quarter last year. The expense ratio for the quarter was 25.6% and 25% for the year. When excluding purchase accounting, various one-time items, and changes in ULAE, the expense ratio increased by 3.4 percentage points for the quarter, driven mainly by lower earned premiums from prior reunderwriting efforts and a higher volume of premiums subject to broker commissions. For the year, the expense ratio rose by 0.9 percentage points, reflecting an increased volume of business subject to broker commissions and higher technology-related costs. In summary, the segment showed robust top line growth along with enhanced premium retention and accident year loss ratios. We are satisfied with the progress made on the NORCAL integration. These accomplishments in 2022 position us well for the upcoming year, despite ongoing economic pressures and challenges of a competitive market. Regarding my decision to retire this year, I want to express my gratitude to all my colleagues at ProAssurance and our agency partners for their incredible support throughout my 37 years here. It has been a remarkable journey, and I deeply appreciate the valued relationships and everything we achieved together. I extend my sincere thanks to Ned Rand, ProAssurance's Board of Directors, and our executive leadership team for the opportunities to lead and serve over the past nine years. I am thankful for your confidence and support during my time. A special thanks also goes to Kevin Shook, our Eastern Senior Executives, and Team Members. Together for 22 years, we experienced the entrepreneurial journey of building a specialty workers' compensation and segregated portfolio sale business. Starting from what we called [indiscernible] back in 1997, we recently celebrated its 25th anniversary. We built not only a business but also families and community support together. It was truly a special journey, and I want to thank you all from the bottom of my heart. I also want to conclude with heartfelt appreciation to Rob Francis, our Senior Executives, Especially P&C, and all team members for their dedication and commitment to excellence over the past four years. Together, we faced challenges, built a strong future foundation, and successfully carried out the largest transaction in ProAssurance's history with the acquisition and integration of NORCAL. I am immensely proud of what we have achieved together and deeply grateful for your ongoing support and valued friendships. Jason, back to you.

Thank you for the summary, Mike. We all wish you the very best in your retirement. Kevin, what key points do you have to share with us from the workers' compensation insurance and the segregated portfolio cell reinsurance segments?

Thank you, Jason. The Workers' Compensation Insurance segment produced a combined ratio of 99.9% for the year ended December 31, 2022, including 100.2% for the fourth quarter. The combined ratio was lower year-over-year, reflecting an improved loss ratio in 2022, partially offset by higher underwriting expense ratio. The 2022 full year combined ratio, excluding intangible asset amortization and the corporate management fee was 96.8%. Gross written premium increased in the 2022 fourth quarter and full year by 4.5% and 2.7%, respectively. The increase in year-over-year gross premiums written reflects higher payroll audits and related premium adjustments, partially offset by the continuation of a very competitive workers' compensation marketplace. Audit premium increased $14 million year-over-year indicative of the payroll rebound after the lifting of pandemic restrictions in 2021. 2022 renewal rate decreases of 5% and lower new business and premium renewal retention of 83% reflected an improved loss environment and competitive pricing pressures. The decrease in the calendar year loss ratio both for the quarter and full year reflects a lower current accident year loss ratio and higher net favorable reserve development in 2022 compared to 2021. The current accident year loss ratio was 72% in 2022 compared to 74% in 2021. The higher 2021 accident year loss ratio reflected elevated claim activity as workers returned to employment with the easing of pandemic restrictions and the labor shortage, resulting in a reduction in skilled job training, alternative work arrangement risks and employee fatigue. Net favorable development was $8 million for all of 2022 compared to $7 million in 2021. During 2022, the claims operation closed 62% of all 2021 and prior claims, representing one of the best claim closing percentages in the last 10 years. Our expense ratio increased in 2022, largely due to higher general expenses from team member compensation and an increase in business-related travel with the full return to normal business activities and events this year. Moving briefly to segregated portfolio cell reinsurance. This segment reported a loss of $284,000 for the year ended 2022, which included underwriting income of $2.4 million that was more than offset by unrealized investment losses. I'll wrap up by thanking our workers' compensation team members, business and agency partners for everything we accomplished together in 2022. Our team members continue to demonstrate an unbending commitment to our core values and enthusiastically execute our service model. We are off to a solid start in 2023, focusing our strategies on profitable growth opportunities as well as marketplace challenges, including the continuation of price decreases, qualified labor shortage and economic and medical inflation. With that, I'll turn it back to you, Jason.

Thank you, Kevin. Ned, would you please close out the remarks with a discussion of the Lloyd's segment?

Thanks, Jason. The Lloyd's segment for the full year produced a small underwriting profit with a combined ratio of 99.7%. In total, the segment produced a small loss for the year. You will likely recall that we discussed the impact of Hurricane in last quarter, and the losses produced by that storm are included in the full year results for 2022. Our estimated share of the losses produced by the hurricane was just under $2 million. 2023 gives us reasons to be optimistic about the prospects for our organization. We look forward to seeing the results of the continued hard work to create scale and efficiencies across the company. The improvement in net investment income that we can achieve will be a key driver of results going forward. I want to take a moment and thank everyone at ProAssurance for what you do every day to support our customers and how each of you has responded to the challenges presented by the marketplace. I am grateful. I also want to thank Mike for all that he has done for ProAssurance over the last 9 years. Mike's leadership and passion will certainly be missed by all of us. And while I'm certain that we will stay in touch, I will miss his friendship, and we wish him well in his retirement. Thank you for your participation in today's call. And now the team and I will be happy to answer your questions.

We have the first question from Greg Peters from Raymond James. Your line is now open.

This is Sid on for Greg. Just curious if you could talk to your approach to case reserves and how or when you go about recognizing good or bad news in your reserves?

Yes, happy to talk on that. It's more on science. And our claims professionals will monitor and manage the claims that are in each of their portfolios and to make adjustments up or down as they determine the facts that come in, what they support. And the discovery on a medical professional liability claim, in particular, can be quite lengthy. So we will establish an initial reserve with the limited information that we have and then adjust that as the facts come in. I think what's really important in that process is that we're consistent in what we do and consistent over time. And that allows our actuaries to use the data and that consistent data that makes projections into the future. What we saw in the fourth quarter was our claims professionals reacting in a couple of jurisdictions to what we see as a heightened claim environment. And that's an ordinary course of business for us.

And then maybe if you could give us some more perspective on the change in open claims and how that's migrated over the last several years?

As far as the number of open claims, Sid? I don't know that we have that information in front of us today. I don't think the quantum of open claims has changed dramatically as we've stated. We have seen across a number of jurisdictions, a continued decline in claim frequency and as compared to 5 years ago, that means the inventory is down, but I don't have the specific details in front of me, I'm sorry.

Mark Hughes: I may have missed some of your earlier comments, but I'm curious about the current heightened claims environment. How does it compare to 2016 and 2017, when you had concerns? You were quick to identify the broader issue of social inflation, but a lot has changed since then, especially with COVID. Can you compare the current situation to that time? Are there specific areas or lines of business that show commonalities in what's happening now?

Yes. I think what we saw, Mark, is maybe it's not at this time around is that we saw pause through COVID in some of those trends that we were talking about back in '16, '17 and '18. COVID hit, the court system shutdown and there was kind of a pause. And as the court systems have reopened as the backlog of cases work their way through the legal system, I'd say we're seeing a continuation of those trends that we identified before that time and kind of that trend continuing, which is more than the prior year and the number of very large verdicts. And we saw that step up in '15 to '16, '16 to '17, '17 to '18, and what happened in '22, I don't have the exact numbers, but I'm confident top what happened in '18 and '19 as far as the quantum of those cases. What we are seeing, I think, is - I'm sorry, Mark, go ahead.

Well, I'll ask this question, but I would love to hear you extend your comments on that. But I was going to ask our competitors recognizing this, and therefore, it may be is being translated into an improved competitive dynamic or at least pricing that may give you some ability to keep up with loss cost trends?

Yes. All right. Let me kind of continue my answer and I'll come right back to that. What's driving some of this? It's always hard to tell. But I think just some of the tensions and hostilities that exist in our underlying communities add to the way juries are reacting and responding. And I think that's a big contributor to it. We, going into COVID, had this idea that health care workers as heroes, which became a very common theme, would push back against that and perhaps for a very short period of time it did, but we certainly we don't see that playing out right now. There's just more anger and frustration out there than anything. As for competitors, absolutely, you're seeing it because I would tell you that if you look at those very large verdicts that occurred in 2022, they weren't ours. And so they are absolutely being seen by the marketplace. They're being felt by the reinsurers as well, and that will play out in pricing as well. We're in this interesting dynamic where a lot of the companies that we compete against are extremely well capitalized. And some of them are willing to throw that capital back at underpricing business that will catch up with them, I believe, eventually. But there are certainly all the factors in the marketplace that should push pricing higher and we can't control how they respond. We can control how we respond, which will be to continue to drive rate forward in this environment.

Yes. And then what was your point is that transferred over into workers' comp? Or is that a separate dynamic? Any inflationary pressure there?

I'll let Kevin answer that. But certainly, we kind of get the tailwind from inflation in wages that will translate to increased premium and then eventually that will work its way into the claims cost as well. I don't know if there's anything you'd add to that, Kevin.

No, that's exactly right. So we're seeing in '22, obviously, the increase in audit premium endorsements. And then we are expecting a commensurate increase in the indemnity portion of the claim and ultimately, the medical portion, which we've put into our base case reserves.

Yes. And what's your kind of view on growth? I think you still had some top line expansion. Is this an environment where you just recognize you want to hold share and costs may be up a bit, but you don't want to see erosion in the book? Or how do you view your top line posture under the circumstances in a very dynamic environment?

Yes, I'm going to let Mike take that one.

Mark, on the specialty P&C side, first of all, the growth was obviously via acquisition this year. And NORCAL contributed 23% growth to the organization. high-quality book of business that's been re-underwritten and I think positions us well for the future. What we're seeing in general is health care growth in the health care professional liability market of 2% to 3%. And we'll approach it with a disciplined underwriting in each of our businesses, whether it's our Life Science businesses, our small business and our health care professional liability is really focused on the bottom line versus top line expansion. Now if the market changes and we did see some firming in our specialty areas in the fourth quarter and start to '23, we'll take advantage of those pricing opportunities.

And congratulations, Mike. We'll miss you on the call. Best of luck.

We have no further questions in the queue. So I'd like to hand it back to Jason.

Thank you, Brica, and thank you to everyone that joined us today. We look forward to speaking with you again.

Thanks for joining. That does conclude today's call. You may now disconnect your lines and have a lovely day.