Good morning, and welcome, ladies and gentlemen, to the RLI Corp third quarter earnings teleconference. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. Before we get started, let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs, and expectations for the future. As always, these forward-looking statements are subject to certain risk factors which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including in the annual Form 10-K, which should be reviewed carefully.
The company has filed a Form 8-K with the Securities and Exchange Commission that contains the press release announcing third quarter results. RLI management may make reference during the call to operating earnings and earnings per share from operations which are non-GAAP measures of financial results. RLI's operating earnings and earnings per share from operations consist of net earnings after the elimination of after-tax realized investment gains or losses. RLI's management believes this measure is useful in gauging core operating performance across reporting periods but may not be comparable to other companies' definitions of operating earnings. The Form 8-K contains reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rlicorp.com. I will now turn the conference over to RLI's Vice President of Corporate Development, Mr. Aaron Jacoby. Please go ahead, sir.
Thank you. Good morning to everyone. Welcome to the RLI earnings call for the third quarter of 2017. Joining me on today's call are Jonathan Michael, Chairman and CEO, Craig Kliethermes, President and Chief Operating Officer, and Thomas L. Brown, Senior Vice President and Chief Financial Officer. I'm going to turn the call over to Tom first to give some brief opening comments on the quarter's financial results. Craig will talk about operations and market conditions. We'll open the call to questions, and John will finish up with some closing comments. Tom?
Thank you, Aaron, good morning, everyone. As noted in our earnings release issued last evening, we achieved $0.04 of operating earnings per share this quarter. To state the obvious, the third quarter experienced a high level of hurricane activity with Hurricane Harvey, Hurricane Irma, and Hurricane Maria hitting in short order. We recorded $36 million in losses for HIM in the quarter, which is within our previously announced range of $30 million-$40 million of net pre-tax losses from these events. After taking into consideration performance-driven decreases in bonus and profit-sharing related expenses, the net impact was $31.7 million or $0.46 per share. It also equates to 17 combined ratio points, which drove the quarter to a 108 combined ratio. Not to be overshadowed by the hurricanes, we experienced $14.9 million of net favorable loss reserve development, primarily from our casualty segment, although both surety and property contributed modestly.
Our property segment reported a $28 million underwriting loss in the quarter, driven by the hurricane activity. Craig Kliethermes will go into more detail on these events in a few minutes, I will add these losses were within our expectations for events such as these. We are, after all, a long-term player in U.S. property, and both Texas and Florida are major markets for us. Meanwhile, the property segment's gross premium was down 8% versus last year. This was driven by the previously discussed product exits from trade and RV. Absent this impact, our property segment would have been up 5% on the strength of marine. Turning to casualty. Premium was up 3% in the quarter. Premium for this segment continues to be influenced by re-underwriting efforts in our transportation unit, which was down a modest 6% compared with a 30% decline we saw in the second quarter.
Casualty premium continues to benefit from many of our new products, particularly in the U.S. space and from our reinsurance relationship with Prime. Excluding transportation, gross written premium grew 5% in the quarter. Casualty turned in a 97 combined ratio, which includes 2 points of hurricane losses as certain casualty-oriented products include ancillary property exposures. Worth highlighting is that transportation, consistent with last quarter, also had a small amount of net favorable reserve development. Finally, our surety segment turned in an impressive 70 combined ratio. The ports in this products continue to be plagued by competition, which drove a 4% top-line decline during the third quarter versus last year. In surety, as in many of our businesses, steady wins the race. Turning to investments, we had a very good quarter as evidenced by the 5% growth in investment income and a total return of 1.4%.
Larger invested asset base and slightly higher yields have improved our investment income profile recently, we remain disciplined in our approach to asset allocation and build a portfolio to be a key contributor to long-term book value growth. Not to be overlooked, our minority positions in Maui Jim and Prime contributed $3.7 million in pre-tax earnings as their businesses continue to grow. The majority of these earnings are related to Maui Jim, which has experienced modest revenue growth and some benefit from the effects of foreign exchange. I will also note that our effective tax rate for the nine months year-to-date has declined to 20%, lower in the quarter due to reductions associated with underwriting losses resulting from the catastrophe losses. I would offer that our year-to-date rate is more reflective of trend given current levels of operating income.
All in, we achieved those cents of operating income for the third quarter. For the nine months, book value per share is up 9% inclusive of dividends. Each of these figures are a testament to our business model and the benefits of our diversified product portfolio and underwriting discipline. With that, I'll turn the call over to Craig.
Craig? Thank you, Tom. Good morning, everyone. As Tom mentioned, the quarter's result was impacted by the heavy storm activity. Despite losses from these events, which I'll discuss more in a bit, we managed to grow book value in the quarter and post positive operating earnings. From a top-line standpoint, premium declined 1% in the quarter, reflective of continued soft market conditions as well as our intentional pruning of a couple of underperforming products.
Excluding the discontinued businesses of recreational vehicle and catastrophe treaty, our top line grew 2% for the quarter. If you look past the improvement efforts in transportation, most of which are now behind us, top line is up 4%. Our underlying profitability is very solid and a large majority of our products experienced favorable loss development in the quarter. On non-catastrophe exposed businesses, our underwriters continue to get rate increases where it is most needed. Whether the quarter's events are enough to broadly impact rates on catastrophe-exposed coverages is yet to be seen, but our underwriters will be testing the market and getting rate wherever available. On an overall basis, we feel very positive and will continue to focus on improving systems, adding talent, broadening relationships, and expanding products.
Our broad, diversified footprint, coupled with our underwriting discipline, positions us to succeed in all market conditions and ready to capitalize on a market turmoil as it presents itself. Disruption gives the best underwriting companies an opportunity to differentiate themselves. Let me provide a bit more detail by segment. Our casualty segment's top line was up 3% for the quarter and is up 1% year-to-date. We posted a 97 combined ratio for the quarter. We continue to take a cautious approach to new products added to our portfolio, as well as any product that has experienced unusual loss activity. Transportation is one of those products we continue to monitor closely and adjust where necessary. We obtained a double-digit rate increase in this business for our third consecutive quarter, and our loss development has stabilized.
We have now completed a full year of re-underwriting the book, and we feel it is now performing near underwriting breakeven. The transportation top line was down 6% for the quarter and 21% or $18 million year-to-date. This has had a significant impact on the casualty segment premium. Excluding this impact, the casualty segment would be up 5% for the quarter and 7% year-to-date. Driving this underlying growth is several new products we have added in the last several years, including energy liability, healthcare, binding authority, cyber, and our quota share arrangement with Prime Insurance. These products added $12 million to the top line for the quarter and have added $26 million year-to-date. Because of our cautious approach to newer products, they have yet to contribute to our bottom line, but they show promise for the future.
The property segment was obviously adversely impacted by the three category 4 hurricanes that made landfall this quarter. The result was a significant underlying loss for the quarter and also pushed our year-to-date result into a loss position. Collectively, the storms resulted in the largest net loss from a hurricane season in our company's history as we recorded $36 million in aggregate net loss from the three events. Hurricane Irma had the largest impact, and Maria was a distant third. All of our products with property exposure were affected, with the most severe impact felt in our E&S property division. Based on our current assessment of these events, we would say there were no surprises. We are in the business of taking measured risks. The estimated losses are relatively proportional to our exposures by product and geographic concentration.
It is true for both RLI and the P&C industry at large that South and Central Florida and the Houston areas are among the largest concentrations of U.S.-insured catastrophe-exposed business. We also have a small number of marine cargo coverages in Puerto Rico. We write almost exclusively commercial businesses in the geographies impacted by hurricanes. The majority of our losses to date have resulted directly from wind damage as we offer only limited amounts of flood, business interruption, and wind-driven rain coverage. Our location-level detail gives us high-resolution data to monitor the storm as it happens, triage, and deploy resources where the damage is expected to be the most significant, allowing us to reach the most severely impacted customers sooner. Our independent adjusters have provided exceptional service as we have had only limited issues in getting to our insured locations.
We are working quickly and diligently to inspect and pay claims wherever possible. Our number one mission in these types of catastrophes is to make sure our customers get back in business as soon as possible so they can continue to serve their customers. Our surety segment's top line was down 4% for the quarter but continued to post exceptional underwriting results with 70 combined ratio for the quarter. Continued competition and the exit of a few larger accounts and miscellaneous programs continue to drive the reduction in premium. Our underwriting discipline and consistent appetite keep us well positioned for opportunities as they arise. Overall, pretty tough quarter in terms of natural catastrophe losses. Despite that, we managed to grow book value in the quarter and post positive operating earnings while remaining in an underwriting profit position for the year.
These results demonstrate the quality of our risk management and financial resilience. The diversity of our product portfolio, the discipline of our underwriters, and our ability to deliver financial support to our customers when needed most continue to make us different. Thank you, and I'll turn it back to Aaron.
Thanks, Craig. We can now open the call up for questions.
Thank you. The question and answer session will begin at this time. If you're using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star one on your telephone. If you wish to withdraw your question, please press star two. Your question will be taken in the order that it is received. Please stand by for your first question. Our first question comes from Arash Soleimani with Keefe, Bruyette & Woods.
Hi, good morning. I just wanted to touch base on the core loss ratio and casualty. I think Tom said two points of the loss ratio there actually came from cat exposure. But I think the core loss ratio was still up even when you backed that out about 600 basis points. Can you talk about what's driving that uptick year-over-year?
Sure, Arash Soleimani, this is Craig. I think I mentioned in my notes, we have a fair number of new products that are contributing to the casualty segment premium. We're just now starting to earn that premium, and we tend to book those new products. We take a very cautious approach to new products since we're not certain, we don't have a long track record with those. Our healthcare, cyber, energy businesses are typically booked a little higher. We've also, after last third quarter, if you recall, that we had a little bit of adverse development in our transportation book, and actually it was a little broader than that. We look cautiously at all of our wheels-exposed businesses.
Since then, we've taken a much more cautious approach to any product that offers coverage in the wheels area, which would include transportation, our personal umbrella business, and some of our package businesses which have auto exposure.
Okay, thanks. In terms of the potentially hardening rates in property, I know we don't know yet what's going to happen there. How big would your appetite be if rates are up meaningfully there?
Arash, this is Craig again. As far as appetite, I think we could double the size of our book, double the size of our exposures, I would say. Then obviously, the price would tag along to that if there's an opportunity that arises. It would have to be a pretty significant opportunity for us to decide to double the size of our cat book.
How large of a rate increase would get you that excited? Would 10% get you there? Would even 5% get you there?
No. Let's talk 25% or 50%.
Okay.
10% just gets us back to where we were last year.
Right
We were growing it like crazy last year. I don't think we would grow it like crazy just to get back to where we were last year.
Right. What was the math? Can you go through it? You had the $36 million that you said was the storm exposure, but in the press release, you had the $31.7 million. What was the difference between that again?
Sure. No, it's Tom Brown. Consistent with how we have always presented reserve activity, whether it's the development on prior years, we always define it as net, and that is net of the bonus and profit share-related expenses that are obviously largely driven off of the loss ratio and expense ratio because the combined ratio. With this large event, $36 million, we reported $31.7 million net. The delta there is the effects of bonus and performance-driven managers.
Okay. Part of that would actually be expense savings then rather than-
on the loss side itself. Okay. Can you talk about some of the products that you have within casualty that were impacted by the storms?
Arash, sure. This is Craig. Any of our package businesses, those are predominantly liability coverages, so they get rolled up into casualty. They also do offer some property coverage. Our package business through our professional liability operation that we offer to architects and engineers and other professionals was impacted. Our CBIC package business, not so much in Florida, but in Texas, was impacted. Our transportation business had some small losses. Our binding authority business, the one we recently started, it also had some losses because they offer some limited property coverages.
Thanks. Last question, then I'll re-queue is what's driving the strength in marine that you were talking about earlier in the prepared remarks?
Well, in marine, and it's mostly, there's rate that we're getting there, and we're seeing some opportunity in the construction space.
Okay, great. Thank you very much for the answers.
We will now take our next question from Randy Binner with FBR.
Yeah, thanks. Good morning. One on G&A, just at the corporate level, it was really low in the quarter. Was there anything unusual there?
Randy, no worries. Tom. I go back to the previous question about the bonus and profit-sharing related. That was for the home office corporate employees. That would be basically some of the driver or probably the majority of driver of that decrease.
Okay. I guess on the loss picks, I want to go back to that because it wasn't just in casualty, I kind of see it across the board. Your mix of business, I think I'm hearing, is going to be increasingly focused on healthcare, energy, and cyber as growth areas. Is this something we should assume as part of that new business mix, or is it a reflection of the soft market, or is it both? I suspect folks aren't running an underlying 71% loss ratio going forward in their models. That's going to swing earnings around pretty good. Just want to understand that better. When would those new risks season? What would the expected outcome on the loss ratio be? Something to kind of understand how that might trend out in the future a little bit better.
No, Randy, this is Craig. Those are products that are growing probably faster than the others. From a pure dollar amount, though, they aren't particularly large relative to, let's say, our excess liability or general liability businesses. They do have an impact as you start to grow them. When you think of seasoning, as I said, we take a fairly cautious approach. We're going to want to make sure losses continue to come in better at or better than expected. First, if they don't, we won't be growing them. Two, we don't want to get in a position where we take down reserves and then have to put them back up. Again, about half of the increase is really driven from auto-related exposures. As I mentioned, we've taken a very cautious approach after what we saw in transportation last third quarter.
I think if you go back and look, we also saw a little bit of activity in our personal umbrella. The things have stabilized, but we don't want that to happen again. We're going to continue to be cautious in that area, continue to try to get rate where we can, and we've been successful in getting rate in the auto-related exposures.
The last one I have is on cyber. Cyber to me is difficult risk for me to get my head around because there's not really a lot of precedent for it. You all are excellent underwriters and I'd just be interested in how you're approaching cyber because it doesn't have the track record we have in other areas. There's probably a lot you can do to work with insureds and mitigate losses. Your approach on that, because frankly, I didn't think I'd see RLI growing as much in cyber just because it's kind of an unknown area of risk.
Right. Randy, let me make sure. I don't want you to be too fearful here. Like anything new, we tend to dip our toe in the deep end, then we might wade into the shallow end over time. As of right now, we've written, I don't know, $3 or $4 million worth of cyber coverage. I don't want you to think we're going nuts here. Again, we're booking it fairly cautiously. We're writing basically right now excess cyber, it's sitting fairly high attachment. It's really out of our D&O operation. It's focused on industries that are highly regulated. Like financial institutions, defense contractors, people that have to comply with government regulations. We're doing it in a very cautious way. That doesn't mean that you can't have a loss. We're also doing it with a fair amount of reinsurance.
We cede 65% of the premium we take in as well as 65% of the losses we take in this product line. Obviously, like anything at RLI, as we gain comfort, as we're convinced that it's going to be a profitable product, we will take more risk over time, and we'll be more willing to grow it. I don't want you to think we're doing anything crazy here out of character.
Listen, Tom, can I just add, Craig did say $3 million-$4 million. That's since inception. Oh, okay. I think it's more in the $2 million range year to date.
Okay. Yeah. All that color is helpful. Appreciate the comments.
We will now take our next question from Mark Dwelle with RBC Capital Markets.
Yeah, good morning. I wanted to spend a second first to Tom on the tax rate. Am I to understand your comments that some portion of the tax benefit in the quarter was really just kind of truing up the full year-to-date effective tax rate to the 20% that you mentioned?
Mark, that's a good characterization. Yes. If you go back earlier, the second quarter, we did talk a little bit about the change in the accounting for stock-based, equity-based compensation that runs through there. That didn't have much of effect in the Q, in the third quarter here. It really is two things, right? It's to true it up to get to a full appreciation of the nine months, which is about 20% effective rate. Really attributing to that is, as Craig mentioned, the underwriting Part of it is in a loss position, side loss position. You're largely left with the investment income that's got much many tax-preferenced items in there. So if you look back to Q2, we had about $14.5 million of in the tax provision. Then you look at the full nine-month result, it's give or take about $11.5 million.
The delta there is what's running through the third quarter.
Got it. That makes sense. The second question is kind of a number-ish question. I feel like both Tom and Craig mentioned what the amount of premium growth would've been excluding the property and RV. I heard 5% one time and 2% the other. Which one was right? Maybe I heard them wrong both times.
Yeah, we might have had a little inconsistency. It's 5% ex those items.
5%. Got it. The last question I wanted to ask is kind of a reinsurance-oriented question. First, remind me when you renew your main reinsurance treaties, particularly as relates to property. I guess if you're able to comment, just kind of how you're thinking about that in general, in light of how those treaties performed for you during this year's cat events.
Mark, this is Craig. The main property treaty renews one-one. That's both our per risk and our catastrophe treaty. We also have another property treaty for earthquake that renews seven-one, but the ones you're most interested in are one-one. I think we're pretty happy with the coverage that we bought. It performed as we expected. We are going to have some per risk losses as it relates to the storm. Our attachment point, as I think we disclosed earlier, is $1 million in that. We had a couple larger wind-affected roofs, things like that we had some losses there. As far as our cat treaty, at this point in time, I really can't opine on whether we're going to actually get into that cat treaty. It's going to be fairly close, and it's going to take time to determine.
If anything, it'll be on, as I mentioned, because it was the largest storm. The other two will not approach the cat treaty.
Okay. Thanks very much. That's helpful color.
We'll now take our next question from Ron Bobman with Capital Returns.
Hi. Thanks. I think your cyber illustration should have been putting your toe into the shallow end and then maybe in the future way into the deep end. I thankfully wander better than your storytelling. I just had a little up off of Mark's reinsurance question. It sounds like so far the reported numbers only reflect some reinsurance recovery on the per risk side of your reinsurance program. What is the current sort of booked loss assumed as far as reinsurance recoverables from the storms?
You're asking what's the difference between our net and gross number effectively? Is that what you're asking?
Yeah. Attributable to the reinsurance recovery.
Less than $10 million.
Okay. Thank you. Then, sort of relatedly, whether it's your per risk, although I assume it's more your broad property cat treaty, is it all provided by traditional reinsurers or any sort of the participants non-traditional and thus sort of posting collateral?
As of right now, this is Craig again, we don't use collateralized reinsurance. We're using traditional reinsurers, all very highly rated. For our cat, A-rated or higher, mostly A-plus rated.
Thanks. Appreciate the details. Best of luck. Hope it continues.
We'll now take our next question from Ken Billingsley with Compass Point.
Good morning. I just wanted to follow up. Obviously, when you set your cat range, initially, it was pretty wide. You were early, in trying to get ahead of it. It seems that you guys are at the lower end of the range, and I imagine people are going to be watching to see how others fare with the initial range that they have given. I think another, Travelers came out near the high end. Can you talk about what was different when you set those estimates early, and maybe why you came in at the lower end of the range and how that kind of will impact setting those going forward?
Ken, Jon Michael. We came out relatively early, especially, I think, early in the sense that Maria had just happened. We set that range at $30-$40. That's not dissimilar to what we've done in the past where, I believe for Katrina, I think we set it at $10-$15, which I think is about the same ratio, exact same ratio. Our losses came in at within that range at $36. We're estimating them to be $36. It wasn't at the lower end of the range. It was at just above the midpoint of that range.
You're saying for this time around, or?
For this time around, we're pegging our losses at $36, the range was thirty-
That's adjusted for-
For bonus and other variable type compensation items down to 31.7, 31.9, whatever the number came out to be.
Okay. 36 moving down, and that's all adjusted from.
Right
from bonus accrual that you already had anticipated. Okay. The other question I have is just regarding California fires. I know out there you have your earthquake. Any exposures for difference in conditions or for a business and commercial standpoint with California fires?
Can I? We do have exposures in California, again, mostly commercial risks. It's fairly spread, I don't think we have any significant concentration. I expect we will have some losses. A matter of fact, I think we've already had a few small losses, but I don't think it won't amount to anything the size of the hurricanes.
Great. Thank you.
Well, if the fire gets put out.
All right. Thank you.
We'll now take our next question from Ron Bobman with Capital Returns.
Hi, thanks. You mentioned Puerto Rico briefly, I think in the prepared remarks, and I think you mentioned some cargo business. Obviously, the devastation has made the logistics and communication nearly impossible. I assume you've gotten some sort of feedback, and I'd be curious if you could just provide some general color about your adjusters' efforts to access the island, access claim information, et cetera. Thanks.
Sure. Ron, this is Craig. As I mentioned, Maria is the smallest by far, a distant third of the storms for us. We only write marine cargo coverages there, and it's only stock coverage. It doesn't cover business interruption or even buildings for that matter. We would say that was the most difficult-to-access location. Now, we use independent adjusters because we don't really have enough staff. Our independent adjusters were able to adjust the claims fairly quickly on the north side of the island. The south side of the island was a little more challenging. They did finally get to the south side of the island, just, I'll say, as short as about late last week.
All the claims that we, or the potential claims that we have somebody who's either been to the location or at least talked to the insured, and we feel pretty comfortable about where we're at there. Again, we didn't have a lot of exposure there, so I can't speak to somebody that might have a lot of exposure there and cover business interruption, because my understanding is that there's still a large portion of the island that does not have electricity.
Right. Thanks, gentlemen.
We'll now take our next question from Ian Gutterman with Balyasny.
Hi, thank you. First, I guess if you can help me think a little bit about the casualty segment. Year-over-year, I guess we're up, I don't know, call it 3 points on the accident year margin. I understand a lot of that obviously is a transportation business. A, are there things other than transportation that are noticeably higher year-over-year, or is it really mostly a transportation issue? Secondly, to your point of the price increases coming through and starting to see things get better, is there a goal maybe you can give us as far as when we get back to that segment being profitable, underlying without the reserves?
Ian, this is Craig. You had asked about the, you spoke to the wheels basis, we certainly took a more cautious approach to booking those products ever since late last year and particularly the middle of this year. As I mentioned, we have several new products that are being booked fairly conservatively. We never usually book a brand-new product underwriting profitability. The best case scenario is underwriting breakeven. That obviously doesn't help. As you're adding some mix to that, I mean, that's really the driver. All I could tell you is we're going to continue to be focused on driving underwriting profit by product. We're not going to grow any products that we don't think long-term makes sense. That's not part of our model, and there's no incentives to do that anyway.
All I can tell you is we're going to continue to drive it the best we can, we're going to continue to get rate where we can.
Good. Got it. Got it. Maui Jim obviously has seen a lot of growth this year, and I think you also mentioned a little bit of FX benefit. As we think beyond this year, first, I guess, I assume what it's doing this year is a new run rate as opposed to a one-time type of event. Do we expect similar, maybe not the same pace, but similar strong growth in 2018, or is this sort of a new level and we kind of plateau here? Just how should we think about that going forward?
It's Jon Michael. We really can't speak to what Maui Jim's going to do in the future. They have had a good year. You're right, as for the future, we'll just have to see what happens.
Fair enough. Just quickly on the surety, you mentioned the competitive conditions. Is that sort of the same degree of competitiveness as the last couple of quarters, or did it get even tougher this quarter? Curious about that.
This is Craig again. No, it's about the same level. It's just that there are some accounts that, based on their risk profile and what other people are willing to do in this market in regards to credit terms, we're just not willing to do those things. We've lost some, that's particularly competitive in the larger accounts. There was a smaller program in the miscellaneous surety side that we just decided wasn't really a good fit for us anymore, that we backed in. That's had a lingering effect throughout the year.
Okay. Got it. Just last one, just back to the question on your reinsurance treaty. Maybe this requires some posturing in your answer, given maybe your reinsurers will listen to this, but if you're not hitting your main treaty, I assume you would think it would be unreasonable to take any kind of material price increase.
Well, this is Craig Kliethermes again. Obviously, what we've stressed with our reinsurers is that we expect order in the market. We expect differentiation in the market based on the underwriters that support the leverage in regards to results and that some of those, I would certainly say some of those lower-attaching Florida companies should probably pay a little more.
Sure.
Obviously, we've been arguing as well as if we're going to get as much rate as we can, so we're going to get rates so they don't have to.
Right. Makes sense. All right. Thank you.
We will now take our next question from Arash Soleimani with Keefe, Bruyette & Woods.
Yeah. I just wanted to touch base again on the casualty loss ratio. I know the comments you made about the new products and transportation and again, backing out the cat losses there, we get to around a 69% core loss ratio in casualty. Is that kind of a reasonable run rate for the near term?
This is Craig, Arash. I mean, I didn't do the math as quickly as you, that's probably the run rate given the mix that we currently have. If the market changes and we get a little more rate, obviously our projections and the way we book things are impacted by what the assumptions are in regards to long-term loss cost trends as well as the price we're getting. If we get more price than what we think loss cost inflation is, I think you would expect that to go down. We certainly think that's true in the wheels-based businesses right now. Again, given what happened last third quarter, and given our nature to be a little more conservative than most, we're going to be cautious before we jump and assume things are getting better. I grew up in Missouri.
I'm from the Show Me State, I want to see and make sure it's better before we do something to take it down.
Right. That makes sense. Can you remind me what percentage of your kind of annual premiums in the casualty segment come from transportation now, after you've kind of pruned that book?
I don't have that right here. We're probably about $80 million out of whatever the total is.
Okay. Great. Thank you very much.
I just say that's an in-force number, so $80 million of in-force premium, roughly.
Okay. That's on an annual basis then. Okay. Perfect. Thank you.
If there are no further questions, I will now turn the conference back to Mr. Jonathan Michael.
Thank you all for attending. The hurricanes that we've experienced this fall, certainly the earthquake in Mexico and the wildfires in California, provide us all with an opportunity that reminds us that that's what we're in business for, and that's to take care of our customers at their time of need, to manage their risks and to be there for them, and put their businesses back together, to help them rebuild. I want to say thank you to all of our associates, especially our claims team, our independent adjusters, as they've helped our customers to rebuild and get back in business. We'll talk to you again next quarter. Thanks for listening. Bye.
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