Good day, ladies and gentlemen, and welcome to the Q1 2015 The Hanover Insurance Group, Inc. earnings conference call. My name is Mark and I'll be your operator for today. At this time, all participants are on listen only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero and we'll be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Oksana Lukasheva, investor relations. Please proceed.
Thank you, Mark. Good morning and thank you for joining us for our first quarter conference call. We will begin today's call with prepared remarks from Fred Eppinger, our President and Chief Executive Officer, and David Greenfield, our Executive Vice President and CFO. Available to answer your questions after our prepared remarks are Dick Lavey, President of Personal Lines, Andrew Robinson, President of Specialty Lines, Jack Roche, President of Business Insurance, and Bob Stuchbery, President of International Operations and Chief Executive Officer of Chaucer. Before I turn the call over to Fred, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the investors section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session.
Our prepared remarks in responses to your questions today, other than statements of historical fact, include forward-looking statements including our earnings guidance for 2015. There are certain factors that could cause actual results to differ materially from those anticipated by this press release, slide two of the presentation deck, and our filings with the SEC. Today's discussion will also reference certain non-GAAP financial measures, such as operating income, operating results excluding the impact of catastrophes, and accident year loss and combined ratios excluding catastrophes, among others.
A reconciliation to these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Fred.
Thanks, Oksana. Good morning, everyone, and thank you for joining our first quarter earnings call. We are pleased to report strong and improving results for the quarter, as demonstrated by operating income per share of $1.27 and an operating return on equity of 9%, which included the impact of elevated winter weather in the Northeast. Along with our financial results, our key metrics and business indicators are tracking in line with our expectations. Specifically, we experienced growth in all our domestic businesses while achieving solid rate increases and improved retention. Domestic combined ratio, excluding catastrophes, improved by almost 2 points over the prior year quarter to 93%. Despite severe weather in the Northeast, catastrophe losses in total were only slightly higher than our expectations. We delivered another good quarter at Chaucer. Our net investment income increased by 5%.
Finally, we had an active quarter for capital management, repurchasing debt and equity, as well as reaching an agreement to divest our UK Motor business. The continued progress in the first quarter gives us confidence in the effectiveness of our strategic direction and our ability to generate strong and improving earnings and growth going forward. I will discuss progression towards our priorities in a few minutes, but first, I'll turn the call over to David to review our financial results.
Thank you, Fred, and good morning, everyone. Our first quarter results were very strong and represent a great start to the year, underscoring the effectiveness of our business diversification and the strength of our underwriting capabilities. Net income was $55 million, or $1.22 per diluted share, in line with the prior year quarter. Operating income was $57 million, or $1.27 per diluted share, compared to $47 million, or $1.05 per diluted share in the first quarter of last year. The combined ratio was 97% in the quarter, compared to 98% in the prior year quarter. Catastrophe losses added 5 points to the combined ratio, in line with the prior year quarter, virtually all stemming from domestic business in both periods. The ex-catastrophe accident year combined ratio improved by 1 point compared to the prior year quarter, reflecting the strengthening underwriting margins in our domestic business.
As a company, we continue to improve our business mix. Our diversified footprint is evident from this quarter's results, despite the severe winter weather we encountered in the Northeast. Catastrophe losses in the quarter were $59 million domestically, primarily due to record snowfall and prolonged low temperatures in the Northeast, especially in Massachusetts, that resulted in elevated claims for roof collapses, ice dams, and associated water-related damages. Non-catastrophe losses also were elevated compared to longer-term averages. However, they were generally in line with the impact of the polar vortex that occurred in the first quarter last year, making underlying accident year results for the two periods generally comparable. Chaucer catastrophe losses were low this quarter, which helped offset the elevated weather impact in the domestic business. Moving on to underwriting results, excluding catastrophe losses.
In commercial lines, through consistent pricing increases and mixed management initiatives, we were able to drive roughly one point improvement in the loss ratio to 58%, led by workers' compensation and CMP lines. In commercial auto, the accident year loss ratio was unchanged compared to the prior year quarter. The underlying loss dynamics in the current quarter, however, were different from last year. Bodily injury was in line with expectations, as we've seen some improvement coming from pricing actions and severity profile management. However, this quarter we noted an increase in physical damage frequency, which we attribute to the heavy snow accumulation this winter. Our recent experience has improved our confidence in this line, but overall, this business remains below target profitability and continues to warrant a cautious approach. In that regard, we modestly added to prior year reserves this quarter.
We will continue to carefully monitor business mix and rate in relation to loss trends and react appropriately to further improve our profitability. The underlying loss ratio in other commercial lines, which includes our domestic specialty business, improved compared to the prior year quarter and was one point better than the full year 2014 results. We are definitely seeing the effect of continuing business maturation, mix management, and pricing actions. However, this was somewhat offset during the quarter by normal volatility in property lines, which affected the current year as well as prior year reserves due to late reported large property losses from the fourth quarter of 2014. In personal lines, the underlying loss ratio for the quarter was 64%, two points better than the 66% in the first quarter of 2014.
We experienced some improvement in the accident year loss ratio, both in personal auto and homeowners, underscoring our underwriting initiatives. Rate increases in both lines are in the 5% range, which is comfortably above loss cost levels, providing confidence in our ability to generate further margin accretion. Domestic expense results were as we expected. In commercial lines, we delivered an expense ratio improvement of over half a point compared to the prior year quarter, reducing the ratio to 36%. This improvement reflects continued operating. The personal lines expense ratio for the quarter remained relatively flat compared to the prior year quarter. Chaucer delivered a strong performance with a combined ratio of 89% compared to 88% in the prior year quarter.
Catastrophe losses were low this quarter at one point of the combined ratio, while favorable development was strong at eight points, helped by the impact of foreign exchange on carried reserves. In the quarter, Chaucer recognized $17.4 million of premium and an equal amount of loss reserves related to a reinsurance to close transaction, or RITC, that had no effect on underlying earnings and a negligible impact on the accident year combined ratio. However, this transaction increased the loss ratio by approximately two points and reduced the expense ratio by a similar amount. Excluding the impact of the RITC, the current quarter loss ratio would've been in line with the prior year quarter, while the expense ratio would've increased by about a point, driven by change in business mix and the impact of foreign exchange on overseas deposits.
Finally, I'd like to provide some financial details around the recent UK Motor announcement. The transaction will be executed through a 100% reinsurance arrangement for all prior claim liabilities and in-force policies, along with property sales and policy renewals. Upon closing, which is expected in the third quarter, our net reserves and invested assets will be reduced by approximately $350 million each. That's based on current exchange rates, as these amounts will all be GBP denominated. The impact on earnings this year will be negligible, but the components of Chaucer's combined ratio will change going forward. The UK Motor business produces a relatively higher loss ratio and lower expense ratio as compared to the rest of Chaucer's business.
We anticipate that pulling this business out of the mix will result in a target expense ratio for the go-forward business of around 39%-40%, up from 38%, which will be offset by a decrease in the overall expected loss ratio. Additionally, the transfer of invested assets at closing will result in lower net investment income in the future. The total consideration for the transaction is approximately $60 million. We expect after adjusting for related intangibles, accounting for the value of the real estate sold, as well as transaction costs and other items, we will realize a gain on the transaction in the range of $30 million. The actual gain will depend on several factors, including the exchange rate at the time of closing.
Moving on, consolidated net written premium growth for the quarter was 4%, driven by 8% growth in commercial lines and 2% in personal lines, partially offset by a 2% decrease in Chaucer, which includes a negative impact from foreign exchange of about three points. Fred will have more to say on our top-line performance in a few moments. Turning to investment results, cash and invested assets were $8.6 billion at the end of the quarter, with fixed income securities and cash representing 90% of the total. Our fixed maturity investment portfolio has a duration of 4.2 years and is roughly 94% investment grade. The portfolio remains high quality and well-laddered. We increased net investment income by 5% for the quarter to $70 million, compared to $67 million in the prior year quarter. The low rate environment continues to place pressure on income returns.
The earned yield on our fixed maturity portfolio was 3.64% in the quarter, compared to 3.79% in the prior year quarter and 3.65% in the fourth quarter of 2014. However, we continue to expand our portfolio mix into non-fixed income security instruments, including commercial mortgages, partnerships, and other assets. Together with higher cash flows, this helped to offset the yield pressure in the first quarter and should lead to a modestly higher net investment income in 2015 after considering the UK Motor transaction. I'll finish with a few comments on the strength of our balance sheet and capital position. Book value per share grew 1.6% to $65.92 in the first quarter. Our total capitalization is $3.7 billion. Outstanding debt decreased to $841 million at quarter end, after we opportunistically bought back $62 million of debt during the quarter.
The debt to capital ratio decreased 1.6 points to 22.5% from 24.1% at the end of 2014. In addition to debt repurchases, we also purchased about 219,000 shares of common stock, for a total of $15.4 million since the beginning of this year. Looking ahead, we will continue to actively evaluate opportunities to repurchase equity and debt, though our belief remains that capital is best deployed for continued business growth. Overall, our balance sheet position remains strong and provides a solid basis on which to grow our business. With that, I'll turn the call back to Fred.
Thank you, David. As I noted earlier, we made solid advances on all our growth and earnings goals in the quarter. I will review how we executed on our priorities in each business, starting with commercial lines. Growth in the first quarter was strong at 8%. All our target segments grew at encouraging levels. We continue to shift our business mix towards higher margin segments while capitalizing on the momentum, the franchise value, and the shelf space we have built with our partner agents. We are pleased with the traction we have established in small commercial business, which remains key to our long-term strategy. Our unique operating model allows us to cost effectively target and underwrite both the point of sale and non-point of sale small commercial market. This model provides agents with the flexibility and efficiency to address the overall market.
Our distinctive approach has enabled us to build preferred shelf space and gain access to an attractive part of the market with our agent partners. We also gained momentum in the middle market segment. We are emerging as a leader within many of the vibrant target industry solutions, including in the manufacturing segment, where our growth is supported by strong expertise and helped by a recovering economy. The breadth and depth of our industry solutions is significant, giving us the ability to access some of the most attractive businesses and markets our agents service. I am very pleased with the current state of our portfolio and the improving performance. In specialty lines, we delivered strong growth in the first quarter, excuse me, led by Management Liability, Professional Lines, and Healthcare.
Our specialty capabilities provide a solid basis for profitable growth and further engagement with the agents who are looking for a carrier that can cover a broad spectrum of specialized needs in the smaller account space. Our insight into these markets and our distribution alignment gives us an opportunity to grow these businesses in a very targeted way with our partners. The commercial lines market remains competitive but rational. We achieved pricing of 6.6% core commercial businesses, slightly down from the fourth quarter, while increasing retention by 1.84%. Our targeted approach to pricing continues to give us confidence that we are improving the quality of our book. While rates have come down in the overall market, the pricing in our target markets has maintained some stability, we remain confident that we'll be able to achieve the price increases we need to meet our targets.
Underwriting profitability in commercial lines improved, reflective of the business mix changes and pricing action. Although the bulk of our exposure work was completed in 2014, we continue to make targeted underwriting adjustments in our portfolio and are taking rate and non-rate actions to improve our portfolio in areas such as commercial auto. In addition, the maturation of our newer businesses and geographies, as well as our growth leverage, has helped us deliver the expense ratio improvement we expected. While our results in the first quarter were lower than expected due to elevated weather losses, our commercial lines business is in a very strong position. We remain on track for additional improvement and to deliver on our goals, and we are maintaining good market momentum that should drive us to achieve additional profitable growth going forward. Turning to personal lines.
The growth momentum we established at the close of 2014 continued into the first quarter, generating a 2.3% increase in net written premium. The rates were up about 5% for the quarter, and we expect we will be able to hold rates at this level through 2015. We also increased retention in the quarter to 83%. Retention will continue to improve compared to the prior year, driven by the shrinking effect of our exposure management, the impact of our growing account mix, and the penetration of our Platinum product. We continue to focus on the value account segment, and 79% of our premium comes from full accounts in our current book. The Hanover Platinum Experience offering is improving the composition of our book and business even further, with higher proportion of accounts, higher umbrella penetration, and better retention.
This premium account product is still in its launch phase and is relatively new to the marketplace. In March, we launched Platinum in Georgia, our 16th state, and the response has been very positive. With 13% of our premium written in Platinum, this offering now represents a more meaningful part of our personal lines business. Looking ahead, we will continue to make investments in our Platinum platform to help drive improved profitability and growth that will benefit us over time. Turning to personal lines underwriting performance, the combination of recent exposure management efforts, pricing, and the improvement of the overall book drove a solid underwriting profitability lift in line with expectations. At Chaucer, as we discussed, our premium was down slightly due to the market conditions. As long as the market conditions remain challenging, we'll be very selective and cautious in our growth in this segment.
We continue to leverage our strong market position and underwriting capabilities to allow us to maximize the profitability of this portfolio and deliver strong earnings. Our focus on optimizing our business portfolio led us to announce the exit of the UK Motor business. This transaction allows us to direct our focus on the international specialty market where we have deep skills and expertise. We believe over time, given the strength of the business, Chaucer will provide significant growth opportunities for The Hanover, and we will continue to invest in this business. In the short term, growth will likely be limited. To summarize, we are pleased with the first quarter results. We will continue to work on enhancing our underwriting performance and on building upon our portfolio and market position to drive profitable growth.
Product and business mix will be paramount as we grow in targeted areas and gain additional shelf space and depth with our agent partners. We feel good about our progress we made in the quarter. In this respect, we remain on track to deliver an EPS for the year in the range of $5.70-$6 a share, assuming catastrophe losses normalize to 5% for the full year, consistent with our previous guidance. Operator, you can please open the line for questions.
Ladies and gentlemen, if you have a question, please press star followed by one on your phone. If your question has been answered or you would like to withdraw your question, please press star two. Please press star one to begin. Your first question comes from the line of Christine Worley from JMP Securities. Please proceed.
Good morning, Christine.
Good morning. Thank you for taking my questions. Just sort of focusing on the sale of the U.K. Motor book. I know that you said that your desire is to focus more on the specialty side of Chaucer, can you give us some thoughts around your decision to the timing of the sale of the book now and sort of how you're thinking about that?
Yeah. Since we've purchased Chaucer, obviously we've had really good success, and we've been able to grow our specialty businesses quite significantly. It was in light of the fact that we're having success and really in the core areas that we were focused on, that we looked at that business and said, "That is more of a flow business and more of a, in some ways, a commodity business." We felt that the investment required to kind of grow that business was really not at the heart of what we were trying to do as part of our portfolio for a period of time. It wasn't a difficult thing for us to find somebody interested in it, but we just felt it wasn't really the focus of us at this time.
Okay, makes sense. Do you have any plans for the capital that this sale frees up?
Yeah. Well, I think as Fred described, Christine, we'll look at other opportunities in the Chaucer book to use some of that capital, although it's a tough market as we've described. In the context of our overall capital plan, the amount of capital being freed up is not significant, and I would tell you, we did some things in this quarter that was a little more active than we'd anticipated as well with some of the debt buyback as well. I think overall, I'm comfortable where we are from a capital perspective, and we have plenty of opportunity to grow our businesses in other areas, and we'll deploy capital as and when we need it. If we need additional capital, we have plenty of opportunity to raise capital if that's required.
Okay, sort of sticking on capital for a minute. You guys have reported some pretty decent earnings growth over the last couple of quarters. I know your primary focus is funding growth, but how do you prioritize deploying capital after that with regards to share repurchases or paying down debt?
I think it's in some ways almost equally weighted in the fact that we're trading above book. I think I made this comment maybe at the last call. For the most part, we've always deployed excess capital and share repurchase when we were trading below our book value, but now that we've come above it sort of equalizes some of the benefit of looking at some of our debt retirement. As you know, some of our debt is higher rated or carries a higher interest rate than current market rates are. When we get rid of some of that legacy debt and have the opportunity to do so, we will take that advantage.
I think what you've seen in our track record, we don't tend to want to hold a lot of excess debt. We've been very successful with the rating agencies. We expect we will continue to be because we have great capital base and depth, but we're pretty active when we believe that we have some excess, and we've been proactive about opportunistically looking for opportunities to deploy it, and we'll continue to do that.
Okay, great. My final question, just turning to the workers' comp. You guys put up some decent growth this quarter. Where are you seeing the best opportunities in that line?
This is Jack Roche. I think we continue to expand our small commercial penetration with agents across the country, and in particular sectors like our technology business and other attractive areas. That leads our growth. As we get more mature in more territories, and the workers' comp line of business continues to improve overall, we're finding more opportunities to round out accounts and drive profitable growth in the workers' comp line.
Great. Well, thank you for taking my questions.
Thank you.
Thanks, Christine.
Your next question comes from Joab Dempsey from KBW. Please proceed.
Morning.
Hi. Good morning, everyone, and thanks for taking my questions and [fits and facets today]. I know he certainly wishes he could've been on the call today. With that being said, my first question is sort of more big picture in nature. With many of your peers discussing the ramp-up in market competition translating into finding fewer business opportunities that meet their target return, could you possibly provide some color on how you guys have been able to go out, find new business, particularly around some of your industry-focused products?
Yeah, Joab, it's a great question. We've talked about this in the past, our strategy, the difference between our strategy and our distinctiveness in the marketplace shows up at this time in the cycle, right? What you're seeing is price increases come down and people's retention goes up. Less business is disrupted. For those that have a strategy of waiting for the phone to ring, if you will, when things are shopped, you're going to see a decrease in good business, and frankly, a risk, when you look at the quality of the stuff that goes to the marketplace. Our whole approach to the market's a lot different, right? We have a lot fewer agents.
We have a lot more information about market opportunities. We're a lot more proactive working with agents to do what we call pipeline, that we identify where the opportunities are, work with them to actually pipeline and have the business be submitted to us, right, for us to look at. If you think about, to Jack's point on the rounding out, what's happening now is people like the way our approach to business is, they're rounding out their small commercial business with us, whether it's point-of-sale, non-point-of-sale, or full account. In specialty, where they like to have fewer markets and more direct contact, they're finding pockets of their business to kind of let us look at together and direct to us.
What I would say is we feel pretty good about our ability to consistently kind of grow the business and thoughtfully grow the business at the right price and be able to really make our mix better and better and better. We feel fortunate right now that we have some momentum like that, I think it'll continue. Again, I said at the beginning of the year, if you looked at January, for those that kind of have thousands of agents, all they do is they kind of wait for the business to come to the market, what you're seeing is the quality in general of stuff that just gets shopped is going to be less, just because of the way the pricing environment is. We don't really rely on that kind of business acquisition.
Again, we feel good about where we are. I don't know if any of the guys want to comment.
The only thing I would add, this is Andrew. There is a couple pockets where we are seeing some disruption, and I think we're very well positioned to capitalize. Healthcare is one of those categories where a couple of the sort of traditional lead markets in the specialty domain around, for example, allied healthcare and long-term care, enough disruption's happening in the market and creating some very interesting opportunities. I think the other thing, just to build on a point that Fred said, we, I think between specialty and small commercial, we've done so much to be able to deliver a number of our specialty capabilities through our service center that that is a distinctive advantage, and we're using that certainly to grow some of our specialty businesses as well.
There are things that are both happening in specific areas from a disruption perspective, but also, I think there are things that we're doing that are unique enough that are, for us, really distinctive growth drivers. Quite honestly, I think we'll continue to see that for some number of quarters.
Good.
Great. Thanks so much for all the color on that. It's very helpful. The second question, switching towards the winter weather in New England this year. With winter storm losses, sometimes you can get a bit of a tail on those claims. Any sense based on claims volume either slowing down or still coming in over the last few weeks, whether any of this will taper off into the second quarter? Do you feel like at this point you've got a real clear picture of the ultimate exposure?
Yeah, I think we have a pretty good, clear picture. I think that unlike maybe kind of hail storms, frankly, winter weather is a little bit more distinctive, right? You have the freezes, the ice dams, we have a very good sense of what the losses were and the nature of the losses. I feel pretty good that we kind of identified it and quantified it appropriately.
Yeah. Absolutely. We see some coming through, not dramatically off of expectation and sort of even a little bit better from a severity perspective from what we had expected. Yeah, I think we have a good handle on it.
Okay, terrific. Just my last question on the personal auto side. Core loss coming down, which is great to see year-over-year. Obviously, there's a lot of moving parts this quarter, it seems like loss cost inflation might be ticking up a little on that line for the industry. First, are you seeing that? To what extent should we be thinking about the winter weather, moving, driving activity and loss cost around a bit?
Go ahead.
Yep, this is Dick Lavey. Great question. Interestingly, in our book, the headline is we feel our loss cost ticks of three and a half is exactly right and kind of what we're experiencing. There's been some questions on prior calls around severity and frequency. We are not seeing the uptick in frequency that perhaps others are. I know there's been questions around gas prices going down. Is that going to lead to increases in frequency? We're seeing the opposite. Severity is up. We have seen that the last few quarters. We attribute that to sort of the change in technologies being put in cars these days. Our model year is increasing. We are seeing newer models, excuse me, and more European imports. As you'd expect, severity would increase.
That $500 fender bender now is a $1,000 fender bender or $2,000 to repair some of the technologies. On balance, we actually feel loss costs are in line with what we have in our plans. I think we're fortunate with the niche market strategy that we pursue in personal lines. I think we're in good shape.
Yeah. I think it's actually quite quiet in total, right?
Yeah.
If you look at the stability of our book, right, it keep grows every day. We're feeling pretty good about the loss trends. Our pricing, as I said, we have pretty good transparency because of the way that book gets filed and our growing retention. We think over a pretty significant period here, we're going to have pricing above any potential loss trends we have in that book. We feel good about them.
Yeah.
All right. Well, that's all I had, guys, and thank you very much for taking my questions. I'll pass it along.
Thanks, Joab.
Thanks.
As a reminder, if you'd like to ask an audio question, please press star one on your phone. Your next question comes from the line of Daniel Farrell from Piper Jaffray. Please proceed.
Morning, Dan.
Morning, Dan.
Good morning. Just a question, on both commercial and personal lines, I was wondering if you could comment on what your assumption is for loss cost inflation, and where does that compare right now to the pure rate component of your renewal pricing that you guys disclose?
Well, this is Jack. I'll start. On the commercial line side, I'll speak primarily about the core commercial lines, because as we said in the past, some of the specialty lines are a little bit more challenging to answer those questions directly. We have said for some time that we take a longer-term view on loss trend. That number for us is somewhere in the three and a half to four point range. You could look at short-term trends and come up with a slightly lower number than that. We believe that three and a half to four is still the right number to keep in mind as we're pricing our business.
With that, what you can see is that we've been achieving some slightly above market pricing, that we believe when you factor in the exposure related to property increases or property insurance to value plus our rate, we're still achieving a point and a half to two points above our long-term loss trend.
This is Dick Lavey on the personal lines side. As I mentioned, we see loss cost trends in the three to three and a half percent. The price, as Fred mentioned, that we're achieving in our book is about a five percent, both in home and auto. We're a point, a point and a half ahead of those loss cost trends.
Right.
That's what we see continuing forward.
You know this, Dan, because on our property areas, you can actually add to that a little bit in both of those answers because when you get exposure or ITV value increases or inflation value increases, because you don't have all limit losses, right, that also is effectively priced.
Right.
We feel very good about where we are and will be kind of through the rest of the year.
As we think about this going forward, we'll acknowledge that we don't live in a different market than our competitors. As we see the dialogue that you all are having with others in this market, that we'll acknowledge that there continues to be some modest pricing deceleration in the commercial lines business. We believe we'll continue to kind of outperform, if you will, based on the three dimensions we've talked about in the past, and that is our average premium size is a full octave lower than many of the people that report out to you guys. Our product distinctiveness that we've built over several years is starting to prove very beneficial. Most agents don't want to go to market with our renewals if they don't have to. Last but not least, our distribution strategy is very limited and very specific.
Again, we have a little bit more control and a little bit more dialogue with our agents about our renewal pricing, and we think that is paying dividends today.
Again, one last point. We think of small commercial a little bit like personal lines. We go region by region, and I think you'll see there might be some movement we take down a little bit given the profitability of the book and where we are by region. As I said, I keep coming back to the same point. I think we feel very confident that we'll continue to be priced in a way that's going to continue to drive improvement in our book.
Yeah.
That's all very helpful. I just want to ask on commercial auto, and I apologize if you touched on this in your remarks, I was a little late getting on the call. You guys, I think, are obviously still staying pretty cautious on that line. We've seen a number of other competitors that have had some concern about trend there. We are getting a lot of rate in that line now for a while. I'm wondering what your view is of how much longer it might take for either you or the industry to sort of get a handle on this line and sort of turn the corner.
Yeah. Thanks, Daniel. This is John C. Roche again. I think in the industry, I think you're going to continue to see quite a variety of results because some got to it sooner, some diagnosed the situation differently. For us, we've been at this for 3 years. It's been a bit of a moving target in terms of when would the BI severity levels level off. We are cautiously optimistic that we are seeing the severity itself level off, and even in some pockets, start to improve. Some of that's driven by the fact that we've taken some fairly substantial underwriting actions, particularly in the major metro geographies. That alone starts to drive your BI severity levels in the downward direction. To your point, we've been achieving price over loss trend for several quarters now.
The auto line leads our pricing right now in the upper single digits. I can say we're cautiously optimistic that the improvement that we're expecting and that is appropriate is going to start to show through.
Yeah. I would say one other thing to your point, Daniel, it's because some people are a little bit late, I think, to recognize, the market is still receiving the price right now, right? For us, that's a good thing, right? There is really, the market has kind of moved. I think we were ahead of it, so there's some room here to continue to push.
Okay, great. Thank you very much.
Thank you, Dan.
I would now like to turn it back over to Oksana for closing remarks.
Thank you all for joining our call today, and see you next quarter.
Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect.