ProAssurance Corp (PRA) Q1 2021 Earnings Call Transcript

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ProAssurance Corp (PRA -1.46%)
Q1 2021 Earnings Call
May 7, 2021, 8:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone. Welcome to ProAssurance's conference calls to discuss the company's first quarter 2021 results. These results were reported in a news release issued on May 5 2021. Please review that document. Management expects to make a statement with this call dealing with projections, estimates and expectations and explicitly identifies these forward looking statements within the meaning of the US federal securities flows and subject to applicable safe harbor protection. The contract this call is accurate all your main business benefits anyone and except as required by law regulation, pressure and will not undertake and expressly disclaim any obligation to update alter information disclosed as part of the former leuke statement.

This management team of brochures also expects to reference non gap items during today's call. The company's recent news release provides a reconciliation with no gap numbers to their gap counterparts. Now as Attorney call the domestic Canon mckibbon of electric. [Operator Instructions]. There will be a time for questions after the conclusion of prepared remarks.

Mr. Ken McEwen, please go ahead.

Ken McEwen -- Investor Relations Manager

Thank you, Francesca. Good morning, everyone. Our Call Today we have Ed Rands President and CEO Dana Hendricks Chief Financial Officer Mike Bogusky, President of our Specialty Property and Casualty lines, and Kevin Shook President of our Workers Compensation Insurance Operations.

Ed, I'll turn it over to you.

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Thanks, Ken. The landscape looks much different than it did at this point in 2020. And not just regarding the pandemic. This time last year, we were looking at a very challenging quarter, and a long road ahead in pursuit of our planned acquisition of the Nord cow group. Today, however, I'm pleased to say we've made outstanding progress in both areas. For the quarter, we got off to a strong start in 2021, as each of our major segments recorded improved results. This represents the continued benefit of the work we've completed over the past two years. And we'll look to build upon this momentum through the remainder of the year. At least as exciting as the improvement in our results whoever is the latest news from the NorCal transaction.

I'm pleased to announce that after over two years of discussions planning and playing hard work on behalf of employees at both companies. We closed the acquisition of Nortel yesterday afternoon. This is a major milestone for proassurance and Nortel and we're excited for the opportunities the deal delivers to our customers and our shareholders. We're excited about the close of the transaction in the strategic value of presents. However, we know the true measure of our success will be the successful integration of the organizations and executing on our strategies to deliver on our short and long term goals. To our new colleagues at Norco, welcome. I cannot overstate how pleased I am to add your many contributions to our business and culture.

Now I'd like to turn the call over to Dana so she can lead us into the results for the quarter, Dana.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

Thank you, Ed. For the first quarter, we saw meaningful quarter over quarter improvement in our underwriting results along with a strong performance from our LP and LLC investment portfolio. Further, each of our operating segments recorded quarter over quarter improvement in its bottom line, with the exception of the Lloyd's syndicate segment. As a result, we reported non gap operating income of approximately $2.1 million or four cents per share. Gross premiums written decreased quarter over quarter driven primarily by the non renewal of two large accounts and specialty PNC, which Mike will address momentarily.

The decrease was also attributable to our reduced participation in Lloyds syndicate 1729 and, to a lesser extent, continued competitive conditions in all our lines of business. Even in the current competitive environment, we were able to secure $18.8 million dollars of new business, a quarter over quarter increase of $5.3 million driven by our specialty healthcare and medical technology liability lines business. Our consolidated net loss ratio was 79.9%. A quarter over quarter decrease of one percentage point attributable to our specialty PNC and workers compensation insurance segment, largely offset by natural catastrophe activity in our Lloyd syndicate segment.

Well, overall favorable reserved development was lower due to the adverse development at Lloyds, we recorded higher levels of favorable reserve development in our specialty PNC and workers compensation segments. Our consolidated underwriting expense ratio for the quarter was 30.1%. A slight decrease from the prior year quarter, despite lower top line revenue, further evidence that the strategic initiatives to improve our underlying expense structure executed in 2020 are having the desired effect.

From an investment perspective, our consolidated net investment results increased quarter over quarter to $21.8 million. Driven by $6.8 million of income from our unconsolidated subsidiaries, we invest in various LPs and LLCs. And the results of those investments are typically reported to us on a one quarter lag. Accordingly, the earnings from unconsolidated subsidiaries in the current quarter represents the gains in value of LPs and LLC is in the fourth quarter of 2020.

Consolidated net investment income was $15 million in the quarter down from the year ago period, primarily due to lower yields from our short term investments in corporate debt securities in the current low interest rate environment, as well as a decrease in our allocation to equities. In addition, the decline in net investment income reflected the impact of Capital Planning in anticipation of closing our acquisition of Nortel. Ken.

Ken McEwen -- Investor Relations Manager

Thanks Dana. Mike, will you please take us through the specialty TNC segment.

Michael Leonard Boguski -- President, Specialty Property And Casualty

I will Ken. The specialty property and casualty segment continues to execute execute a comprehensive business strategy to address our operating and underwriting results. Although we record in an underwriting loss in the quarter, we are encouraged by the 6.5 percentage point reduction in our combined ratio from the first quarter last year and continued positive momentum. As Dana mentioned, gross premiums written contracted in the quarter, primarily due the non renewal of two policies and specialty healthcare, representing $13 million of premium writings.

The retention loss of these two accounts reflects discipline pricing and underwriting decisions. We will continue to focus on underwriting discipline and achievement of our long term profit objectives. Managing the segment's top line as necessary to improve our bottom line. As a result of these aforementioned non renewed accounts, premium retention for a specialty line of business was 56% in the quarter. Standard positions, however, increased 86% a quarter over quarter gain of six percentage points.

While standard positions retention was has largely stabilized from the impact of price strengthening and state strategy re underwriting initiatives over the past year and a half. It remains slightly lower than than our historical average for this line of business. Retention in our small business unit and medical technology liability business both increased to 91% and 87%, respectively. With the non renewal of the two specialty accounts behind us, we anticipate retention rates for the segment will continue will continue to normalize going forward.

We achieve renewal protein price increases of 6% in the segment driven by price increases in our standard positions in specialty businesses of 6% and 8% respectively. However, in addition to the pricing increases in specialty, we continue to strengthen rate adequacy through adjustments to product structure, terms and conditions. increased level of new business written in the quarter, totaling $12.1 million was primarily driven by $8.7 million from our specialty business, an increase of $6.8 million from the comparable period of 2020.

Furthermore, new business in our med tech line increased by $1.1 million to 1.8 million. The current action that year net loss ratio decreased 4.4 percentage points, which primarily reflects the improvement from our re underwriting efforts and pricing gains. We observed a reduction in claim for frequency in 2020. That has continued in 2021 some of which is likely associated with the pandemic as courts, and jury trials in most places have yet to return to normal schedules.

We remain cautious in recognizing these favorable frequency trends in our current action at your last pick, either the long tail nature of our lines of business and the high degree of continuing on uncertainty that COVID-19 has introduced into operating conditions. Speaking of COVID, we have not seen significant emergence of additional suits from the incidents reported today, with with only nine actual suits filed. As of the end of the first quarter. We continue to carefully monitor pandemic related claim activity, and no additional ibnr reserves have been book since the second quarter of 2020.

Despite the challenges of the current loss environment, we recognize net favorable development of $2.7 million primarily in our med tech business, which is an increase of about $300,000 compared to the first quarter of 2020. Especially property and casualty segment reported an expense ratio of 22.8% for the first quarter, an improvement of 1.8 percentage points from the year ago quarter. Despite lower net earned premiums. We continue to benefit from organizational restructuring efforts and proactive expense management.

To conclude and as Ned mentioned in his introduction, we are delighted with yesterday's closure of the Nortel transaction. We are especially pleased with the response of Nortel policyholders to our tender offer through which we have acquired over 98% of the stock of Nortel insurance company, the successor to NorCal mutual. This is an exciting day for proassurance one that represents the hard work and dedication of employees at both companies.

And I'd like to thank them all for their contributions to the close of the transaction. We look forward to the discipline, integration of the companies in a very, very bright future. Together, we are confident in our ability to deliver a premier healthcare professional liability platform on a national basis. Ken?

Ken McEwen -- Investor Relations Manager

Thank you, Mike. And congratulations again to you and the team. Now I'll ask Kevin Chuck to give us some details on the workers compensation insurance. segregated portfolio sell reinsurance, Kevin.

Kevin Merrick Shook -- President, Workers' Compensation Insurance

Thank you, Ken. The workers compensation insurance segment produced underwriting income of $1.9 million and a combined ratio of 96.2% for the 2021 first quarter, compared to 98.7% in 2020. The decrease in the combined ratio quarter over quarter reflects improvements in both the net loss ratio and underwriting expense ratio. During the quarter, the segment booked $72.3 million of gross premiums written a decrease of 8.7% quarter over quarter renewal price decreases in our traditional book of business were 2% in 2021, compared to 4% in 2020, and premium renewal retention improved to 89% for the first quarter of 2021.

From 85% in 2020. Traditional new business writings for 2021 were $5.9 million dollars compared to $8 million in 2020. audit premium and our traditional book of business decreased $2.5 million quarter over quarter, reflecting the economic conditions associated with the covid 19 pandemic and its impact on Final audits of policyholder payrolls. The decrease in the county or loss ratio from 66.9% in 2020 to 65.5% in 2021 reflects prior year favorable development of $2.2 million in 2021, compared to $1.5 million in 2020 partially offset by an increase in the current accident your loss ratio from 70.2% in 2020 to 71% in 2021.

The claims operation closed 18.2% of 2020 and prior claims during the 2021 quarter consistent with first quarter historical trends. The increase in the current accident your loss ratio reflects the impact of renewal rate decreases and the reduction in audit premium partially offset by the impact of favorable prior year trends on the 2021 loss estimate. reported claim frequency for non COVID claims decreased 19% during the first quarter of 2021 compared to pre pandemic run rates. Gross undeveloped incurred losses for the 1754 reported traditional COVID claims since March 2020 Total $2.9 million as of March 31 2021.

Importantly 96.4% of all 2020 and 2021 reported COVID claims are closed as of March 31 2021. And the reported COVID claims trajectory trended downward in 2021 compared to 2020. We continue to monitor legislative attempts to broaden workers compensation coverage in our underwriting territories. While many legislative enactments or proposals expired at December 31 2020 new legislative sessions that commenced in 2021 may revive efforts in this regard, the 2021 underwriting expense ratio decreased 1.1 point 230 point 7% compared to 31.8% in 2020, primarily due to the restructuring initiatives implemented in August 2020 partially offset by a decrease in net premiums earned general expenses were $7.3 million in the first quarter of 2021, compared to $8.7 million in 2020, a decrease of 16%.

The segregated portfolio sell reinsurance segment produced income of $545,000, and a combined ratio of 90.9% for the first quarter of 2021. Premium trends in the SPC ri segment. were largely consistent with those in the workers compensation insurance segment. We renewed all of the captive programs that were available for renewal during the current quarter. The SPC ri segment reported favorable development of $1.4 million in the first quarter of 2021 compared to $1.8 million in 2020. Reporting COVID claims since the beginning of the pandemic, through March 31 2021. For this segment, were 1417 with $3.3 million of gross undeveloped incurred losses. Ken?

Ken McEwen -- Investor Relations Manager

Thank you, Kevin 32 Lloyd syndicate segment now I'd like to ask ned to take us through the results for a monetary investment there, Ed?

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Thanks, Ken. As you know, we reduced our participation in syndicate 1729 for the 2020 underwriting year from 61% to 29%. And the gross premiums written in the segment this quarter reflect that change. The adverse development in our Loyd segment came from higher than expected losses in development on certain natural catastrophes. Our participation in the results of syndicate 1729 and 6131 led us to record a loss of just under $3 million in the quarter. As we disclose last quarter, we have further reduced our participation in syndicate 1729 from 29% to 5% for the 2021 underwriting year. Additionally, we reduced our participation in syndicate 6131 from 100% to 50%, for the 2021 underwriting year. Due to the quarter lag, these changes will be reflected in our results beginning in the second quarter of 2021.

Ken McEwen -- Investor Relations Manager

Thanks, Ed. Any closing comments for us before we open it up for questions?

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Yeah, I do have some Thank you, Ken. I think the progress we're making is clear in our results for the quarter. However, it's important that we maintain this momentum. The fog that COVID-19 settled over the healthcare professional liability and workers compensation insurance industries will take time to dissipate. But in the meantime, our objectives are clear, responsible underwriting, rational pricing and an unwavering dedication to our customers.

Again, I'd like to add my welcome to our new colleagues at Nortel and I look forward to our journey together.

Ken McEwen -- Investor Relations Manager

Thank you, Ed. Francesca. That concludes our prepared remarks and we're ready for questions.

Questions and Answers:

Operator

We will now begin the question and answer session to ask a question. [Operator Instructions] And the first question is from Matt Carletti with JMP securities. Please go ahead.

Matt Carletti -- JMP securities -- Analyst

Hey, good morning. I was hoping you might be able to give us a little more color around market conditions and pricing and terms and conditions that you're seeing. I mean, the nominal pricing increases deal moderated a little bit. Understanding we're several years into the increase now and you're compounding well. It's about the data as it sits right now and how we should think about numbers in that context.

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Right Thanks, Matt. And good morning, I'm gonna I'm gonna let both Mike and Kevin kind of just give a quick update on market conditions for for both healthcare professional liability and work compliance. Mike, do you mind going first?

Michael Leonard Boguski -- President, Specialty Property And Casualty

Of course. Thanks, Ned. And good morning, Matt. What we've seen, you know, in the in the first quarter is some, some moderation of the rate increases, but you do have to keep in mind that, as you described earlier that this has been compounded. So, you know, we have in as an example, in core physicians, a loss pack that makes really good sense for us, in our core states, so that we've moderated that we want to make sure we retain that great, great book of business, it has been a little bit more competitive. As a result, you know, maybe some of the slowdowns on the claim side as a result of the pandemic.

And certainly, we have competitive pressures from mutual players on a state by state basis, but we're pleased with the consistency of the rate increases. We want to retain that quality book in standard positions. And we're certainly have taken most of our underwriting actions in what I would describe as a non non core states from a state strategy standpoint, in the specialty business, the market has been firmer, really nice improvements in terms product structure, and overall rate adequacy on top of the premium rate increases.

So we're hopeful that that that continues, our medical professional liability business continues to be competitive, as it as it is in our small business ISP area. But, you know, definitely a little bit of a slowdown from from some of the terms and conditions that we were able to secure and 2020.

Kevin Merrick Shook -- President, Workers' Compensation Insurance

And then Matt, quick, quick, quickly on comp, you know, the environment remains competitive, certainly, despite COVID-19 and the associated economic conditions, but we are starting to see indications that the market may be bottoming out, you know, accident, your combines of 100 or greater for the industry, larger package, players looking for rate loss cost normalization, and a lot of insurance carriers filling expense ratio pressure from payroll decreases, and the need to underwrite a little bit more. So our rate was down to about minus 2%. And we are starting to see rate on some of the more difficult risks, which, which also is a good sign.

Matt Carletti -- JMP securities -- Analyst

Definitely, you know, past quarter, you have referenced the kind of significant reduction in frequencies in the computer line, you know, largely COVID related. And, Mike, I know, you touched on in your your opening comments, but I was hoping maybe you could just kind of be updated on your thoughts there. More so around just kind of, you know, what the timeline might be in terms of what you might recognize that a little more in the numbers if we need to get to kind of the back end before reopening and let things work in the courts. And that might be several quarters away or help us understand kind of, we know you're observing and kind of optically optimistic, I guess, would be my take away, but you help us understand.

Michael Leonard Boguski -- President, Specialty Property And Casualty

Hey, Matt, I'm sorry, your question that your audio was not good, but I think it was respect to the, to the claim frequency reductions as a result of COVID and some color on that. So I'll try to address that. You know, as we stated, you know, we're taking a conservative view to it because of the slowdown of the system. It is material that the reductions, and this is particularly in the healthcare professional liability area, then you really expect to see that play out as as, as you look at the next kind of 12 to 2012 months to 24 months on on record on recognition of the benefits of that. I mean, you might see some at the end of 2021. But you'll see a really true understanding of that, I think, you know, as we go out into 22, from the standpoint of recognizing it.

Matt Carletti -- JMP securities -- Analyst

Great, thank you so much for the color and your congrats on getting your clothes on board.

Michael Leonard Boguski -- President, Specialty Property And Casualty

Thanks, Matt. Really appreciate your questions.

Operator

The next question is from Greg Peters with Raymond James. Please go ahead.

Greg Peters -- Raymond James -- Analyst

Good morning. Can you hear me? Okay?

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Yeah, Greg, we can hear you, I think that may have just been unmasked blind.

Greg Peters -- Raymond James -- Analyst

Okay, just making sure. So I know you are excited about the, the Nortel acquisition. So I'm looking at, I think, which is the statutory summary of the results over the last five years and the loss ratio or in 1617, and 18, looked to be in the high 70s. And then in 2018, popped up 245 is the debt I had, it might not be the right data, and then in 2020, it's still elevated to 106. And that loss ratio is higher than your group average. So maybe it just can comment on what we should be thinking about as you merge this entity, which looks like it was running at a higher combined ratio, higher loss ratio than where your company's at.

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Hey Greg, thanks for that question. Mike, do you want to respond first?

Michael Leonard Boguski -- President, Specialty Property And Casualty

Sure, I mean, I think is is we look at their force first quarter results, Greg that, that through their underwriting, re underwriting efforts, and and throughout 2020, the loss ratios come down to the 96 level, really closer getting closer to us than the historical results. So that's an encouraging trend. But I think that just kind of the big picture of it, when you start looking at a roughly a $300 million core physicians book that they have roughly the same on our side is that, you know, the ring underwriting side of that will really be focused on, you know, just come rate trends and state strategy.

So as we look at the integration of the companies, we will have the opportunity to really evaluate that from a re underwriting perspective, a state strategy perspective, and then really kind of move the loss ratios incrementally the way we have with with with our book of business over the last few years, but they have been working hard throughout 2020 on on their book of business as well. And the other thing that I just say is you look at the combined combined companies is, you know, we've stated this public, we think from a competitive position standpoint, the synergies with the expense synergies on the north calc transaction are kind of in that $20 million range.

And we've kind of done the same thing over the last two years was especially PNC, and in particular, particularly h Cpl. So, roughly in that $20 million range as well. So the other the other strategy here is really to run a what I say a very competitive expense structure, reduce the loss ratios through pricing and state strategy. And really bring this closer together as we go out into the future. That will take some time, but I'm confident in our ability to get that done.

Greg Peters -- Raymond James -- Analyst

Just as a follow up to that, you know, versus your specialty business. It looks like and I made again, my data might be wrong. It looks like they've actually grown their top line in the last two years. And if I compare it with your results, you know, your top line has been under pressure as you've been re underwriting and repricing. So where have they been able to grow where you guys haven't? are assuming my numbers are right here.

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Greg, like Mike, one thing to keep in mind, especially when you look at what they did through through last year, is the pending de mutualization of Nortel and the benefit back to the policyholders or Nortel caused that them to have much higher retention levels. Then then probably the industry average, certainly higher and higher retention levels, then then we have we see that kind of any demutualization that we've been involved in, you see that kind of between the period of announcement and the close of the transaction. But Mike, you want to add some color?

Michael Leonard Boguski -- President, Specialty Property And Casualty

Yeah, Greg, it's a good question. They're, their growth on the new business side has really been in that core physician book in a company wide basis and it was higher Then our new business in 2020. But the other thing on top line trends was their ability to secure to secure rate. Also to re underwrite some of their, they have a much smaller specialty portfolio and and did some re underwriting on that side. So I think both organizations really focused on that. I think the real difference is Ned state is is the demutualization and probably more growth on their side in the core physicians book.

Greg Peters -- Raymond James -- Analyst

Thank you for the those answers. I'm going to ask one more question on North Cal just just because I'm, you know, for the benefit of everyone just trying to make sure I accurately sort of run the numbers through my model or make the best guest possible. Is there any seasonality to the earn premium or the written premium? And then do you anticipate you know, I look at their investment income results? Do you anticipate any change in their investment portfolio as you've wanted to? To proassurance?

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Certainly, there's not a lot of seasonality in their in their earned premium. Greg. Mike, you may know better on the seasonality of of the written side of things. I don't recall there being tremendous seasonality. on that, and Dana wants your question on on investments that might be more difficult about the written side.

Michael Leonard Boguski -- President, Specialty Property And Casualty

Yeah, it's relatively consistent. And Greg, I just wanted to go back to that previous question as well. They did have the Nord count team had a large tail premium. Also during 2020, that drove the top line a bit more than usual, and it was a one off. So I just want to mention that as well. But no, I think, you know, with the core core physicians book, and not allow large, large account business and Nope, hospitals and facilities and larger stuff. The seasonality will be more consistent.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

Hi, Greg, it's Dana here as to your question about Nortel's investment portfolio and how to be thinking about that as we move forward, we will be looking to take down risk at NorCal to be more in line with our investment, portfolio allocation. So they certainly have more in terms of equities. And we'll be looking to take, take that some of that risk out of the portfolio.

Greg Peters -- Raymond James -- Analyst

What just Dana, just one quick follow up on that. What's the total invested asset base that's going to transfer to proassurance.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

We we've got over over a billion dollar invested asset base. That'll that'll come over, I can give you a more specific. I can give you an example momentarily.

Greg Peters -- Raymond James -- Analyst

We we've got over over a billion dollar invested asset base. That'll that'll come over, I can give you a more specific. I can give you an example momentarily.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

Thank you, Greg.

Operator

The next question is from Bob Farnam with Boenning and Scattergood. Please go ahead.

Bob Farnam -- Boenning and Scattergood -- Analyst

Hey, there. Good morning, I just set up maybe a couple questions on the specialty PMC segment. I'm trying to get a feel for and it sounds like probably Matt and Greg, are similar trying to get a feel for what you're actually your loss ratio is going to be doing going forward, you're getting two rate increases, the last trends, you know, have been favorable, but you're not recognizing that you're getting the changes in terms and conditions or whatnot. So I'm just trying to figure out, should we expect your kind of your accident, your loss ratio to improve going forward? Or is this kind of where it is for the time being?

Michael Leonard Boguski -- President, Specialty Property And Casualty

Hey, Bob, good morning, it's Mike. You know, what we're waiting to see here is we've we've made tremendous progress on our on our re underwriting efforts. And we're starting to see the early benefits of those re underwriting efforts. And our goal, obviously, is to bring that down, bring that down further into the future. And it really comes down to when we start to see it in the data. And then also the second piece, which we are starting to see the early returns of that, which is why we were able to reduce the accident year loss ratio in 20. And, and 21. So, you know, we would be, you know, cautiously optimistic that that will continue to improve.

Bob Farnam -- Boenning and Scattergood -- Analyst

You have kind of a goal you're trying to get to I mean, you're you're kind of around 90% right now in terms of accident, your loss ratio, so is that something that you're trying to get down to the 80s and the 70s 60s. You know, is there is there a in mind for you?

Michael Leonard Boguski -- President, Specialty Property And Casualty

Yeah, absolutely. I mean, we look at it big picture and, you know, you know, our initial goal is, is really to get into the, into the mid 70s. And better on a loss and in a LED shit lie side of our business, our core book in fit standard physicians is is running, you know, much better than that when I say core, our physicians business and some of our core states, our non core states are run a bit higher. And, you know, again, one of the challenges is really bringing that specialty loss ratio, which is it, which did not meet our expectations on loss ratio aggressively down. I think that, you know, I'm just, I'm really confident in the underwriting actions that we've made. And it just kind of needs to earn out over over the next, you know, quarters, and we should be able to make improvements going into the future as well.

Bob Farnam -- Boenning and Scattergood -- Analyst

All right, and so in the non renewals that you had in there, is there any anything in particular about those accounts that that you can no force?

Michael Leonard Boguski -- President, Specialty Property And Casualty

Yes, absolutely. The, you know, first of all, we, it was really what I would describe as the last quarter of, you know, heavy re underwriting in specialty we, we've been at this for two years. The first one, we had an $8.5 million, large account, that was on a two year policy. So we did not have the opportunity to Bob to to, to re underwrite that back in 2020, when this was the first time, and that was a result of significant price strengthening, you know, we wanted to make sure we hit our premium targets for that. And we lost that to competition.

The second one pretty important is was roughly about a $4.5 million correctional care account that we non renewed. And importantly on that, by the way, that business has not been profitable for us over the last five years, the correctional care segment, they believe we have roughly five to seven accounts, and we are effectively out of that business as a result of this non renewal. So I think the thing to keep in mind, you know, over the last five quarters, we've we've taken out about $45 million dollars of what I would call more volatile, large account business.

That was not meeting our financial targets for loss ratio. And then we certainly reduced our volatility in senior care. And then we really jumped out of effectively jumped out of correctional care, which was not profitable as well. So when I looked at a big picture going into the future, those are the those that are real, the strong underwriting decisions, and I'm really proud of our underwriting teams, they've done a terrific job that I think are really good to help us on that accident year loss ratio as we go forward. But again, we're seeing the early signs, and I'm excited about where we can go with this.

Bob Farnam -- Boenning and Scattergood -- Analyst

Great, thanks for the thanks for that color, Mike. And one last question I have is the cat losses. Now you mentioned this, the Lloyd second head cat losses, can you kind of quantify the amount of cat losses that you saw?

Michael Leonard Boguski -- President, Specialty Property And Casualty

We may have to not necessarily we had that at our fingertips. There are two things that were going on there. One was cat losses. And recall that for us as a quarter lag, so this is fourth quarter last year. And it was both cat losses that occurred in that fourth quarter as well as kind of increased attritional losses on on prior catastrophes. And, you know, 2020, while didn't have any one large catastrophe has had a high, high number of individual catastrophes, then you may have more detail on that. I'm not sure.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

I do that. Yeah, I have some detail on that and happy to address it. So you know, we we did share a little bit at our year end earnings call in early February that the syndicate saw natural catastrophe losses in their fourth quarter related to hurricanes Laura and Sally and the wind storms that came through the Midwest. And when we talk then those losses on the storms and other natural catastrophes in the last few months to 2020.

From all that we were expecting a segment loss in the first quarter of about two and a half million and so as we expect Did the syndicate did see that deterioration relative to the past quarter on Laura, Sally, the wind storm, approximately $2 million net deterioration there. And then also had losses related to the fourth quarter hurricanes delta and data around 3 million there. So I think that gives you sort of the highlights, but a little more detail.

Bob Farnam -- Boenning and Scattergood -- Analyst

That's very good. Thanks. All the questions for me. Thanks.

Operator

The next question comes from Paul Wilson [Phonetic] of Barclays Capital [Phonetic], please go ahead.

Paul Wilson -- Barclays Capital -- Analyst

Good morning, folks. I have a personal one, I want to beat the Nortel a little bit better. But it's really an accounting question. How will the accounting work for your cow? If your cow if you end up taking reserve charges for your cat, I recognize that there's a piece of the purchase price that changes. But I'm just curious, in that offset those reserved changes. But I'm just curious about how the accounting work just so we're not confused when we first see the second quarter results.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

Yeah, this is, Paul, this is Dana. Essentially, any adjustment to reserves that we make will be made through the purchase accounting adjustment on the front end.

Paul Wilson -- Barclays Capital -- Analyst

So you if you have reserve changes, in the second call after the purchase agreement, would you would that flow through? Or is it you sort of have one shot to do it at the beginning of the purchase agreement?

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

We would fair value that at they at the onset of the transaction.

Edward Lewis Rand Jr. -- President and Chief Executive Officer

I think part of the to your questions. Typically there's a there's a period of time after the close that if they're kind of things become delight, that they would affect the fair value I close that those would push back into any any goodwill number that this is associated with the transaction for down. We our actuaries will will get in starting today and really begin to pound hard on on the reserves come up with what we think the overall reserve number should be. That will be reflected in the fair value of reserves that we established in the opening balance sheet. Our objective there would be that the you know that we did that is a really solid number. But if something were to come to light, you know, shortly after that it would it would flow back into the goodwill number. I think that may have answered your question.

Paul Wilson -- Barclays Capital -- Analyst

Yeah, I think so. And then, kind of similarly, the Lloyd's business, I believe next quarter will be pretty darn small, I think, a very small participation, will it? Will it be material enough to have a separate segment anymore? Or do you think they'll just kind of get rolled up into other parts?

Ken McEwen -- Investor Relations Manager

Yeah, I think so. And then, kind of similarly, the Lloyd's business, I believe next quarter will be pretty darn small, I think, a very small participation, will it? Will it be material enough to have a separate segment anymore? Or do you think they'll just kind of get rolled up into other

Paul Wilson -- Barclays Capital -- Analyst

Is there any possibility that we might see senior losses isn't the same kind of losses that we've seen in the past? Two months?

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Yeah. So largely because of the large number of catastrophes that did occur, and dread 2020 and then kind of into the beginning of 2021. The way that the reconstruction reinsurance structure that we have for the syndicate is structured, there's there's an aggregate cap on exposure that essentially has been breached. And so we'll get reinsurance recoveries on the vast majority of those clients.

Paul Wilson -- Barclays Capital -- Analyst

Right. Thanks for the call. Congratulations on closing your account deal, obviously very interesting, strategic thing to do. So Welcome.

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Thanks Paul.

Operator

This concludes our q&a session. I would like to turn the conference back over to Ken McEwen for any closing remarks.

Ken McEwen -- Investor Relations Manager

Thank you, Francesca. And I actually did want to say one thing. Earlier, Dana, you had mentioned that the net losses from the q4 hurricanes of delta and zeta was 3 million that's that's actually the total for the hurricanes and the windstorm. There was 1 million from delta and divita. And then 2 million from Laura Sally and the wind storms, so just want to make sure that was clear.

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

Thank you. Ken for that correction. I certainly had 1 million in my head and just said the wrong thing. So thank you for that correction.

Ken McEwen -- Investor Relations Manager

My pleasure. I thought you did. I just wanted to make it clear. So I just want anyway just wanted to say thank you to everybody who joined us today. Please stay safe and healthy and we'll look forward to speaking you again in August.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Ken McEwen -- Investor Relations Manager

Edward Lewis Rand Jr. -- President and Chief Executive Officer

Dana Shannon Hendricks -- Executive Vice President, Chief Financial Officer, and Treasurer

Michael Leonard Boguski -- President, Specialty Property And Casualty

Kevin Merrick Shook -- President, Workers' Compensation Insurance

Matt Carletti -- JMP securities -- Analyst

Greg Peters -- Raymond James -- Analyst

Bob Farnam -- Boenning and Scattergood -- Analyst

Paul Wilson -- Barclays Capital -- Analyst

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