Pricing is important, and it’s among the issues facing Definity Financial Corporation as it aligns the expense and loss ratio sides of the recently acquired Travelers Canada business with its own operations.
Those alignment opportunities vary by line of business, Rowan Saunders, Definity’s president and CEO tells a May 8 earnings call in response to an analyst’s questions.
On the commercial side, both Saunders and Obaid Rahman, Definity’s executive vice president for Commercial Insurance say, that market is divided between large account segments where competition has intensified, and smaller accounts.
“We’ve mentioned in a couple of quarters, that the market is bifurcated where competition is most intense in the large account segment,” Rahman tells the call. “Over 80% of our business is not in that segment. When we look at the renewal book that we have, we have strong retention, and we’re still getting strong rate on the majority of that book. We don’t really have any concern with how the renewal portfolio is performing, the margin it’s holding, no concerns there.”
Commercial approach
As for new business within commercial segments, underwriting discipline is pushing a shift in the portfolio mix to ensure Definity is writing more smaller accounts than larger accounts.
“What that’s doing is, it’s having an impact on the overall growth, premium growth percentage by about a couple of points, but we are gaining market share, maintaining our margin and we’re continuing to grow the customer base…,” Rahman tells the call. “We’ve talked about how well the Travelers’ integration is going. We expect that retention of that book to continue to strengthen as we move forward. We’re already very close to where the Definity retention is.”
Related: Definity Q1 earnings show Travelers integration producing results
With Q1 behind them, the company is onboarding new underwriters as part of the transition.
“The first wave of production underwriters from the Travelers side got deployed towards the end of Q1. The second wave is coming in Q2,” he says. “What we see is that extra capacity that will come on board, as well as the new products and capabilities that will keep on rolling through the year. That will give us a boost in growth.”
Meanwhile, the digital platforms on the small business side will help the company gain share on the specialty market side.
“We’re managing the cycle with a lot of discipline in terms of preserving margin. Our small business specialty, as well as the Travelers capabilities com[ing] on board, will continue to give us market outperformance and be sort of in that mid-single-digit range as we go through the year,” Rahman tells the call.
Overall, for commercial lines, and for personal lines home insurance, “there are not any material segments or portfolios that don’t fit our appetite or need significant actions,” Saunders says.
Personal auto probably had the most loss, Saunders says.
“There will be two things happening there,” he says. “There will be their own rate filings that started last year earning through. Then as it converts onto our platform, the portfolio will become aligned with Definity binding rules, segmentation, and pricing. That’s just automatically going to happen over the conversion cycle.”