Argo Group International Holdings, Ltd. (NYSE:ARGO) Q3 2019 Earnings Conference Call - Final Transcript
Nov 08, 2019 • 11:00 am ET
Kevin J. Rehnberg
And the lines that are not getting it are the ones that are most profitable in the industries.
Okay. Thanks for the color there. And then so what are your current loss cost trend assumptions? And why do you think you need to take extra rate to get ahead of loss trends?
Jay S. Bullock
Well, I mean, look, the loss cost trend assumptions have been consistent for the last couple of years in the sense that we -- well, yes, our approach to it, sorry, has been consistent. So we're taking in current factors that we see in the environment. And so, to the extent that those current factors are suggesting that loss cost trends are accelerating, which they are in certain areas, that gets factored into our pricing. So I can't really get into specific loss cost assumptions by line of business. But we're always factoring in the current environment. And so, if you think about, for example, the current environment and professional liability, right? There's a belief and some examples of the losses [Phonetic] are increasing and becoming more frequent. And so that is, I think, reflected in the fact that market pricing is moving up quite significant to get ahead of those loss cost.
Okay, thanks. And then just moving on to the expense ratios, it looks like U.S. was down year-over-year and international is up a bit. So how should we be thinking about both of those individually going into 2020? And what's a good consolidated expense ratio that you're targeting in the next year?
Jay S. Bullock
Well, we stand behind our target of incremental year-over-year, trying to knock 100 basis points off the loss ratio. I think next year, our target would be another 100 basis points of being solidly in for the year and a 36 [Phonetic] area. As it relates to the expense ratios, it's pretty easy to explain. Scale is what's driving the U.S.
International, is, and as I mentioned, additional technology spend. And I -- and that bears a moment of explanation because that's not digital spend or something else. It's just more expensive these days to manage things like security, to manage things like infrastructure. And that's part of also what gets factored into our thinking about the platforms that we have. And by that, I mean, more sort of the legal platforms and where we can write the business and so forth. And how we can simplify that and how we can make that more streamlined. Much as Kevin has done in the U.S., that's the idea internationally. So overall, for our group, I've provided a number. We need to make improvement in international. We've got to figure out how to do that because all things being equal, we won't see the same level of scale in international that we have in the U.S.
Okay. And then just lastly, one for Kevin. So apart from the expenses that we just talked about, what lessons can you take from the U.S. segments persistently strong