Mark Hughes: Yes. Did you have any movement in the reserves on the large accident that came at the end of – was it 2022?
Janelle Frost: No. No, we have not. No, we have not. We feel very comfortable with the reserves that we initially recorded for that claim.
Mark Hughes: Yes. The audit premium is holding in there pretty well. One might have thought with the economy slowing that would be tapering a bit. Is there any particular area you’re seeing better audit premium?
Janelle Frost: Mark, across our book, we’re seeing strong audit premium. We – across our book, I can tell you, we had about 7.4% of what I would call payroll growth, 5.6% of that was wage growth. And if you look at BLS data, I think the wage growth number projected at least for construction or maybe the country-wide is 4.1 as of the last quarter. So we’re running slightly higher than that. That doesn’t really surprise me, given the skilled labor jobs that we ensure. And we’re still not seeing a large influx of new employees. Now what the labor market will do in 2024, that I don’t know, but construction jobs are up that we feel pretty confident in that – that being a large part of our book of business, that should be pretty resilient in 2024.
Mark Hughes: Yes. I was going to ask you that question. You used the formulation of kind of the next job, but it sounds like you see construction holding in there pretty well.
Janelle Frost: We do. We do.
Mark Hughes: Okay. And was the 7.4% and 5.6%, was that the fourth quarter or was that full year?
Janelle Frost: That was fourth quarter. And it was right in line with third quarter. If you recall, third quarter was 7.5%. So in line, not – no real deterioration between the two quarters.
Mark Hughes: Yes. And do you think the still projected loss cost going to be down high single digits again?
Janelle Frost: I do. And again, that’s Janelle’s opinion, but I do. I mean based on the things that we’ve seen come in, the approved loss costs that have already come in the door this year, I do think that. And I just don’t see anything on a macro basis that’s going to change that. I mean we’ll get industry-wide results in May, and we’ll see what that looks like. But just based on following other companies and their reporting, I don’t think anyone has had any large surprises in terms of losses. Concerns, I think we can all list the things we worry about, but haven’t really seen it in the results. So I don’t know that that will change the perspective on loss costs.
Mark Hughes: Yes. You mentioned the growth being helped by your ease of doing business. Anything on the competitive front or your change in your own appetite in terms of end markets, class codes, anything like that…
Janelle Frost: No, I appreciate the – looking for clarity on that. No, we – we have not changed our underwriting approach. We have not changed our mix of business. We haven’t changed our risk tolerance. This is really just about trying to further our relationships with our agents.
Mark Hughes: Yes, yes. Okay. Yes, I think that was it for me. Appreciate it.
Janelle Frost: Thank you, Mark.
Operator: [Operator Instructions] We’ll take our next question from Bob Farnam with Janney.
Bob Farnam: Hi, there. Good morning.
Janelle Frost: Good morning, Bob.
Bob Farnam: I think I have – I have additional questions on the approved loss cost. So this year, you got Florida down 15%. You have a change coming up in Louisiana, down 9% or so. I’m curious, do the classes of business that you write, are they comparable to the overall the statewide averages? Or are they better or worse in terms of kind of loss cost terms?
Janelle Frost: That’s a really good point, Bob. They are. They run – it run – our book of business sometimes varies a little higher, sometimes a little lower. But on average, I think using the industry-wide if you’re trying to model out, I think using the industry-wide approved loss costs does track with our own experience.
Bob Farnam: Okay. And this is probably more of a kind of a philosophical question. But as the approved loss costs continue to go down, at some point, you’re going to go beyond where they should go down. So you’re going to kind of miss the inflection point I believe.
Janelle Frost: Yes, yes.
Bob Farnam: So how do you ensure that your strong profitability remains if kind of the underlying loss costs have gone too far?
Janelle Frost: It goes back to what I was just saying earlier, the fact that we are individually underwriting our accounts, and we’ve had a very consistent book of business for a long period of time. So I think my underwriters have a true expertise in understanding how much rate or how much – how many dollars of payroll we need to cover our loss and to cover the margin that we want in that individual book of business. Hence, why we always try to report the – we have been reporting the ELCM. It was just trying to give you a measure. It’s not absolute cost. But the fact that we’re not chasing that 10%, 20% – or 10%, 15% down in terms of the rate that – the approved rate. We have – I think we have the expertise to understand that rate per $100 of payroll and what it takes for an individual risk. But we’re highly relying on our expertise versus the industry-wide averages.
Bob Farnam: Right. Just refresh my memory, does the ELCM, does that include or not include kind of scheduled credits and debits?
Janelle Frost: The ELCM would include that. So it’s sort of the aggregate. If I took all my states and aggregated them together, it would be inclusive of that.
Bob Farnam: Yes, that’s what I thought. Okay. Thank you.
Janelle Frost: Thank you, Bob.
