EIG
#I will take that question, <UNK>.
I'd be reluctant to forecast where this might go.
When we look at reserves on a quarterly basis it is our best estimate at that point in time.
If you look at where the development was presently coming from, the bulk of it was coming from 2013 and 2014.
And we attribute a fair amount of that to the accelerated settlement activity that we've discussed just previously.
So that certainly has had a very positive impact on losses and, again, I think seeing it in 2013 and 2014 is significant.
You will recall that when we did the reserve strengthening several years ago we had an increase in our provision rate for 2013 in the fourth quarter of 2013.
It was at the time what we felt was necessary.
And I think what you are seeing here now with that favorable development in 2013 and 2014 is that our initiatives are having a positive impact.
Again, I can't forecast that out, that would be inappropriate, I believe, at this point.
But certainly we will continue the initiatives that we think will drive better cost containment loss control.
The approach there, <UNK>, is we will take it when we see it.
We are not ---+ we don't take it anticipating that there is more to come.
It is reflective of what we are seeing at the point in time in which we do the loss evaluation.
Now you referenced some of the improved performance we've had relative to the industry and specifically I believe that's a reference to our experience in California.
Relying on the data of the Workers Compensation Research institute we consistently outperform the industry in terms of average medical cost.
And I think what you are seeing in the reserve release is, in fact, reflective of that, the outcomes-based network that we put in place in California and across the country.
I think that will be supportive of generally better-than-industry average results going forward.
Yes, let me turn that over to <UNK>.
<UNK>, in terms of the commission results that we reflected earlier, as you would expect our commission arrangements in terms of our agency incentive agreements with some of our key agents reflect both growth goals as well as profitability goals, loss ratio goals.
And some of our agents did not meet all of those criteria and some of them didn't meet the growth criteria.
So as a result of that, the payments to those agents specifically were lower than we would have anticipated.
I referenced that a little bit at the end of my comments.
I think as we look at 2017 we expect that there is going to be continuing pressure on the top line because as declining loss costs following rates and a very competitive marketplace everywhere.
So our focus will remain on retaining the outstanding business that's on the books today and then very selectively pursuing growth opportunities where we can get the appropriate return.
In terms of what we expect to see on the loss side, I think the declining frequency trend is likely to continue.
I think there are some shifts in the economy that are occurring that have been occurring for many years that will continue going forward.
And so I would expect to see frequency continuing to be supportive of a declining loss cost.
Offsetting that, and maybe this is where the uncertainty is will be what happens on the severity side and specifically what might happen on the medical side, we've been through a fairly sustained period of very stable medical inflation.
Really below expectation and Worker's Compensation medical inflation being below CPI medical inflation.
Given the uncertainty around what could happen with the Affordable Care Act and whether or not any of that has an impact on workers compensation cost is an unknown.
It is not something that we are worried about, but it is something that we will be carefully monitoring because we could see an uptick in medical severity.
I am not forecasting that, but it is something we are watching for.
Yes, <UNK>, do you want to take that one.
Sure.
One of the things that we continue to see is when we evaluate our payroll at final audit relative to the payroll estimated at the inception of the policy, which is generally 15 months after the policy was intercepted, we continue to see payroll growth.
And as you know, a big part of our business is the restaurant class and that's consistent within that class, as well.
But we continue to see increases in payroll overall.
That hasn't deteriorated over the year.
In fact, it's been pretty stable.
It's clearly reflecting the fact that the employers that we write our actually hiring more employees, in some cases just adding hours to existing employees.
We have not seen that deteriorate throughout the year.
I don't know what that means for the future, but clearly we haven't seen any deterioration over the past year.
I don't know that it's reflective of a change in our thinking.
We have been looking to increase the yield through the dividend.
Obviously, the declining activity in share repurchases is connected to the rapid increase we saw in our share price in the fourth quarter.
We have always viewed share repurchases as a very powerful tool to return capital to shareholders, but we have been very opportunistic in the way we do that.
So on a quarterly basis we consider all of the tools that are available to us to return capital that we believe is excess of what's necessary in the business.
I will let <UNK> answer that.
Sure.
<UNK>, clearly one of the contributors to our new business growth has been the new states that we have gone into in 2016.
New York has driven a lot of our strong growth.
But even some of the existing states that we've been in, particularly in the Northeast territories, Pennsylvania, New Jersey and then down in the Southeast.
Florida, we've seen significant growth in Florida, as well.
And then in California, we've talked a lot about Southern California and what's been happening there, but in the Bay Area and other parts of the state we saw significant growth in 2016, as well.
So those are some of the larger contributors to the new business growth we've seen in 2016 over 2015.
I think we are.
In fact, in the fourth quarter for Los Angeles we actually grew our new business for the first time in a while.
So I think we've plateued there.
It still is our largest.
It's the largest market, and we obviously are still very interested in writing business that's profitable for us in that territory.
So we saw a turn in the fourth quarter that I think bodes well for us in that territory in the future.
Yes, I will take that.
Yes, that was principally coming from 2013 and 2014.
Well, let's take a look at what some of the drivers are here.
I referenced in response to one of <UNK>'s questions some of the initiatives, particularly in California but also nationwide in terms of the outcomes-based medical network we have in place.
That continues to drive much better results and there's no reason to believe that that's likely to change.
The accelerated claims settlement activity was really directed at a body of claims related to specific years.
But that will continue going forward.
And we have every reason to believe that that will continue to drive better outcomes than we've had in the more recent past.
Clearly, we will hit some point where the market plateaus.
But we believe that those initiatives along with the things we are doing in terms of better analytics around claims management will continue to support a stable if not improving loss environment.
It really isn't a consideration or a principal consideration to capital management for us.
Clearly we have been able to build a much stronger capital position from the standpoint of the A.
M.
Best rating.
If you will recall we had some fairly significant growth that occurred in 2011 and 2012 that was creating a growth penalty or a capital charge relative to our A.
And as that charge ran off over about a three-year period of time it really allowed that capital to come back in from a ratings standpoint.
Couple that with the increased profitability we've seen over the last several years and it's really completely rebuilt our capital base from a ratings standpoint.
So is it a consideration.
Well, certainly it's always a consideration.
But I don't view it as being a constraint in any way.
Thank you.
I thought about that, <UNK>, and I actually went back and looked at those numbers.
I've said this before and I'm feel comfortable saying it, I think we got 2013 pretty close to write.
We made that adjustment in the fourth quarter because of the trends we were seeing in that quarter.
Those were real claims.
They didn't go away.
Fortunately many of them are now being settled.
But I think in the end 2013 will prove to have been about the right call with the adjustment we made in that fourth quarter.
Very good, thank you.
Thank you everyone for joining us today.
Again, a very strong quarter and a very strong year.
We think we are heading into 2017 with a very good foundation.
I appreciate your participation today and your questions.
We look forward to speaking with you again in a couple of months to report the first-quarter results.
Thanks everyone.
Have a great day.
