Question-and-Answer Session
Operator
(Operator Instructions). Your first question comes from Paul Newsome – A.G. Edwards.
Paul Newsome – A.G. Edwards
Good morning. I was hoping you could give us just maybe some more details on the reserve release in the fourth quarter. It was wonderfully high and a pickup from prior quarters. Should we be reading something into that based upon claim counts in the fourth quarter or is that a normal true-up pattern in the fourth quarter, just whatever you can give us is great.
Charles Divita
Good morning, Paul. What we did in the fourth quarter obviously is complete our extensive year in reserve study. What we saw is really a reaffirmation of what we've seen in prior reserve analysis, frequency remaining at historically low levels, the severity measures being well within our expectations and so because of those results, it led us to lower our current year loss ratio because of the results we've seen and also recognize additional favorable prior year development.
In terms of the level and what we might see going forward, I think it is important to point out that we've seen dramatically improved claim results since 2003 and over 85% of our reserves sit in accident years 2004 through 2007.
So assuming the claims trends continue, we could see additional favorable development. I wouldn’t comment on what specifically that might be or read into the quarter how much that might be other than to say obviously we are very comfortable with the favorable development we recognized, the change in the 2007 loss ratio and where we stand with reserves.
Paul Newsome – A.G. Edwards
Great, thank you.
Operator
Next question comes from Mark Hughes – SunTrust Robinson Humphrey.
Mark Hughes – SunTrust Robinson Humphrey
Thank you very much. I just wanted to make sure I heard correctly that severity was level year-over-year in the fourth quarter?
Charles Divita
Yes, the severity measures that are underlying the reserves are level. In fact, they're probably stable and even down some. In terms of our (quip?) percentage overall, the paid losses, the severity trends, etcetera, so that's what we mean by that. The severity measures altogether continue to be very good.
Mark Hughes – SunTrust Robinson Humphrey
Right, how much of that is mix shift in favor of the lower risk specialties versus the broader market trends?
William White Jr.
Mark that’s really due to the fact that our policy limits are relatively low compared to other markets. 85% of our policyholders only carry limits of $500,000 per claim or less with the bulk of those, roughly 63% of our total policyholder account, at $250,000 per claim limit. That caps what severity can be in any given year.
- To read the full transcript on Seeking Alpha, click here »
