Meadowbrook Insurance Group Inc. Q1 2010 Earnings Call Transcript
Before reviewing our results, I will take a few moments to discuss some changes we made to the presentation of expense line items on our income statement. We are excited about these changes because we can not report consolidated results in a manner that will enable you to calculate our combined ratio from the face of the consolidated income statement.
In 2010, we completed an in-depth cost allocation study and made refinements to our process to track these costs on a functional basis. The purpose of the study was to align our internal expenses with key areas of activity, such as underwriting and related policy administration, claims administration or otherwise referred to as ULAE, general, selling, and administration costs assisted with the production and management of net commission and fee revenue and general corporate expenses.
Upon completion of the study, we have the information to better define our inter-company fees and to treat these fees as an inter-company cost reimbursement for financial reporting purposes.
This enabled us to align the consolidated results with the underlying nature or function of the internal activities and expenses. Previously, we used estimations based on an overall cost study that focused on inter-company fees in total and the reasonableness of the allocation between claims administration and other underwriting activities.The previously disclosed salaries and benefit expense line item and the other administration expense line item are now included in one of the following four line items, based on the function to which they relate, net loss and LAE, policy acquisition and other underwriting expenses, general, selling, and administrative expenses and general corporate expenses. This reclassification of expense is for presentation purposes only. No expense has changed and the bottom line does not change.Last evening, we filed a Form 8-K as a supplement that illustrated a summary of this reclassification. Hopefully these changes will improve transparency and make it simpler for everyone to calculate our expense ratio, our loss and LAE ratio and combined ratio from the face of our consolidated income statement.
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