Brian Hertzman: Sure. So on the general liability occurrence, I think it’s important to know there can be changes in mix of business. And we also have been getting significant rate increases there. And then in some of like our excess businesses, we’ve also still been looking at higher attachment points and higher deductibles. So there’s really a change of mix of business that’s happening that kind of mutes the impact on the loss pick changes. In the claims made, we tend to be conservative early on and then that sets us up for more changes of favorable development there.
Andrew Andersen: Okay. Thank you.
Operator: Thank you. Our next question comes from the line of Meyer Shields of Keefe, Bruyette & Woods. Please go ahead, Meyer.
Meyer Shields: Great, thanks. I think earlier, Carl, in your comments, you talked about 20% plus rate increases in commercial auto. And I’m wondering how we should think about that impacting demand for captive solutions as opposed to maintaining same insurance programs companies that have?
Carl Lindner: I don’t think it probably has that big of an impact one way or the other. I mean, the whole marketplace is struggling with social inflation in the commercial auto liability side. And the market is allowing increases now. On specific captive accounts, if the experience is better, then it wouldn’t be the 21%. Probably some parts — some accounts and some businesses that got lower price increases and those that haven’t had great results higher.
Meyer Shields: Okay. So then I guess where I’m going with this is to just infer that as those rate increases earn in the improving on writing profit should basically emerge in a typical fashion instead of being sort of offset by clients retaining significantly more risk?
Carl Lindner: Yes. Again, it’s our goal to improve the commercial liability combined ratios over the next year or two and hence, having stronger overall commercial auto results. That’s — and as I mentioned in some of the specialty casualty lines, we’re very underwriting profit driven company. I mean in commercial auto, we’re probably outperforming the market by five or six points at East and we’re serious about getting the right returns on that business. So if anything, on that part of the business, I’d say our guys are serious on getting the pricing terms changes and the selection of business that achieves our goal of improving things over the next year or two. So definitely, our guys would be more focused on improving that result than growing a ton right now.
Meyer Shields: Okay. Perfect. And if I can switch gears briefly. Is the growth in Specialty Financial likely to impact the amount of reinsurance that you want to carry for the rest of the year?
Carl Lindner: Definitely, that’s something that we — as that business has grown, that we definitely are monitoring. I think in fact, I believe we’re looking at purchasing some gap insurance to cover the gap between our underlying cat tower and the catastrophe bond that we have.
Meyer Shields: Okay, perfect. Thank you very much.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Charlie Lederer of Citigroup. Your question please, Charlie.
Charles Lederer: Hey, thanks. Just one follow-up. You mentioned the alternative markets business a little bit. We’ve heard about certain specialty peers kind of scaling it back after experiencing losses there. I know it’s relatively small dollars for you. But curious if you can share whether your thoughts have changed on that business?
Brian Hertzman: I assume you’re referring to the innovative markets business, where we talked about having…
Charles Lederer: Yes. I misspoke. I said alternative. Yes, sorry, innovative markets, the IP business.
Brian Hertzman: So in that business, we’re evaluating the opportunities there and some of the particular programs that those losses are things that were no longer operating new coverages in.
Charles Lederer: Okay, thank you.
Brian Hertzman: Charlie, while we have you on your question earlier about prior year development in the Specialty Casualty, I think it’s important also when you’re looking at that to put it in context, where we’re coming from in those results. So when you look at the businesses that we had some adverse development in, those are still very profitable businesses for us. For example, for the full-year 2023, most of our more social inflation exposed businesses had a counter underwriting profit despite some of the noise there. And only one of them had a return on equity that wasn’t double-digits. In fact, when you look at our excess and surplus businesses overall, — all three of those had calendar year ROEs above 20% in 2023. So I thought it might be just good to remember when you’re thinking about some of the lumps in prior development that those are in businesses that are generally very profitable over a long number of years.
Charles Lederer: Great, thank you.
Operator: Thank you. Our next question comes from the line of Michael Zaremski of BMO. Your question please, Michael.
Michael Zaremski: Okay. Thanks. Just a quick follow-up, probably for Craig. But on the real estate returns. I guess I probably should know this, but I don’t think we all fully appreciate it. Does the — how does some — is it a mark-to-market there? Or how does that work? I think we appreciate how private equity works and sometimes a lag and how the private equity firms mark that, which I think are third-parties. But can you remind us how other marks are created on your real estate portfolio? Thanks.
Craig Lindner: Sure. It is similar to the private equity investments and that the general partners in our multifamily — with our multifamily investments, review the valuation on a quarterly basis and mark them to market on a quarterly basis.
Michael Zaremski: Okay. Got it. So the interest rate — so it’s — so just as a follow-up, could there be — historically, has there been more volatility on the PE or the real estate, if there’s a way to kind of just high-level size up whether we should maybe be thinking about there — maybe there can be some lumpy quarters that actually come from real estate, whereas I thought it usually came from private equity?
