Carl Lindner: Yes, I think, every year is a different mix based off, we take an opportunistic approach. We think our stock is especially attractively valued. We’ve shown over this in the past year that we have been in the market repurchasing shares and value that. Where we’re generating large amounts of excess capital at these kinds of returns, special dividends can also be important. But obviously, priorities are organic growth, building or building the business itself. We’re tough buyers on the M &A side, but we look at lots of things and we’re always starting businesses, building businesses and acquiring things that make sense and can earn double -digit returns for us over time. You’ve seen the, our annual increase in our annual dividend has been substantial over time. So we also think our shareholders value a consistent increase in our annual dividend also. I mean, those are, that’s the way we think about things. Each year is going to be a different mix.
Operator: Our next question comes from the line of Michael Zaremski with BMO.
Michael Zaremski: Hey, great. Good afternoon. Just kind of want to make sure as we think through the combined ratio guidance for next year and what ultimately equates to a very strong ROE, of course. If we reflect on 2023 a bit in an investor’s mind, there was a bit of a [inaudible] from kind of social inflationary adverse development. I believe crop was a little below normal. There was an A&E kind of ding, maybe 1% to 2% on earnings. So I guess, just want to make sure like that if I’m thinking about those correctly, so on a go for basis you don’t expect the combined ratio to improve just because I guess maybe pricing can access a trend, but just the trend is still I guess I’m just trying to think through like, am I missing something? I guess the trend is maybe moving a little higher, pricing’s moving higher, but just returns might not be as excellent if I, even if I ex out those items, I just started kind of calling out.
Carl Lindner: I think the returns are very similar, and we’re projecting our business plans for a combined ratio that’s at the same level of a really great year. Certainly in comparison to our peers, it’s one of the stronger performances on underwriting and on return on equity and that so we’re proud of those results. There will be businesses that as in workers’ comp in this year that had less favorable development that have outstanding results when you look back on this year, but the underwriting profit wasn’t as large. There’re businesses as you said like crop-hail that had a below average year. In our business plan the way it is together, in the past when we were giving guidance, we were planning for our average crop year. So the way we build our plan is really consistent with the way that we used to give guidance as far as how we would get there. Our guidance generally was based off of our business plan in the past.
Craig Lindner: Mike, this is Craig. One thing that I think you need to recognize in this year’s plan is an assumption on return on alternatives that is somewhat below the historical level and certainly below what we expect to see on a go forward basis. We have $2.4 billion invested in alternatives. About half of that is invested in multifamily and the balance in more traditional private equity investments. In our plan for 2024, we’re assuming a low single digit return on our multifamily properties and a high single digit return on the balance of our alternative investments. Give a little color on our view of multifamily. We still like the asset class longer term. We’ve generated fantastic returns in the past. As I said in the conference calls group, we’ve averaged 15% return, annual return over the last five years.
We are in very attractive markets. Florida and Colorado represent 53% of our multifamily investments. Dallas, Phoenix and North Carolina, another 27%. They’re markets with very strong population growth. So the new builds in the recent past, the bulk of the new builds have been at attractive markets with population growth. That is impacting our ability to push rates the way we have in the recent past. So we think it’s going to take 12 to 18 months to work through this new inventory, the new supply of multifamily properties, and then we do expect that we will have the ability to push rental rates more in line with what we’ve done in the recent past and generate strong returns. But if you — our long-term expectations on alternative investments would be for a return of 10% plus.
Historically, we’ve done better than that. If you normalize this year’s return and use 10% as a kind of a normalized number, it would add $0.90 per share to the EPS, which is about a point and a half of ROE. So I think that is something that investors need to recognize because of our significant multifamily exposure, which near term is going to hurt these returns. It’s an unusually low return expectation for this calendar year, and I think that needs to be normalized when you take a look at this year’s earnings expectations.
Michael Zaremski: Okay. That helps. I think investors will understand that, okay. Lastly, and this might be for Brian, just on triangulating the excess capital and the parent company cash and all those moving parts, I believe that debt to capital, if I’m thinking about the right way, is below the company’s kind of maybe it’s a max threshold of 30, or I don’t know if it’s a target of 30, you can clarify that. But if, is there — would there be an option to issue some debt in the future potentially to release excess capital to the extent there weren’t M&A opportunities, or is that not something we should be thinking about as a lever? Thanks.
