David McElroy: Yeah. Thank you, Peter. And thank you, Elyse. To Peter’s point, we have to be careful around generalizations because we are actually hitting rate of a trend in most of our big businesses. The outlier is financial lines. And financial lines, you also have to unpack a little bit and understand that excess D&O, and excess D&O in large public companies is probably driving some of the macro numbers, but it’s not driving the behavior underneath. So in our financial lines business, we have professional liability. We have cyber. We have private company business. We have financial institutions. And all those businesses are actually getting rate over trend. But sometimes, when you aggregate up the excess public company business, it suppresses it.
And in that case, Elyse, it’s hard to rationalize, I’ll be very frank. That’s a place where, if you’re primary, you’re still getting rate. You’re still getting flat maybe down a little bit, but you have risk-adjusted rate that’s helping. In the excess business, it’s been very competitive. It’s a different sort of market. And it’s actually a market that I would say that cycle manage and companies that are being thoughtful and need to actually wrestle with, whether that’s a place they’re going to trade, okay? If the rates are going down 20% to 30%, it’s probably influencing some of the numbers that you look at on an aggregate basis. And inside that portfolio, your decisions are going to have to be made as to how you trade there, okay? In our case, it represents a small amount of the portfolio.
But I’m conjecting that, that’s actually where the commoditization of the business is going to cause a little bit of pain in the 2023, 2024 year, okay? But it’s €“ I do €“ Peter hit it. We look at rate over trend on a very granular basis, and I think we’re comfortable with what that means to our big businesses and even in financial lines, what it means to our sub-products there, and I think that’s an important part of our story.
Peter Zaffino: Thanks, Dave. And don’t forget, like the cumulative rate increases we’ve achieved in D&O over the last three years have been north of 80%. So again, it’s a line, as Dave says, we’re laser focused on. We’re not going to chase the market down. But the cumulative rate increases and margin developed hasn’t been fully recognized, and we’re going to look to 2023 with a lot of discipline. Next question please.
Operator: Thank you. Our next question comes from Paul Newsome with Piper Sandler. Your line is open.
Paul Newsome: Good morning. There’s been an enormous amount of conversation, and you obviously did a lot to add to about excess casualty or excess of loss reinsurance and €“ but as a large account commercial writer, I assume you’re using a lot of facultative as well. And I was curious if the comments that you’re making extend into not just sort of excessive loss, but also facultative and even quota share as being as impacted as some of the other pieces of the business and how that would affect the AIG?
Peter Zaffino: Thanks, Paul. We do purchase facultative in certain segments of our business, but we were really referencing the core treaties. When we look at risk appetite, when we are thinking through our ability to protect the balance sheet and where we want to structure treaties, we don’t require facultative reinsurance for other segments in order to supplement the core structure. So when I was referencing in my prepared remarks, the treaty structures, we did an exceptional job. The team really focused on modeling changes, inflationary changes and where we thought capital was going to be less expensive versus more expensive. An example of that would be taking big excess of loss CAT across the world. It gets too expensive for allocation of capital, and that is something we moved away from.
