Michael Zaremski: Sorry, is that 6% to 8% on all insurance premiums ex mortgage or just with total company…
François Morin: Total company-wide, ACGL total.
Operator: Our next question comes from the line of Dean Criscitiello from KBW.
Dean Criscitiello: My first question was on the net to gross ratio in reinsurance. I saw that it ticked down about 5 points year-over-year. I was wondering, is that a function of buying more reinsurance? Or is there anything else going on there?
Marc Grandisson: No. I think if you look at the — it’s a good question. If you look at the last 4 or 5 years in the first quarter, you’ll see that our net to gross ratio hovers between 65% to 70%. Last quarter last year, it was 70% because we had a larger transaction that came through that was not seated. So it’s really just a comparison that’s not — just 1 period comparison is not reflective of what’s going on. If you look at the longer term, you look at the 65% to 70%, so nothing changed there.
Dean Criscitiello: Okay. And then the next thing, shifting back to the insurance business, I was a bit surprised to see solid growth within Professional lines given the rate environment there. So can you maybe talk about the market dynamics or the opportunities that you’re seeing in that? And is that growth coming from D&O? Or is that within other professional lines?
Marc Grandisson: Yes. So the — it’s — the thing — our professional liability has many things into it. It’s got a large company, large public company D&O, it’s got some smaller private, also has cyber in it and some professional liability like agents and stuff like this, that’s more E&O based. I think that the growth is largely attributed to the cyber. Our teams are leaning a little bit more into it, and we’ve also acquired a couple of more team or developing a team in Europe, there’s a big need for what we realize as a need for cyber in Europe, and that’s something that we’re starting to grow and see more of. And the reason it’s grown in cyber is because even though some of the rates, as we all heard, went down slightly, it’s still a very, very favorable, we believe, very favorable proposition for us to underwrite.
Also it helps us doing other lines of business because it creates value for our clients. It’s still a little bit harder to get in terms of coverage. On the D&O, we would have decreases and increases depending on where the rates are or where we see the relative valuation or the profitability of our portfolio. On that note, the rates in D&O went down about 8% in this quarter, not as bad as it was 1.5 years ago. You heard the comments that the SEAs are down. So there’s there’s still — we believe there’s still a lot of favorable opportunities in that segment as well. We just have to be a little bit more circumspect when we do this.
Operator: Our next question comes from the line of David Motemaden from Evercore ISI.
David Motemaden: Marc, you mentioned in your prepared remarks that you’re seeing increased underwriting appetite and developing competition, specifically within Reinsurance. Could you just talk about where you’re seeing that, elaborate on that a little bit? And what specific lines you’re seeing that in and how you guys are responding to that?
Marc Grandisson: Yes. I think right now, what we’re seeing is more a higher appetite, cyber is one of them. That’s for sure, Insurance and Reinsurance, that would also — I mean, can run the gamut, there are many of them. Typically, right now, what we are the lines that are more short-tail in nature. You can see a little bit more willingness to take some more risk from the competition. And how we react to it is, we have many things we do. We typically will tend to first look at the overall [indiscernible] if the rates go down or if the rates stay as is, with the new conditions, you actually price the business as if it’s a new piece of business and what kind of return it will get to you. And if it’s a little bit not as much — or not too close for comfort, we might just decrease our participation.
And we also might just stay on the clients that we believe have a better chance to really maneuver through that a little bit sideways market, if you will. It’s really an underwriters’ market at this time.
David Motemaden: Got it. And just within Reinsurance, the underlying margins there were strong and even better, if I exclude the bridge loss. Can you talk about if there is anything in there that would flatter the results? Or is it more just sort of the earn-in of the property, more short-tail lines and these results are fairly sustainable? I guess how should I think about the sustainability of the results on the Reinsurance side?
François Morin: Yes. I mean it’s a great market, right? And we’ve been saying that for a few quarters. I think and we’ve said it before, I think we encourage you all to look at results on a trailing 12-month basis. I think it’s a bit more reliable, I think, less prone to volatility that is sometimes hard to predict. But yes. I mean, we — and Marc said it. I think the quality of the book that’s in force right now is excellent, and we’re going to earn that in. But whether how — was this quarter a little bit better than maybe the long-term run rate? Maybe, we don’t know. But again, as you try to look ahead, I’d say more of a trailing 12 month, again, view is probably a bit more reliable.
Operator: Our next question comes from the line of Josh Shanker from Bank of America.
Joshua Shanker: On the other income which doesn’t get enough attention, that’s Somers and Coface. It was a weak quarter for Coface stock return in 4Q ’23, yet the other was quite strong and maybe I’m misunderstanding how to model this, but I bring this up because Coface had an excellent quarter this past 1Q ’24. And I’m wondering if that presages a very, very strong other income return for the company as we head into 2Q ’24?
François Morin: Yes. So just to be — make sure we’re on the same page, there’s a lag, right? So Coface is booked on a one lag — one quarter lag basis. So what they just reported for Q1 will show up in our Q2 numbers. Somers is on a real-time basis. And as we know, Somers should follow relatively closely the performance of our Reinsurance book because it’s effectively [indiscernible] there’s some nuances to it. But big picture, that is booked on a real-time basis and should mirror fairly closely our Reinsurance book. But to your point, yes. I mean if Coface reported out a strong Q1, you should see the benefits of that to flow through in our second quarter.
Joshua Shanker: In theory, there should be — I guess, if you’re saying some correlation between Reinsurance segment underwriting income and Somers, which appears in that other line?
