François Morin: Correct. Yes. It’s not perfectly correlated because it’s not the whole segment. It’s mostly the Bermuda Reinsurance unit that we — that they follow. Not the entire business, but big picture is still — I mean, if the market conditions are good and Reinsurance, the Somers will benefit from that on a similar basis.
Joshua Shanker: And if one other numbers question post the S&P Model, the change from a few months ago, is there any way to think smartly about how much excess capital you think you’re sitting on or the possibility if you find other interesting M&A items, the ability to quickly deploy?
François Morin: Yes. I mean that’s always an evolving topic, right? I think we are always focused on putting the capital to work in the business where we can. I think we’ve done a fair amount of that, obviously, this quarter with the Reinsurance growth that we saw. The $1.8 billion that will support the Allianz transaction is another example. We will see how the year plays out. No question that, we’re generating significant earnings so that goes to the bottom line. And we’ll be patient with it until we can’t really find other ways to deploy it. But for the time being, it’s — we’re in a really good place in terms of capital and gives us a lot of flexibility.
Operator: Our next question comes from the line of Brian Meredith from UBS.
Brian Meredith: A couple of quick numbers and one big-picture question for you all. The first one, just quickly, on the Allianz deal, is it possible to give us how much cash you’re expecting to come in from the, I guess, [indiscernible] net cash position you’re expecting…
François Morin: Yes, big picture, it’s a $2 billion [indiscernible] with dollar for dollar, right? So we get $2 billion in cash, and we were spending $450 million that goes out back to them for the cash consideration. So net-net, it’s $1.5 billion of incremental cash that we will get. And the rest on the new business, then it’s, call it, it’s the premium flow with as we write that business, that’s the overall — over time, that will be the incremental investment income or invested assets that we will get.
Brian Meredith: That’s helpful. Second quick question here. You referenced in your commentary higher contingent commissions on ceded business in your Reinsurance. What exactly is that?
François Morin: A lot of it is third-party capital, right? We — last year was a very light or a good year for the performance of that book. So some of those agreements, many of them actually pay us a commission that is — there’s a base and then there’s a variable aspect to it, then that was kind of a lot — a large part of that. So that’s effectively performance-based commissions on property cat or property business.
Brian Meredith: Makes sense. And then one bigger-picture question here. I’m just curious, on your Reinsurance business, Obviously, during the first quarter, you’re getting a lot of [indiscernible] coming in from clients. What are you seeing with respect to reserve development at your clients, right? And how you kind of protect against that and not potentially seeing some of that adverse development that your clients are seeing on your cut of casualty quota share business?
Marc Grandisson: Yes. So I think the — Francois mentioned the actual is expected, which is sort of consistent in both insurance and reinsurance on the more recent policy or accident year, which having the right starting point means that you don’t really have to correct frequently. So I would say that we’re not surprised on the Reinsurance about what we see. But as I said earlier, I think there is anecdotally and some heavy — a lot of more friction, I would say, between Insurance and Reinsurance companies to make sure that people get an agreement as to what the ultimate book is going to be. So we’re hearing this going in the marketplace. Of course, we participate in that, but we’re not seeing this as being a big issue for us.
And the other years that would have been pre-2020 and 2021, I want to remind everyone that we were very defensive. We do not have a whole lot of those premium and those harder-in-developing areas that people are talking about. So I will say that we see opportunities to write more of those, and we expect to see more opportunities to write more of those types of deals this year, but I wouldn’t say that we are the most present in those worst years, if you will.
Operator: Our next question comes from the line of Cave Montazeri from Deutsche Bank.
Cave Montazeri: I only have one question today on the Florida market. The total reform implemented over a year ago seems to have had some positive impact on the primary carriers, and Reinsurance capital seems to be coming back. This is a market that you guys know very well. Do you have any color you can share with us on the state of the market in Florida?
Marc Grandisson: No, I think it’s — to your point, some of the adjustments are coming through, but inflation is also picking up. And there’s also, as we all hear, there’s potentially more activity in the Southeast of the US. in terms of activities and storms. So I think that people are trying to sort out what they will do at this point in time. I think we have already existing relationships that we think will get us a little bit ahead of the game in terms of participating and getting a participation in the marketplace. But bottom line is we expect the Florida market to be well priced and very good from a risk-adjusted basis. Nothing indicates anything else other than that. Even, of course, the — everything that’s been done to take care [indiscernible] and whatever else in between, I think, is helpful.
But it’s still the largest property cat exposure for everybody around the world. So even if you make some corrections and they have made some corrections, I think we still have a couple of years before we start thinking about having a heavy softening in the market. There might be some here and there, but we still believe the market will be healthy as a reinsurer.
Operator: Our next question comes from the line of Bob Huang from Morgan Stanley.
Bob Jian Huang: Quick question on M&A side. Obviously, you have historically generated very durable underwriting returns, mainly because of cycle management, in my view. Just curious as you move into M&A and diversify your business mix, does that impact your cycle management ability for retention levels when we think about M&A or potential M&A down the road?
Marc Grandisson: No, it doesn’t change. I mean cycle management is a core principle of ours. And if anything, we’d like to be able to do — it’s going to be a matter of degree perhaps. Some lines of business have more acute cycle management because they’re probably more heavily commoditized. I would expect the cycle management to be much softer in the Allianz and the US. MidCorp business. And that’s also what’s attractive about it, right, because it creates more stability for the portfolio.
