Yaron Kinar: Okay. And then my other question, just on public D&O and cyber, where we’re clearly seeing a little bit of pressure and competitive pressure there. Do you still view rates as adequate there? And are they clearing the loss cost trends?
Marc Grandisson: Yes, our return expectation on both these lines, cyber and D&O, is still very, very healthy.
Operator: Our next question comes from the line of Joshua Shanker from Bank of America.
Joshua Shanker: Yes. With the high retentions, this quarter in terms of premium ceded. Can you go maybe line by line or dig in a little bit about which lines of business you’re retaining more? And is that a signal that you’ve gotten to the point where you have enough information that you love the profitability more and want to keep it yourself? Or is your you’re looking at your capital thing, we have the capital deployed. So let’s eat a bigger plates the pie. How did that all come together?
Marc Grandisson: I think you answered the question beautifully. I mean by asking a question to give the answer, I think that all those things you said are true. I’ll get to the lines in a second. But to your point is exactly right. We’re going to this hard market and we make — we still value reinsurance. You cannot go without a reinterest. You still need for various reasons, limits management, risk management and also information, right? Reinsurers are providing us on the insurance side with valuable information about what the market is and the state of the market. So we don’t want to be an outlier out there. So it’s always good to have this as an additional value proposition from the reinsurance companies. In terms of what we decided to do over three years, you’re quite right, we have been building, asFrançois mentioned, a significant amount of capital through our mortgage earnings.
So that’s certainly something that was helpful and available to deploy in other areas, and that also helps being able to maintain and retain more net. I think if you at a high level, I think that the patterns of buying, we’re buying a fair amount of less on the liability lines, specifically those that went through the first act and really had a lot of good uplift. So we definitely saw that happening on the property, even though the property is very hard, as we all know, since last year, this is a much more volatile line of business, so we still maintain our loss on the cat side and still by a quota share, a significant quota share on that business as well. So I think overall, it’s meant to be the balancing act between providing relief or volatility protection to some extent and information.
But you’re quite right, having more capital definitely helped us take more net on our balance sheet.
Joshua Shanker: And switching gears a little bit. When you have a 25% ROE quarter, you’re making a lot of money and you have a large team that has contributed to that result. I assume they’d like to be paid for their good work. How should we think — we’ve not seen a quarter like this in a long time in a year like this. How should we think about the pattern and the cost of discretionary comp where it hits the P&L and how it should compare with prior years?
François Morin: Great question, sorry. We — just again, in terms of timing, right, our incentive compensation decisions are made in the first quarter will be made in February of next year. But no question that throughout the year, we accrue expected bonuses based on what we think that our performance might look like, and there’s effectively a true-up that takes place in the first quarter when the final amounts are determined. Something we’re keeping an eye on. So I don’t know if there’ll be an early adjustment in the fourth quarter or not something we’ll be looking at carefully, so that we don’t go to distort too much the first quarter next year. Obviously, the Board has final say in how much money will be available to pay our troop.
So that’s — it’s a little bit of — we don’t want to front run it. We want to be reasonable and not introduce too much volatility in the numbers on the OpEx side. But that’s certainly something that we’ll take a look at in the fourth quarter to make sure we’re not missing anything here.
Operator: Our next question comes from the line of Alex Scott from Goldman Sachs.
Alex Scott: First one I had is on the attritional loss ratio in the reinsurance segment. I was just thinking if you could give us a little more color around just what’s driving this year, favorable performance year-over-year? And if there’s anything new as we should be thinking about or if it’s just the pricing environment being as strong as it is?
François Morin: Two quick things there. One is — and we said it before, and it goes both ways. We think of reinsurance as a line of business or a segment that we think is better analyzed on a trailing 12 month basis. We think looking at a quarterly there’ll be some good, it will be some bad. And we’ve said in past quarters where we have elevated the traditional claim activity. We said don’t panic, don’t overthink it in the same way here, I think. So we would certainly encourage everybody here to look at a trailing 12-month basis to have a better view of the long-term kind of prospects of the segment. The other thing I’d say is also, obviously, we’ve grown a bit more in property than relative to get align. So by nature, right, our ex cat combined ratio should probably come down and it has as a result of, again, the growth — the significant growth we’ve had both in property cat and property other than cat.
