Marc Grandisson: We’ll do better its looks like.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Bob Jian Huang from Morgan Stanley.
Bob Jian Huang: Hey, good morning. Just two quick ones. First, I think two quarters ago on the earnings call, you said when we look at the insurance underwriting cycle, we were at about 11 o’clock. That’s kind of where we were implying improved rates and also lost trend stabilization. Just curious, in your view, what time is it right now? Is it 11:30 or is it 11:59, 2:00 p.m.? Just kind of curious is it where you think.
Marc Grandisson: It’s the longest 11 o’clock I’ve ever seen in my life is what I’m going to tell you. So I think we’re still roughly around the 11 o’clock , which again, that clock is never like a one year after the other, right? You can stay 11:00. Unfortunately, you can stay into the 3 o’clock and 4 o’clock or where that you would want. So I think that it’s still roughly around that level the 11 o’clock , 11:30, perhaps in some cases, but, yes, roughly in that range.
Bob Jian Huang: Okay. That’s helpful. 11:00 to 11:30, that’s very helpful. Thank you.
Marc Grandisson: Yes.
Bob Jian Huang: My second question regarding MGA and capacity in general, there has been some concern that MGAs have been increasingly aggressive. Is this something you’re seeing? Is this concern rightfully placed? Does it have any impact on how you think about your underwriting cycle management? Are you becoming more cautious, especially within your reinsurance? Not sure if you answered that before, so apologies.
Marc Grandisson: That’s a great question. I think I mean the MGAs emerge, as we all know, when there’s a dislocation where there’s need for capacity. And I think we see it more acutely in the professional lines and some of them in property. But again, between the supply and demand on the professional lines, I think now that the capacity is probably more plentiful than. It’s not more probably, it is more plentiful than it was. So I think it has some impact at the margin. Of course it does. I think the answer to your second part of the question, which is, how do we react? Well, we do it, the same way we always do it, which is if the pricing is going down and the returns are not as good. We will tend to deemphasize or pick or select the better clients that we have in our portfolio and still react the same way we would do in cycle management.
On the property side, we also have similar MGAs and MGUs, right? But I think these guys, there’s an acute need for property coverage and capacity. And I think it sort of feels that we need all the capacity we can get our hands on a property at this point in time. So we’re not seeing that much of as much of an impact. The property market is still very strong.
Bob Jian Huang: Okay. So property side, not enough capacity, professional line, plentiful capacity. That’s the way we should think about it. Thank you.
Marc Grandisson: Yes, that’s right.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Meyer Shields from Keefe, Bruyette & Woods.
Meyer Shields: Hi, I think we’re in the same situation where people can only hear the answers to their specific questions. So I’m hoping that comes through here as well. Similar question to Bob, we’ve seen, obviously, a number of companies report some reserve problems in the fourth quarter. And I’m wondering, when you look at the book of sedans that you have within reinsurance, is what we’re seeing in the public companies a good representation of overall trends, or is it something different in the non-public world?
Marc Grandisson: Well, I think when you price — Meyer, good question. But for the record, this will be recorded, right? So we’ll be able to — so this will be recorded. So we’ll be able to share, you’ll be able to hear the other questions and the other answers. Sorry, is that okay?
Meyer Shields: Yes, that’s perfect. Thank you.
Marc Grandisson: So I think the issue with casualty reserving, and you’re an actuary as well as I am, the actual number is in the high of whoever is doing the work. So I think it’s like everything else. Our teams may have different views about the loss ratio pick for some of the things that we’re looking at than they would have themselves. So I wouldn’t say that it’s a one to one. Some of them will not renew, or some of them we may not be able to participate on because we have a different view of the ultimate loss ratio. So I think it’s really each individual underwriter and each individual company or sitting company come up with their own number and you have to make your own decision and your own opinion as to where it is.
Meyer Shields: Okay. I’m sorry, go ahead.
Marc Grandisson: No, no, go ahead. I was wondering whether you were still there, so carry on, please.
Meyer Shields: Yes, no, I’m still here. Similar question, I guess, obviously what we’ve seen here is a lot of domestic concerns over liability lines on the international casualty side, is that concern worsening as well, or should we think of that as just a domestic concern?
Marc Grandisson: It’s a similar issue. It’s not to the same acuteness in some kind of level, but the world has similarly closed down in a courts. It’s not as litigious internationally as you would expect, but we’re still seeing some hardening in international casualty as well. We saw this for the last two, three years. So it’s a very similar hardening of the market, may not be as acute in terms of reserving potential issues. And I’m not talking now to the globals that are internationally underwriting internationally, that’s a different story, right? If they write in the U.S., they will have similar issue, but there is similar issues all around, but it’s not to the same level internationally we’d see in the U.S.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Elyse Greenspan from Wells Fargo.
Elyse Greenspan: Hi, thanks for taking the follow-up. I will say I think you have a lot of folks wondering who’s writing the coverage for your conference call provider. But my follow-up is on casualty insurance. Can you give us a sense of the loss trend that you’re booking your casualty insurance book to and what rate you’re getting in casualty insurance as well?
Marc Grandisson: Well, it depends on line of business, Elyse, but I think the numbers you hear around 7, 8, 9, 10, sometimes it’s 5. It depends on line of business, depends on the attachment point, it depends on the limit that you provide, depends on the size of risk. But the numbers you hear — the numbers that are heard around the marketplaces, we see the similar phenomenon. I think we’ve said it historically, it’s coming — it’s happening as we speak, that the insurance trend in liability generally will out pay the CPI increase. And we’re seeing this coming back, so with 200, 300 basis points above. So we’re largely consistent with those kinds of pick.
Elyse Greenspan: So loss trends, you said 7, 8, 9, 10, but can vary by line and sometimes be 5%. Where would you put the price increase?
Marc Grandisson: Oh, again, depending on line of business, but we’re low to mid-teens, I would say right now.
Elyse Greenspan: Okay. Low to mid-teens. I’m just also repeating. So folks listening?
Marc Grandisson: Yes, I appreciate. I appreciate, Elyse. Thank you. Yes.
Elyse Greenspan: Can’t hear the answer. So low to mid-teens. Yes, I think that’s one, I guess on your, one last one, your cat, you said your PML went a little bit higher, right? But the percent of equity is lower, given the equity rise in the quarter, where would you put your cat load at the start of 2024?
François Morin: Well, certainly up from 2023, right. I’d say for the year, we’re looking at somewhere loss ratio points, right? Call it 7% or so of like 6% to 8% of like our premium would be kind of like the cat load.
Elyse Greenspan: Okay. 6% to 8% cat load. Thank you for taking the follow-up.
Marc Grandisson: Thanks, Elyse.
François Morin: You’re welcome.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Cave Montazeri from Deutsche Bank.
Cave Montazeri: Good morning, guys, it’s Cave.
Marc Grandisson: Good morning.
Cave Montazeri: Hey, I have a question on reinsurance terms and conditions and attachment points. Does feel like overall the industry probably took on more high frequency, low severity risk than they should have over the past couple of years. And now maybe on aggregate reinsures are probably more willing to negotiate on price than on attachment points or terms and conditions. Just tell me what your view is on that topic.
François Morin: Are you talking about property?
Cave Montazeri: Yes, property.
François Morin: Yes. I think — well, I think what we’ve seen is we continue to see is that a lot of lower layers historically for the last four or five years turn out to be just swapping money, trading dollars back and forth. And there was a lot more activity, perhaps of frequency, as you mentioned, and the reinsurance market was willing to take on. So there was a natural tendency to try to increase a premium at those level but then at some point it breaks down in a sense that the client is buying the reinsurance protection, is paying more for things than they actually realize they should be retaining. That’s why you’ve seen retention go up. Now in a sense, by virtue of having a higher retention, then they have to turn on and then that’s what we’ve seen, they’re turning onto their own portfolio and try to manage and make it better and improving the aggregate loss that they have there.
