Andrew Watts: About 35%.
Powell Brown: Yeah, about 35% of the business is employee benefits. And that’s a business that we have consciously invested in over the last, let’s say 10 years. And when I say consciously invested, not only in the middle market space, but in the upper middle market and the very large space and are very pleased with the ability to serve customers in all of those segments. And we very much enjoy going out and trying to earn business and have been successful and think we can even be more successful going forward. So we think it’s a great business for us.
Operator: Please standby for our next question. The next question comes from Meyer Shields with KBW. Your line is open.
Meyer Shields: Great, thanks, and good morning. Andy, you mentioned company-owned life insurance and I didn’t catch what the impact was on the quarterly results.
Andrew Watts: Yeah. It’s — so again, on the company-owned life insurance, this have an impact on our numbers based upon how the market moves either up or down. So when you see the market going up, right, it will impact the S&R and the offset is down in other operating expense. The impact on margins is basically almost zero. So for the quarter itself, it was a drag on the S&R as a percentage of revenue of about 150 basis points and last year it was about 60 basis points. So we kind of look at those both ways internally kind of puts our S&R substantially flat year-over-year, ex-COLI, so. And again, those are going to move around. That’s not something that we’re able to forecast because it all depends upon how the market moves and then it’s the comparison to how the market moved the year before.
Meyer Shields: Okay. No, that’s perfect. That’s helpful. Second question, when you talk about the upside to organic growth in Programs, that’s just because you’re not going to see the same what was a $19 million hit in the fourth quarter of this year. If that is flat next year, then that’s $19 million of organic revenue. Am I thinking about that right?
Andrew Watts: Correct. And, yes, we’d expect that in ’24.
Meyer Shields: Okay.
Andrew Watts: And we would not expect any sort of reversion though in ’25, just in case you’re wondering, Meyer.
Meyer Shields: Yeah, no, that’s exactly what you needed. And then final question because we’ve gotten different viewpoints from different people. But when you look at the shift of some catastrophe exposed wholesale or, sorry, catastrophe exposed property business to the wholesale channel in 2023, is that basically like a one year shift, and now we’re done, and if nothing changes, then that impact slows or should that persist in 2024 at more or less the same pace that we saw this year or I guess it’s last year now.
Powell Brown: I want to make sure I heard that correctly. Meyer, can you repeat the question? Because there was a word or two that cracked up in there.
Meyer Shields: Yeah, absolutely. One of the themes of 2023 seems to be a lot of catastrophe exposed property business moving to the wholesale channel from the retail channel, which is great news for companies with wholesale brokerage, and wondering basically whether that shift, as you see it, is mostly done or there are reasons to expect it to continue in 2024.
Powell Brown: Okay, so let’s back up and say there’s an enormous amount of business that’s CAT exposed, that was already in the E&S market. They’re constantly and consistently in the traditional admitted market. Carriers by name that you may follow or know, are evaluating their CAT property exposure and are making decisions whereby should they renew that on an admitted basis or does that in turn get picked up by another admitted market or does it go into the E&S market? So what I would tell you is that there’s lots of business that flows in and out, I shouldn’t say lots. There is a good amount of business that goes into the E&S market in ’23, and I think there will continue to be a flow of business out of the admitted market into the E&S market in ’24.
Is it an equal amount? I don’t know, but I think more importantly, inside the wholesale space, there’s an enormous amount, an enormous number of opportunities for us to write business that still and has been in the past in the E&S space. So there’s more than enough business for us to write in the existing space without one account coming over in the — from the admitted market. I think that’s going to continue because in my career and yours as well, you’ve seen more of a shift in E&S market, and I think admitted carriers will continue to evaluate their position in particular CAT-prone areas.
Meyer Shields: Okay, fantastic. That’s very helpful. Go ahead. I’m sorry.
Andrew Watts: Hey, Meyer, on that, it’s also probably always helpful is to bifurcate that between the commercial and the personal lines, because there’s different kind of profile and activity underneath of there. Back to our comments, in the four states that we talked about is, we are seeing more personal lines into the E&S space, and we would expect to see that in 2024 until those markets calm down. And then it may seem some of the other carriers come back in, but that doesn’t appear to be anything in the near term.
Meyer Shields: Okay. No, that’s excellent. Thank you so much.
Powell Brown: Thank you.
Operator: Please standby for the next question. The next question comes from Michael Ward with Citi. Your line is open.
Michael Ward: Thanks, guys. Good morning. You mentioned the remaining portion of Services was moving to Retail. I was just curious if you anticipate holding on to those businesses or if there’s any alternative plans.
Powell Brown: We anticipate holding on to those businesses.
