There will be some volatility there as investments are a little bit volatility, but over the long pull, which is what we shoot for, we are a long-term strategy team here, we think we can lower that long-term combined ratio range from 95% to 100% to 92% to 98%.
Unidentified Analyst: Got it. Perfect. Thank you. Can I sneak in one more? Just on the expense ratio, we are seeing it trending up quarter-over-quarter in 2023. You mentioned some high share commission, etcetera, in 4Q. How should we think about the run rate for 2024? Any kind of color you have there would be great.
Mike Sewell: Yes. Thank you for the question. This is Mike Sewell. I think we have kind of really said over the last couple of years that we have been targeting a 30% expense ratio. And so we are still looking at that. We are shooting for that. And we are actually there for the last 2 years. So, I am kind of setting my sights. And we are not going to give up. We are going to keep investing where we need to invest, keep controlling costs where we think we can control it better. And any time that we can get that below 30%, we are going to try to do that. So, I am targeting for below 30%, but I am happy where it is, but we can always improve.
Unidentified Analyst: Thanks so much.
Mike Sewell: Thank you.
Steve Johnston: Thank you.
Operator: And our next question today comes from Grace Carter, Bank of America. Please go ahead.
Grace Carter: Hi everyone. Good morning.
Steve Johnston: Good morning Grace.
Grace Carter: I was looking for the commercial casualty reserve development. You mentioned that, I think $29 million of it was related to prior to 2019. I was hoping we could zoom-in on the remaining piece. And I guess just considering how claims activity was suppressed during the pandemic, if you can help us think through how the pandemic years are developing relative to your expectations? And just any sort of surprise in the trends there? And how much of the commercial casualty total reserve base we should think of accident years 2020 to 2022 comprising?
Steve Johnston: Hi Grace. This is Steve Johnston. I think we can get you those numbers. I do not have like the carried reserves for those years in front of me here what we would carry for those years. I do feel that we are looking at the pandemic years is, obviously, there were challenges we were going through the pandemic with the economy slowing down in ports and so forth. But I do think that now it’s been well behaved.
Grace Carter: Thank you. And I guess kind of considering how interest rates have been – were lower in the decade following the financial crisis with a pretty sharp change in that over the past couple of years. Conventional industry wisdom has kind of historically suggested that if you have better investment income, maybe you can let your combined ratio float up a little bit higher. So, I guess considering the potential for higher interest rates to stick around for longer. I was just wondering your thoughts on that and if you think that, that no longer holds in light of the updated combined ratio guidance and just the extent to which the prevailing interest rate environment influences, how you think about your outlook?
Steve Johnston: Great question. I think we would be slow to change those combined ratio targets because interest rates, as we have seen, can fluctuate more quickly than the loss ratios of books and business. And so I think it would be risky to see high interest rates or higher interest rates and react by lowering your standard on a combined ratio when there would be a good chance, I think over the next 10 years that interest rates would go back down. I would expect that over the next 10 years, a lot of what I have seen in terms of interest rate expectation is to go down. If you got yourself in a situation where you reacted to the higher interest rates with a higher combined ratio target, you can’t recalibrate and cash back up as quickly as those interest rates change. So, we are going to stay conservative in terms of our loss ratio targets.
Grace Carter: Thank you.
Steve Johnston: Thank you.
Operator: And our next question today comes from Michael Zaremski with BMO Capital Markets. Please go ahead.
Unidentified Analyst: Hi. Good morning. This is Jack on for Mike. Thanks for taking our follow-up. I am just – you guided to buying more reinsurance and seeding more premiums. Any color on how you expect those changes to impact the combined ratio in 2024?
Steve Spray: Jack, this is Steve Spray. We – I will say, on the property cat treaty, we buy that for balance sheet protection. As last – if you recall, last year, we increased our retention on the property cap from $100 million to $200 million. We renewed it for ‘24 with that same $200 million retention. And we also then bought another $100 million on top. So, now the total program is $1.2 billion. We obviously balance the cost of that with what we are trying to do on the loss ratio, but again, always keeping in mind that it’s for balance sheet protection, not earnings. I would also note that in that $1.2 billion tower that we have for the property cat, we also filled out some more of the – we will call it, maybe the middle layers this year than what we did for the 2023 year. So, no guidance on loss ratio for you on that, but just maybe a little background or color on the property cat treaty.
Unidentified Analyst: Got it. Thank you.
Operator: Thank you. And this concludes our question-and-answer session. I would like to turn the conference back over to Steve Johnston for any closing remarks.
Steve Johnston: Thank you, Rocco and thanks to all of you for joining us today. We look forward to speaking with you again on our first quarter 2024 call.
Operator: Thank you. This concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.
