Everest Group, Ltd. (NYSE:EG) Q4 2023 Earnings Call Transcript

Everest Group, Ltd. (NYSE:EG) Q4 2023 Earnings Call Transcript February 8, 2024

Everest Group, Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to the Everest Group Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Matt Rohrmann, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Matt Rohrmann: Good morning, everyone, and welcome to Everest Group Ltd. fourth quarter of 2023 earnings conference call. The Everest executives leading today’s call are Juan Andrade, President and CEO; and Mark Kociancic, Executive Vice President and CFO. We are also joined by members of the Everest management team. Before we begin, I’ll preface the comments on today’s call by noting that Everest SEC filings, including extensive disclosures with respect to forward-looking statements. Management comments regarding estimates, projections and similar are subject to the risks, uncertainties and assumptions as noted in these filings. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I’ll turn the call over to Juan.

Juan Andrade: Thank you, Matt. Good morning, everyone. Thank you for joining us. 2023 was the most profitable year in our history. We delivered exceptional full year results. We achieved record underwriting income, record net investment income, record operating income, record net income and record operating cash flow. We executed on our objectives and delivered a 2023 operating ROE of over 23% and a total shareholder return of over 26%. The strength and quality of our franchise was evident as we achieved these results in another elevated catastrophe year, while also taking prudent actions to further strengthen our balance sheet, Everest capitalized on the hard market to grow in attractive lines across our businesses. Our precise execution at the 2024 January reinsurance renewal created excellent outcomes.

We completed the deployment of our $1.5 billion equity capital raise on schedule and at superb risk adjusted returns. We expanded key client relationships, while improving the scale, quality and profit potential of our portfolio, giving us a strong start to the year. Market conditions remain strong. We are not seeing any meaningful new capacity enter the market and we expect conditions for upcoming renewals to remain excellent. Our capital strength positions us to profitably grow both underwriting businesses. At Everest Investor Day last November, we outlined our progress, strategy and financial objectives for the next three years. As you have seen from our 2023 results, we are on-track to achieve these goals. Our primary objective is to generate industry leading financial returns consistently and across market cycles and we have delivered.

We are building on momentum created by our actions to transform Everest over the past four years. Operating as one Everest, we elevated all aspects of our business. Everest is a more diversified and higher margin business with a strong underwriting culture of execution and accountability. This guides our underwriting decisions and our drive to outperform and allows us to deliver on our long-term objectives. Turning to the full year financial highlights beginning with the Group. The Group delivered outstanding results in 2023. As I said, we achieved new company profitability records including annual operating income and net income which both exceeded $2.5 billion for the year. We grew by 21% in constant dollars, ending the year at nearly $17 billion in gross written premium.

Our performance was supported by the execution of our strategies and our ability to take advantage of strong market conditions and reinsurance and insurance. We generated $1.2 billion in underwriting profit also a company record and we improved the combined ratio more than five points to 90.9% despite industry catastrophe losses exceeding $120 billion. We achieved a six point year-over-year improvement in the Group loss ratio contributing to our excellent underwriting results. Building the strength and flexibility of Everest balance sheet has been a priority for this management team since we took over this company. This was reflected in the quarter through our modest favorable development as we built additional strength into our already strong reserve position.

Mark will provide more detail on these actions. Turning to investments, we achieved another record with annual net investment income of $1.4 billion driven by our actions to capitalize on the rising interest rate environment. Now for the underwriting segments beginning with reinsurance. The reinsurance division had an exceptional year. Our disciplined planning and execution in 2023 allowed us to capitalize on the generational hard property market, delivering outstanding top line growth and bottom line results. For the full year 2023, growth was 26% in constant dollars and excluding reinstatement premiums with $11.5 billion in total gross written premiums. Growth was broad based as we expanded with core seeds, grew in targeted markets and allocated capital to higher return opportunities.

We grew our core North America property catastrophe portfolio by over 30% had exceptional risk adjusted returns. Internationally, we grew our total property portfolio by over 40% with strong and targeted growth in Europe and Asia. We also leaned into growth opportunities outside of property catastrophe including in targeted proportional property deals, aviation, marine, and in facultative with strong of returns in these lines. The division delivered $1.3 billion in underwriting profit for the year. The attritional loss ratio improved by 4 point to 57.7%, and the attritional combined ratio was down 110 basis points from 2022 when adjusted for prior year commissions related to the reserve releases. We leveraged deep client and broker relationships and our strong balance sheet to build a more profitable and higher margin book, which culminated in outstanding results at the January 2024 renewal.

At 1/1/’24, we grew our total property catastrophe portfolio by over 25% compared to expiring premium. Following the significant increases in 2023, we saw further property catastrophe rate increases at 1/1 broadly across geographies. In North America, the Property Cat XOL risk adjusted rate change was approximately 7%. Internationally, rates on our portfolio were up 14%. This trend also continued in specialty lines particularly marine and aviation. The flight to quality in the reinsurance market continued. Our leading market position allowed Everest to grow market share on oversubscribed deals with leading clients on the best quality Property Cat, cyber and specialty line treaties and in geographies around the world. Our clients signed down other carriers to make more room for Everest.

We also played a leading role in several of the increased CAT limit purchases being made by some of the best primary insurance underwriters in the business. This reflects the strength of our franchise and reputation in the market. To illustrate the point, we generated close to $300 million in additional premium growth through increased shares on existing property treaties. The favorable terms and conditions that we achieved during the 2023 renewals held while attachment points which increased significantly last year or maintained. We were also surgical in our approach towards certain casualty lines at 1/1. We non-renewed 16% of our casualty and professional liability pro rata business particularly when ceding commissions did not meet our thresholds.

These targeted actions however were partially offset by expanding shares on attractive casualty programs with select top clients. We achieved our objectives at 1/1 executing with the same discipline and focus Everest has consistently applied to shaping and diversifying the portfolio. We do not right the market. We selectively underwrite risks that meet our requirements. Our priority is growing the bottom-line to deliver leading financial returns. Coming out of the 1/1 renewal, the quality of our book is excellent. We are positioned to drive sustainable margin expansion, while continuing to distinguish ourselves as the preferred lead market platform. Now turning to our primary insurance division. 2023 was a pivotal year for Everest Insurance.

We advanced our key objectives while establishing strong foundations. We solidified and enhanced the division’s global leadership team with top talent in the right places operating through a regionalized structure aligned to customer needs. In 2023, we grew the insurance business by 10% in constant dollars, achieving record annual premium of over $5 billion. Growth was balanced and diversified by product, business line and geography. We saw excellent opportunities in property and specialty lines including marine, aviation, trade credit and political risk. We are disciplined. The modest growth in certain casualty lines was primarily driven by robust rate increases as we remain prudent in our writings and focus on lines of business meeting our return thresholds.

We continued to shift to shorter tail lines with favorable pricing and a strong profit trajectory. For both the year and the fourth quarter, we achieved a broad-based 12% rate increase in our core portfolio, excluding workers compensation and financial lines. Beyond property, pricing accelerated and was particularly strong in marine and other specialty lines, commercial auto, general liability and access liability. Overall, rate remains ahead of loss strength. We will only grow where we can do it profitably. We will remain disciplined in less attractive lines including D&O, workers’ compensation and commercial auto. The combined ratio increase was driven by our reserve strengthening to address the impacts of social inflation along tail lines in the 2016 to 2019 period.

The core underlying performance of the book is strong. We advanced our disciplined international strategy led by a proven entrepreneurial team of industry leaders and local underwriting talent. They accomplished a great deal in 2023, scaling our insurance platform across Latin America, the UK and Ireland, Continental Europe in Asia Pacific where our value proposition is differentiated and eagerly welcome. We made strides implementing systems and capabilities enabling us to operate from common platforms and drive efficiencies. We are on-track for new openings this year in Colombia, in Mexico and Australia. While we have tremendous headroom in lucrative markets, we are focused only on the most accretive opportunities. Since this management team took over in 2020, we have significantly increased prudence around risk selection and deployed a disciplined underwriting strategy.

We rebuilt the underwriting engine from top to bottom, investing in top tier underwriting and experienced talent. We significantly strengthened our underwriting guidelines and risk selection parameters. Additionally, we pushed rate in excess of trend, broadly raised our inflation assumptions and initial loss picks. We added more loss sensitive features, raised deductibles, and lowered limits. We exited certain social inflation prone industry classes and invested in additional claims technology. As I said, if business doesn’t meet our underwriting criteria, we just won’t write it. As we head into 2024, the insurance division is executing from a strong foundation and is well positioned to deliver on the targets we set out for the business at Investor Day.

Our financial results led to the most profitable year in Everest’s history. We are building on this momentum with standing start to 2024. As favorable market conditions persist, we are leaning into robust tailwinds across our reinsurance and insurance businesses with the full power of Everest behind us, and we will make the most of the opportunities in front of us. We have the right team driving a clear strategy with multiple avenues to deliver on our primary goal of generating consistent leading financial returns. We are confident about delivering on our objectives. With that, I’ll turn it over to Mark to review the financials in more detail.

Mark Kociancic: Thank you, Juan, and good morning, everyone. Everest had a strong finish to 2023. For the full year, Everest delivered record annual results in underwriting income, net investment income, operating income and net income. This drove annual operating earnings per share of $66.39 and an operating return on equity of 23.1%, the annualized TSR or total shareholder return was excellent at 26.5%. 2024 is off to a great start as we successfully executed on our 1/1 renewals, where we enjoyed strong growth and deployed the remaining capital from our $1.5 billion equity raise last spring. We capitalized on our market position and prevailing conditions, growing in attractive lines of business with expected returns in excess to cover our financial targets.

This was evidenced in particular by strong growth in our Property Cat book globally. Market fundamentals remain strong and we expect the upcoming renewals throughout 2024 to continue to be excellent. Our underwriting franchises are fully mobilized and our capital strength gives us lots of capacity for 2024. This positions us well for profitable organic growth. Turning to the fourth quarter results, operating income was $1.1 billion or $25.18 per diluted share, equating to an operating ROE of 32.4%. Looking at the Group results, Everest reported gross written premiums of $4.3 billion representing 18.3% growth in constant dollars and excluding reinstatement premiums. The combined ratio was 93.2% for the quarter, driven by improving underlying loss ratios offset by the results of an active CAT quarter and the CAT losses in the quarter were largely driven by Hurricane Otis, which made landfall in Acapulco, Mexico as a Category 5 Hurricane.

I would note that the prior year quarter had much lower than average CAT activity. Everest also recorded modest net favorable reserve development of $5 million in the quarter, which we’ll discuss in more detail in just a few minutes. The Group attritional loss ratio was 59%, 60 basis point improvement over the prior year’s quarter with both segments contributing to the improvement. The Group’s commission ratio was 21.3%, when excluding the impact of 2.5 points from the profit commissions associated with favorable reserve development in the reinsurance segment related to the mortgage business, an improvement year-over-year. The Group expense ratio was 6.3% in the quarter, an excellent result as we continue to invest in talent and systems within both franchises.

Moving to the segment results and starting with reinsurance. Reinsurance gross written premiums grew 21.9% in constant dollars when adjusting for reinstatement premiums during the quarter. The strong growth was primarily driven by double-digit increases in Property Pro rata, Property non-Cat XOL and Property Cat XOL, and was broad based globally. The combined ratio was 78.8%, an improvement of 8 points from the prior year. The attritional loss ratio improved 40 basis points to 57.8% as we continue to achieve more favorable rate and terms, particularly in property. The attritional combined ratio improved 90 basis points to 85.1% when excluding the impact of $94 million in profit commissions associated with favorable mortgage reserve development this quarter.

The normalized commission ratio was 24.8% when you exclude the 3.6% attributed to those profit commissions. The underwriting related expense ratio was 2.5%, an improvement of 30 basis points from the prior year. Moving to insurance, gross premiums written grew 11.6% in constant dollars to $1.4 billion. We continue to methodically scale our primary franchise globally, while proactively focusing our North American portfolio towards the most accretive lines of business, led by retail property and short tail specialty lines. The growth in casualty and professional lines was largely driven by rate increases. A number of casualty lines saw pricing accelerate in the fourth quarter. We remain disciplined in our approach as some lines are less attractive than others, including D&O, workers’ comp and commercial auto as we’ve discussed on prior calls.

The attritional loss ratio improved this quarter to 62.6%, driven primarily by business mix, given the higher proportion of short tail lines within the portfolio. The commission ratio improved 110 basis points, also largely driven by business mix as increased property writings earned through as well as increased volume of ceding commissions. The underwriting related expense ratio was 16.6% with the increase largely driven by the continued investment in our global platform. Now, let me touch on the reserve moves in the quarter. As we stated at our Investor Day, our objective is to book the company’s overall reserve position at management’s best estimate plus a margin. And as of year-end, we’ve accomplished that as our reserve position remains strong.

This quarter, we recognized $5 million of net favorable reserve development following the completion of our detailed ground up review of all of our reserve portfolios for 2023. We released $397 million net of our embedded reserve margin from the reinsurance division, primarily from well-seasoned short tail lines like property and also our mortgage lines. The releases were split roughly evenly between the two lines. And this was partially offset by $392 million of strengthening in the insurance segment driven by a few specific casualty lines of business. The entire industry faces the real impact of social inflation focused on the 2016 to 2019 accident years. And Everest is seeing some of these same trends and we’ve prudently acted on them given the now well-developed loss patterns for those years and this is driven primarily by higher severity in general liability and to a lesser extent commercial auto liability.

And this is contrasted with accident years 2015 and prior, which continue to show strength and stability and more recent accident years, namely 2020 and onward, where we see the benefit of significant rate increases, limit reductions and targeted portfolio management actions as Juan highlighted. We will be prudent and let long tail reserves from those more recent accident years from 2020 onwards continue to season more fully. As a result of these comprehensive actions, the portfolio today is a higher quality, more diversified book of business well-positioned to provide strong risk adjusted returns. In terms of the reinsurance division, we made marginal adjustments to long tail lines that were impacted by social inflation from 2016 to 2019 accident years and these adjustments were easily offset by favorable developments in other lines.

Since this management team took over in 2020, we have made significant improvements to our reserving, underwriting and claims functions. And this allows us to improve the efficiency and effectiveness of our feedback loop between underwriting, management, claims, pricing, and reserving. This allows us to manage information faster improving overall portfolio performance. We have been embedding conservatism into social inflation prone lines in both divisions to make sure we can manage these types of industry hurdles. In conjunction, the actions taken to build the company’s balance sheet strength, Everest has significant financial flexibility, underwriting diversification, and the ability to better manage volatility. We were able to generate an operating ROE of over 23%, while taking actions to fortify the reserves on our balance sheet.

As you can see from our full year 2023 results, we can manage issues as they arise and still produce excellent returns overall. Given our disciplined approach to acting on bad news early and good news late, we feel our reserve position is prudent and there is meaningful embedded margin that we will let season, we believe the balance sheet moves we made this quarter have closed the book on the 2016 to 2019 reserves and put us in very good shape to generate leading returns in the years ahead. Moving on, net investment income increased over $200 million year-over-year to $411 million for the quarter, driven primarily by higher assets under management, higher new money yields, and our investment in floating rate securities as they benefit from higher reset rates.

Alternative assets generated $41 million of net investment income, an improvement from the prior year as equity markets have continued to rebound. Overall, our book yield improved from 3.5% to 4.7% year-over-year and our reinvestment rate remains at approximately 5%. We continue to take deliberate actions to best position our investment portfolio and capitalize on market conditions. We made a number of portfolio moves over the past quarter to take advantage of the evolving interest rate environment. We successfully executed our strategy to sell lower yielding bonds totaling $3.3 billion of market value in Q4, which resulted in after tax realized fixed income losses of approximately $210 million in the quarter, while reinvesting the proceeds into higher coupon bonds with higher credit quality and this contributed approximately 30 basis points to the book yield increase in the quarter and is expected to add significant additional interest income in 2024 and beyond.

We generally purchased 10-year maturities thereby extending our duration modestly to 3.3 years, which is broadly consistent with our liability duration of 3.9 years. For the fourth quarter of 2023, our operating income tax rate before the Bermuda taxing impact was 14.5%, which was higher than our working assumption of 11% to 12% for the year, given the geographic distribution of income. However, the full year operating effective tax rate excluding the Bermuda tax impact was 10.5%, well within our expected range. Everest also booked a $578 million net deferred tax benefit in the quarter as a result of Bermuda’s income tax guidelines and this will begin to be utilized in 2025 when the Bermuda income tax is in effect. Shareholders’ equity ended the quarter at $13.2 billion or $13.9 billion when excluding net unrealized depreciation unavailable for sale fixed income securities.

At the end of the quarter, net after tax unrealized losses on the available for sale fixed income portfolio equates to approximately $723 million a decrease of $1.1 billion as compared to the end of the third quarter resulting from interest rate decreases. Cash flow from operations was $1 billion during the quarter and $4.6 billion for the full year. Book value per share ended the quarter at $304.29 an improvement of 44.3% from year-end 2022 when adjusted for dividends of $6.80 per share year-to-date. Book value per share excluding net unrealized depreciation on available for sale fixed income securities stood at $320.95 versus $259.18 per share at year-end 2022, representing an increase of approximately 23.8%. This is an outstanding result and shows the value creation from 2023.

Net debt leverage at quarter end stood at 16.3%, modestly lower on a sequential and year-over-year basis. As mentioned earlier, our capital raise back in May coupled with the organic capital generation of our portfolio throughout the year put us in a position of strength to be able to capitalize on a number of market opportunities. Another tangible example of this was our ability to reduce our CAT bond reliance at year end 2023 as we seek to retain more of the gross and net economics in lines of business with exceptional risk-adjusted return potential. So while our PMLs have gone up in the tail with the Cat bonds rolling off, we remain well within the risk tolerances of our predefined risk appetite as well as having ample room for additional organic growth.

In addition, Everest had an excellent fourth quarter and year in 2023. We began 2024 with a strong set of renewals, plenty of dry powder for future renewals and attractive organic growth opportunities in both of our underwriting franchises. Our teams are fully mobilized to serve their markets. We have substantial flexibility and strong momentum across both businesses, leaving us very confident in our ability to deliver on the total shareholder return and combined ratio targets, we introduced at our most recent Investor Day. And with that, I’ll turn the call back over to Matt.

Matt Rohrmann: Thanks, Mark. Operator, we are now ready to open the line for questions. [Operator Instructions]

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Q&A Session

Operator: [Operator Instructions] Today’s first question comes from Yaron Kinar with Jefferies.

Yaron Kinar: I guess, I wanted to start with the reserve strengthening in insurance, and I appreciate the color that you offered in the prepared comments. But that said, it seems like there may be a little bit of a break with the messaging we heard in prior quarters, namely that the company was already — had already started reserves considerably back in 2021, has cut loss picks conservatively high since then. So what’s changed from that perspective now? And how can investors gain comfort or confidence that we’re not going to see some similar pattern emerge in the reinsurance reserves?

Mark Kociancic: Yaron, it’s Mark here. So let me address that. I think, look, 2016 and ’19 clearly is impacted by social inflation and there was a very marked rise in actual losses during the 2023 calendar year. And those years are exposed to social inflation and casualty, in particular, really showed signs of development for 2016 to ’19. So we’re seeing reported loss patterns that are very seasoned, very mature and the trends are undeniable. So for us, the issue really lies primarily in general liability. And from that standpoint, we believe we’ve captured it simply because these reporting patterns are fairly well developed, but the losses are on an actual basis now to a larger degree. And so there’s less estimate involved more precision in how we’re able to size that class or period of business. And so we feel pretty good about the fact that we’re able to put this to.

Juan Andrade: Yaron, in addition to that, this is the Juan Andrade. Look, I would say there is no change in the messaging from our perspective. We have been very consistent in the fact that we have a strong overall reserve position. We are confident in the most current years. You’re right. We have raised inflation assumptions. We’ve raised our initial loss picks. We have pushed rate in excess of trend as well as a number of other things that I talked about in my remarks this morning. So we feel very confident about that. And I think as Mark said in his prepared remarks, we believe this closes the book on the 2016 to 2019 years.

Yaron Kinar: And then maybe pivoting a bit to the current accident year and your current calendar year. In reinsurance, the underlying loss ratio, it did improve year-over-year, but the improvement actually subsided relative to what we saw earlier in the year, the first nine months. And intuitively, I would have thought that we’d see that improvement accelerate just as the changing terms and conditions and better rates that you implemented starting in 1/1/’23 would be earning in. So can you maybe address? Were there any offsets there? Anything I’m not thinking about correctly?

Jim Williamson : Sure. Yaron, it’s Jim Williamson. Thanks for the — thanks for the question. So just to step back a little bit, our approach to establishing our quarterly loss ratios has been very consistent over the last few years. We set conservative loss picks as we enter the year. And then we don’t tend to change them unless we see some bad news emerge. And so we do that at a very granular level. And so quarter-to-quarter, the only real effect you’re going to see are mix related. And so what we have seen is, particularly on an earned premium basis, casualty is still greater than 50%.

Operator: Pardon me. It appears, we have lost the connection with our speakers. Pardon me, everyone. We do have our speakers back, and we will move on to our next question, which comes from Josh Shanker with Bank of America.

Jim Williamson: Hold on, please. I’m sorry. Just one moment, let me — this is Jim Williamson. Let me finish answering Yaron’s question. Sorry for the interruption of their folks. So as I was saying, we did not take credit for the 1/1/’23 property rate increases in our 2023 property attritional loss ratio. And we do that out of prudence. We keep that pretty consistent year-to-year. And then the last factor, the only thing that affected our fourth quarter reinsurance attrition loss ratio was we did recognize the effect of 2 large property risk losses in the fourth quarter. And again, out of prudence, we bumped up our loss pick for those losses. That’s about — that’s worth about 60 basis points on the total reinsurance loss ratio. So that also masks some of the underlying improvement that you’d be seeing from us, Yaron.

Operator: And our next question comes from Josh Shanker with Bank of America.

Josh Shanker: More questions about the insurance reserve charge, of course, $392 million of net adverse development principally related to ’16 to ’19 in general liability. But of course, those are inflationary CAGRs that are being set correctly, which span into 2020 to 2023. What was the gross amount of the inner impact on the loss reserves, I assume offset by development for frequency-related issues on the short-tail lines from the ’20 to ’23 period. I guess what I’m getting at is how much will reserve strengthen for inflationary issues on those later years?

Mark Kociancic: Well, virtually, all of the strengthening took place in 2016 to ’19, and that was really related to the inflationary pressure favorable development. We had some on the insurance side with respect to workers’ comp, property and surety. But by and large, we’re dealing with more of an isolated issue from ’16 to ’19. When we look at 2020 to onwards to 2023, we feel good about the loss picks that we’ve set and then the process that we followed there. So we’ve got a few points there. So start with underlying rate that’s been achieved on an annual basis. And even before social inflation became even more elevated, we were increasing loss picks in 2020. And then there’s the portfolio actions really identifying the root cause of some of the general liability development that we’ve had, and that’s been acted upon.

So the loss picks from 2020 to 2023 have reflected a proper amount for the social inflation risk, and we feel comfortable with those figures. And then going back to 2016 to ’19, given the seasoning and the really well-developed patterns, payment patterns that we’ve seen, the fact that they’re so mature approaching the 70%, 80%, 90% range depending on the year, you’re looking at, that’s what’s giving us the confidence in that segment, and that’s also why we’re confident for the 2020 to 2023 period.

Juan Andrade: Josh, this is Juan. I would also add maybe just a couple of things. Gross is very similar to net and there are no big moves under the covers per se. I think, as Mark basically just said. The other thing that’s important to note in context always matters. When we’re talking about general liability, for 2016 to 2019 and the actions that we took, they’re really isolated to two things. One is a program that’s now been put into runoff. The second one is related to a block of business that we have aggressively reunderwritten as well in the past couple of years. This is not endemic to the rest of the GL book in insurance. That also gives us confidence on the go-forward numbers. And hence, what you hear Mark saying that we have closed the door on the 2016 to 2019 years with this action.

Josh Shanker: So look, I’m just someone who throws peanut shells from the cheap seats, and I apologize. To understand what you’re saying is that the inflationary CAGR was underestimated in the ’16 to ’19 period, but even on those accident years, it was corrected in the 20 to 23 years such that you didn’t have to make — I mean I would assume that if you felt that the inflationary was 5% from the 6% all years need to be just up for that 6% CAGR. Is that a too simplistic way you’re thinking about it?

Mark Kociancic: No, you can look at it that way for sure.

Josh Shanker: And then the question would be if the 2018 accident year inflationary CAGR was underestimated in ’18, ’19, ’20, ’21, ’22 and ’23, why don’t I need to be concerned that the 2020 year was underestimated in 2021, ’22 to ’23?