And so you’re seeing the claims data, what we’re getting on the reserving side and embedding it within management pricing and underwriting. So which classes of business, which programs are causing issues or at risk? Are we getting adequate pricing for it? And so we’re far more disciplined, I would say, 2020 onwards with respect to that. Second part, there’s been a significant amount of rate that’s accumulated on a quarterly basis beginning in Q4 of 2019. And that’s clearly helping and it’s supported by the industry loss data that’s been developing since that point in time. And then you’ve got the prudent loss picks. Clearly, we’ve elevated our loss pick selection, taking into account social inflation factors, other risk factors, just trying to be more prudent as a management team.
Nobody wants to go through this exercise. And so we recognize that when we started. And hence, the constant effort on portfolio management. I mean, that is ultimately the key understanding at a granular basis, your portfolio by line, by client, by policy what is driving your profitability? What is driving underwhelming results? What is driving good results? The risk selection aspect, and that’s something that I think we’ve been able to do a pretty good job of since 2020.
Mark Kociancic: The other piece I’d add to all this is as you think about us growing into the hard market years, these portfolio compositions are dramatically different. So to point to risk selection, we’ve massively cut down rates over 40% on average, our rates — our overall limits are down in excess or we’ve actually continued to drive and thinking just on GL, our policy count is down over 23% in heavy risk selection, driving rate embedded to exceed margin. So we’re making all the right steps to continue to be proactive in our portfolio management.
Operator: And our next question today comes from Gregory Peters with Raymond James.
Gregory Peters: I’d like to pivot to the reinsurance business and a lot of market commentary and your commentary around the 1/1 renewals certainly seem more orderly on from a supply-demand perspective. I guess where I’m going with this is just the sustainability of price and terms and conditions that have been achieved over the last year. As we look to 6/1 and future renewal periods. So any perspective on that? Like, for example, we were hearing of more interest in the risk remote layers by the marketplace, et cetera. So just your perspective on how the market’s changing inside reinsurance would be helpful.
Jim Williamson: Everest did have another excellent Jan 1 renewals you heard Juan say we were able to deploy our incremental capital at really exceptional economics. We did grow the cat book, including leading or participating in many of the new top-off programs that you would have heard about as well as executing on a number of non-CAT opportunities in engineering and cyber, aviation and marine. So it’s really excellent all around. In terms of the dynamics of the sustainability of the market on the Property Cat side, which is, I think, where the core of the question lies, I would really point to three critical factors in terms of what is driving or what drove the market correction that started in the back half of 2022, and then obviously reached a peak and sustained itself through 2023.
The first is there’s been this persistent gap between supply and demand in terms of available capital. And clearly, some of that ameliorates as the industry earns good returns in 2023. But there’s really fundamentally been no formation of new capital in the industry other than our equity raise. And so I think there’s still that element. There’s also a rising demand from our cedents to buy more limit, which we saw again in some of those new deals that came out. The second key factor, which I think is critical is underwriting psychology. The fact is the industry has been affected by multiple years of elevated loss activity that’s hurt underwriters across the business. And they understand, I think, where you need to sustain rate momentum to earn good returns.
And then the last thing is, if you look at the underlying loss trends, climate change, the impact of development patterns we’re in an elevated CAT world. It’s the new normal, and we saw it again this year. We had an elevated 2023 CAT year. So our view is that puts legs on this market, and our expectation remains that these terrific conditions will persist past the January 1/’25 renewal. In terms of risk remote layers, yes, I mean, look, there’s interest there because I think people are trying to get away from all of the factors that I just described. We did see some cap on formation up in the towers that caps price increases. But as you saw in our portfolio, there’s plenty of areas of these programs where we can continue to do exceptionally well.
And so we see just tons of opportunity for us as we go forward.
Gregory Peters: And just building on that answer. I was looking at Slide 16 of your investor deck where you talk about the risk profile and after-tax net 1:100 year PML. Given some of the growth statistics you’ve thrown out in Property Cat. I guess I’m surprised that we haven’t seen a bigger increase in your 1:100 year sort of PML calculation. Give us a sense of what’s going on there that’s keeping it muted.
Jim Williamson: Sure. Greg, Jim again. Yes, so a couple of things, and you would have heard us opine on this in prior calls, a couple of things moving there. First of all, the way we shaped our portfolio definitely has an impact on the shape of the curve and the shape of the PMLs. And so, one of the things that we did, for example, throughout 2023 was move up in programs and really get more remote in terms of our average attachment level. And I’ve talked about an average attachment that might have been in the 1 in 4 or 1 in 5 year range is now more like a 1 in 7, and that’s very meaningful in terms of managing total risk profile. And so that’s been very important. The other thing I would indicate, obviously, is we are growing our portfolio across the world.
We see really terrific opportunities in markets in Europe, in Asia, in Latin America. So we don’t have to over-lever ourselves to our existing peak zones. We can be diversified and get exceptional returns. And then the last thing I would note, obviously, is the company is growing. And so the capital base, the denominator of those 1:100 calculations that you’re referencing is getting larger as well, which gives us obviously capacity to prudently grow our portfolio. So if you were to look at on a dollar basis, our reported PMLs, you’ll see growth. I think that growth is appropriate given the environment. I’d say gross PML growth is lower than net PML growth. As we’ve hedge last as Mark indicated in his comments, which means more retained profit for us.
So we’re really moving all of these dials to ensure superior returns as we move forward.
Mark Kociancic: Greg, it’s Mark. I’ll just add another point to it. I do think that you will see a movement to the right on that slide that you’re indicating where we’ll take a bit more exposure to tail risk through the course of 2024 and probably beyond. We are becoming more of a gross underwriter. And so in addition to Jim’s point on the expansion of capital, the portfolio is shaping, there will be less reliance on some of the hedging instruments as we move into more of a gross underwriting mindset but all within our risk appetite and only where we have significant margin expectations. And then the last point is we are benefiting from meaningful diversification in our Property Cat book as well.
Operator: And our next question comes from Brian Meredith with UBS.
Brian Meredith: I’ve got two quick ones here. The first one, I’m just curious, back to the reserves and I apologize on the reinsurance side. You’re not the only ones on the primary side, obviously, there’s some taking to adverse development in the ’16 through ’19 years on the insurance side. I’m just curious, is the border rows come in from all these other companies that are taking reserve charges. Do you or have you taken into account that increase in the claims activity and severity that you’re likely to see just from Border Rose coming in on reinsurance?
Mark Kociancic: Yes. We’re definitely, I think, ahead of the curve on that. That’s something that we’ve had in our vision for quite some time. And we’re prudently reserved clearly in ’23, have been proving out. So we feel very good about our casualty reserve positioning in the reinsurance segment for those years and recent years.
