Jim Williamson: And Brian, it’s Jim Williamson. The only thing I would add to that, I totally agree with what Mark said. But we’re not waiting for border rows. We have very strong collaboration with our core cedents in terms of claim — from a claims management perspective, we’re getting signals much earlier than reported rose and that helps to stay on top of these trends and to ensure that we’re building significant prudence into our quarterly loss base.
Brian Meredith: And then second question, just curious, capital management. I mean, obviously, you’ve had a lot of fantastic organic growth opportunities here, you’re really growing. But as I look at your stock right now, it’s kind of come down and getting closer to some pretty attractive valuations. And what are thoughts on kind of using some of the capital that you’re generating for share buyback?
Mark Kociancic: Well, it’s always a consideration, Brian. But we made this point last year. The underwriting opportunities are very lucrative, particularly in reinsurance. And we think we can capture a lot of in 2024, build our portfolio, build the franchise, and we can execute easily. So remunerating that capital is fundamental to achieving our Investor Day objectives. If we can’t do that, yes, capital management is a tool that we can use to remunerate our shareholders more adequately, but we’re very confident in our ability to achieve those objectives from Investor Day, deploy that capital profitably, build the franchises and get it done. There’s a runway here for 2024, clearly and well into 2025.
Juan Andrade: Yes, Brian, this is Juan. And I would echo what Mark said, look, from our perspective, buybacks are always there right after organic growth and something that we consider on a regular basis.
Operator: Our next question comes from Ryan Tunis with Autonomous Research.
Ryan Tunis: Just one for me. If we think about your 2024, 2025, 2026 objectives, let’s say, social inflation continues to kind of nag. So there’s — in this area where there’s a little bit of underlying loss ratio pressure at the group level. Are those objectives still achievable in your mind? And I guess, if not, you mentioned capital management, but are there other levers that you can pull to stay within that ROE range?
Mark Kociancic: Ryan, it’s Mark. Short answer is, yes. Very well-diversified set of lines of business that we have in both franchises to execute from. It goes back to my earlier point about the granular that we have in our portfolios so that we understand where loss trend is, what we think of social inflation exposure, medical inflation, economic inflation, et cetera, all the kind of risk factors that go into calculating the expected returns that we can get. And so when you’ve got that type of diversification, much easier to do cycle management and make sure that you’re disciplined in allocating that capital over time. So lots of paths to do that. In terms of the social inflation aspect, I mean, it’s well known, I think, in the industry. So we’re obviously taking prudent loss picks into consideration as we price that business going forward. So we feel very good about the three year plan beginning ’24 to ’26.
Operator: And our next question today comes from Michael Zaremski with BMO Capital Markets.
Michael Zaremski: So back to the reserving discussion. You said I think, Juan, you might have said that you’re making much higher loss — taking much higher loss picks on the — as of 2020 from looking back at the transcript wording. I don’t believe, and maybe I’m incorrect your disclosure, many of your peers, you can see the disclosure, but I don’t believe you Everest discloses loss tax side vintage or by major line of business. So unless I’m wrong, and you want to give some color on that, it would be great to understand how much higher those loss picks are or if you wanted to change the disclosure in the future kind of as many of your peers to disclose that.
Juan Andrade: Yes, Mike, I’ll start and then I’ll have Mark add some commentary as well. Look, we don’t disclose our loss picks, obviously, for competitive reasons. But I can tell you that, again, as I’ve said before, since I arrived here in the fall of 2019 and for the first plan that we did for 2020, we significantly increased our loss picks in both insurance and reinsurance, particularly on long-tail lines of business. And that is something that we look at every quarter. and we true up every quarter, and you have not been seeing us really take loss big staff, at least not since I’ve been here as CEO of this company. And the reason for that is everything that we have been talking about right now, right? Number one is the fact that we recognize that there is loss inflation in the environment.
So that’s one of the key reasons for increasing the loss picks and not taking them down. We also have been truing up our loss trend assumptions and we’ve been doing that on a very regular basis starting in 2020. So before inflation, economic inflation really started to happen, we started doing that really in 2020. So I think those two things really come back to what Mark and I were saying earlier in the conversation, which also gives us comfort as to where we are right now. In addition to that, and very importantly, it’s all the risk management and portfolio management actions that we have taken across the book. You heard Mike Karmilowicz, for example, talk about the fact that in lines like ex liability, where we might have had $25 million limits exposed back in 2018, 2019, they’re down to $10 million now, and it’s actually a net of $5 million for us in the company.
So significantly lower. And that’s across every single line of business that’s out there. So when you take into account the increased loss picks, the increased rate, the additional loss trend is put up, the rate and the portfolio management actions, the risk selection, et cetera, all of this comes together. And essentially, the conclusion that we’re giving you today on how we feel about that go-forward business and the fact that we have dealt with the 2016 to 2019 years.
Michael Zaremski: That’s helpful, especially the reminding us about the limits changes on lots of the policies in ’20 and beyond. Let me — just lastly, I don’t know if — just looking at the — you’ve taken a lot of realized losses make sense to kind of lock in some higher yields and some reserve changes, too, a lot of premium growth, which is — which uses up capital. So just is there — should we be thinking about just being careful with our buyback assumptions on a go-forward basis given all the moving parts? Or should we — am I splitting hairs and that you can keep kind of at the current pace?
Mark Kociancic: Mike, it’s Mark. The first point that I would make is we have ample capital. There’s a lot of capital that we have at our disposal — the capital raise that we did last year, fully deployed, we’ve generated an additional $1.5 billion in the second half of 2023. I think we’ve also got very favorable margin expectations for 2024 and beyond. And so the ability to generate income and retained earnings going forward, we feel very bullish about. And then you’ve got process that we have internally where there’s the — and I think this is really important, there’s a discipline of what I call threshold pricing where we are able to move into the most accretive opportunities. We are not forced to simply underwrite certain lines or classes of business to keep volume or whatever it is.
