Matt Carletti: Okay. All right. That’s helpful. And then just maybe zoom out a little bit, Frank you gave some high level comments just on state of the market. And obviously, things sound like very good. Can you dig in a little bit? And kind of as we think about your kind of the specific underwriting divisions, as the markets continue to evolve, what have you seen recently in terms of, have you seen more opportunity in certain areas and pulling back in others? Or has it been a little more constant over the past several quarters?
Frank D’Orazio: Yes. No, it’s a good question, Matt. So I would say very healthy growth opportunities still persist across much of our E&S platform. And we saw that in the third quarter. Majority of our underwriting divisions continuing to report solid growth, nearly all divisions reporting positive renewal rate changes. I don’t think we’ve seen any significant change in the opportunity set for the E&S business. Our core E&S segment, which of course, as you know is all of our E&S underwriting divisions, with the exception of Commercial Auto, that grew at a double digit clip, so at 10.3%, stands at about 11% year-to-date now certainly driven by some healthy rate increases. New submissions, I think I referenced in the script, growth for the quarter was up 8.4% over Q3 last year.
That’s the highest it’s been in 2023, which is a great indicator for future growth. And many of our underwriting divisions are certainly growing at an attractive pace, certainly greater than rate increases, including contract binding, Sports & Entertainment, professional liability, energy. And then two of our biggest underwriting divisions, General Casualty, where we see a lot of opportunity and Manufacturers and Contractors, so it’s these types of market dynamics where you get strong rate healthy submission trends that I think suggest that the conditions should continue to be very favorable as we move into next year. But I guess the other side of that, and I spoke about it, is Commercial Auto. So listen, no surprise here. Most data points suggest the industry hasn’t made a lot of money in the last five years in Commercial Auto.
We continue to purposefully reduce the size of our portfolio by being extremely selective. And I would suggest acutely aware of the impact of loss cost trend as well as social inflation. And we’re aggressively pushing rate, particularly in the subsectors of the classes that we’re most concerned about. And I mentioned food delivery before. And as a result of these types of portfolio management actions, we decreased our writings in the quarter by 44% compared to the prior year quarter. So that results in about a 4 point drag on our E&S growth rate. And I would say that’ll probably continue to be a trend going forward, just relative to our views on Commercial Auto.
Matt Carletti: Great. Appreciate the color. Thank you.
Frank D’Orazio: Sure.
Operator: Thank you. The next question comes from the line of Tracy Benguigui from Barclays. Your line is open.
Tracy Benguigui: Thank you. Good morning. Congrats on your JRG Re sale announcement. While structurally the sale will reduce some overhang, I’m wondering if you could walk through why you feel a 0.75x price to book is fair valuation. I get that maybe other runoff deals valuation is in this range, but you do have that LPT in place. And then I’m also kind of thinking about the $93 million net loss or dilution that you talked about. And if I compare that to your tangible common equity, that was $385.5 million. It feels sizable.
Frank D’Orazio: Yes. Let me start with some commentary about how we thought about the transaction. So clearly we felt, I think the biggest concerns that our investors and other stakeholders in the company had were the questions surrounding our Bermuda Reinsurance segment. So, including whether we were going to continue to experience adverse development from prior years, whether we had purchased enough LPT limit from the legacy market, and frankly whether we get to a point where we need to raise additional capital in the event we had to take steps to further shore up the entity. And so we feel this transaction addresses those risks, removes roughly $400 million of volatile reserves from the balance sheet and again without the need to raise capital.
And after we took the steps in the third quarter, sell the renewal rights of our workers’ comp portfolio. What we’re left with now, James River is now roughly $1 billion well performing E&S carrier, recognized as a leader in the sector, and one of the few very well regard fronting companies that’s been around for a while with a very deep team and a coveted value proposition. But relative to your question, I mean, certainly we’re valuation sensitive. As for the discount to the entity and the sales price, we analysed industry transaction of this nature that have occurred over roughly the last 15 years. And while this entity is a bit greener in terms of how recently it was writing live business, and I think that’s a factor, Tracy, obviously also solely focused purely on reinsurance.
So we felt the discount to book value still very comfortably in the range of prior transactions. Even with some of the scenarios, the idiosyncrasies that we’ve just referenced between the LPT limit still there, but the fact that we’re not that far removed from being a live underwriting operation, and it is purely Bermuda Reinsurance. And so taking all that into consideration, in addition to providing the great new home for the entire team of our segment and providing a clean and final break from the business, I think prospectively the company is just in a much better position with this transaction. Simplified and focused on areas where we’ve got scale and expertise.
Tracy Benguigui: That was very thoughtful – sorry, go ahead.
Sarah Doran: Yes. I was just going to add a couple more data points to your questions if I could. So, obviously, the runoff entity, just to get a valuation for a few more points, obviously, not a place where you see a ton of entity-level runoff transactions, very disparate and the level of liabilities is also in the age of the liability. So just to kind of add on to the 75% of book value metric. I think second, the LPT in place, yes, certainly helpful to have the LPT in place, but to some degree it’s counterbalanced by, as Frank referenced, the greenness of the reserves. The entity has only been in runoff for a couple of quarters at this point. Second, on to the capital question, we certainly have our tangible common equity number spot on.
