Joe Lacher: It – the file – don’t over think that much is just the delayed – you’re expecting to go up further. Let me make sure I got your view.
Greg Peters: Yes, I would expect the 54.8% to go up to 70% or 65% or something with the additional California approval.
Joe Lacher: The 54.8% included the California filed rate. It hadn’t been approved. This is filed, not approved.
Greg Peters: Got it, okay.
Joe Lacher: It has filed, not approved. And so when that is approved and you’re starting to see the written go up because on August 4, we started writing it.
Greg Peters: Got it.
Jim McKinney: And so in the third quarter, it will become part of the written rate. And remember the entire book won’t have it, but everything written in the quarter will have it. So that’s why it moves up there and we will renew them over the course of the policy term.
Greg Peters: Got it, all right. And then —
Joe Lacher: So, Greg, to your our point, that’s the secondary piece, which is following that earned rate which is the 23% moving towards that 56% or that 54% that we’re representing. So that’s where it earns across the totality of the book.
Greg Peters: Got it, that makes sense. And then on Slide 6, in discussion of your adverse reserve development, you talked about some elongated development patterns in the second half of ’22, more claims closing with payments. How do you see those trends in the first half of ’23 versus what you saw in the second half of ’22? And are we going to be looking at in another situation 6 months from now where there’s going to be another reset because there has been another adverse change in how those patterns are looking in your book of business?
Jim McKinney: Yes, great question. Couple of points on that. The first point is what we saw at least across our book and it’s really become much more transparent at this stage is a jump up in terms of the ultimate losses that we incurred in between Q2 and Q3, which then has continued forward of last year. If you think about the trajectory on, we’re were consistently for three quarters in a row had been down at 0.5, 2 points, little bit more at times kind of averaging that 2-point trajectory. And then now, as you would see if you push everything back, we actually have an increase that occurred in Q3. And so that pattern changed and we’ve effectively incorporated that going forward. So I don’t think that it’s likely to repeat again.
When we look at our Q1 results, those actually developed favorable from an entry year, about $6 million that was inside of it, so modest. But based on what we’re seeing at this stage, we feel really good about kind of our well, we feel really good about our loss picks. We had obviously a pattern or trend change that was very unusual from an industry perspective and from what we’ve seen across our book. We dove underneath that. We continue to segment that out and that pattern change whether it was environmental or other is essentially what has led to the development that we’ve had to date. It’s unfortunate, but we think we’ve got it covered and we feel pretty good about the book as a whole.
Joe Lacher: If I can add a little bit Greg, I think Jim was completely clear, we saw that pattern change between second and third quarter and a new pattern is incorporated in all our current picks. I think you had a second – I think part of your question was, did we included in our current picks and part of it is will there be another pattern change? I’ll be able to forecast that for you. What we’ve tried to highlight is, this is a disrupted environment. Your question on pricing is a great one, okay. What if somebody gets a 20-point or 30-point price increase and then a year later they get another 20? At what point do they stop buying insurance, at what point is a claim pattern change. We’re watching all of that. And when I say our margin of error is wider, we intentionally are looking at that and having our radar up watching for it.
