I think that would be a good omen in terms of forecasting decent growth prospects for the industry. The E&S tax receipt information from some of the big E&S states like California, Texas, Florida and New York seemed to indicate that, at this point in the first quarter of 2023, the E&S market continues to grow, had a pretty dramatic rate. So, all those things I think give us a good sense of optimism for 2023, certainly. Beyond that, it gets a little bit more speculative.
Mike Zaremski: Okay, great. And just lastly on — some industry participants have seen a bit of narrowing spread between pricing and estimated loss cost trend. I appreciate the commentary you gave us on pricing just now. But anything notable you’re seeing in terms of loss trend — any incremental pickup in loss trends in any lines?
Bryan Petrucelli: No, I think we noted a slight deceleration in the real rate, and the reason we mentioned the real rate is because there’s the effect of a premium trend in there. So, we’re seeing, generally, the same things our competitors are doing. We’re just trying to convey it in a way that makes more sense and sort of ties more towards the movement in adequacy across the book.
Michael Kehoe: And I think our estimate of loss cost trends pretty steady from the third quarter.
Bryan Petrucelli: Yes. So — yes, what we see in the underlying data is not dissimilar to what our competitors say, and it’s like a very slight deceleration or whatever you want to call, (ph) have a reduction in the margin, is what you said? A reduction in the gap…
Mike Zaremski: Spread. Yes, got it.
Bryan Petrucelli: Spread. That’s the word, I’m sorry.
Mike Zaremski: Okay. Thank you very much for the color.
Michael Kehoe: Thanks, Mike.
Operator: Your next question comes from the line of Mark Hughes from Truist. Your line is open.
Michael Kehoe: Good morning, Mark.
Mark Hughes: Yes, thank you. Good morning. So, when you’re talking about real rates up 7%, you’re defining that as nominal pricing less your judgment on inflation trends. Is that right?
Brian Haney: Plus, also adjusted for the effective premium trend. Remember, a lot of our policies are sold on an inflation-sensitive exposure basis. So, as prices go up, the underlying premium goes up without even irrespective of the rate. So, for example, we cover products manufacturers. If the price of the product they are selling goes up because of overall inflation, that’s going to give us more premium, with that resulting in more exposure necessarily. So, it’s nominal rate change, adjusted for the loss cost trend and adjusted for the premium trend.
Mark Hughes: Okay. So, your spread essentially versus inflation would still be considered 7 points. Is that the right way to think about it?
Brian Haney: Right? Another way of saying it is, that — if the real rate were zero, our rate adequacy should be steady. If real rate is positive, our rate adequacy, in theory, should be getting stronger.
Michael Kehoe: And our real rate is 7%.
Brian Haney: Our real rate is 7%.
Mark Hughes: Got you. Okay. And so, the nominal rate, presumably is something higher than that, add your inflation assumption on top of that would be your nominal rate. Is that right?
Brian Haney: And the nominal rate going to be something in the high-single digits at this point. Loss cost trends also going to be in the higher single digits as well and then we have new premium trends.
Mark Hughes: Bryan, what was your precise comment about submission growth of just under 20% compared to 20% — a little bit better than 20% previously?
Brian Haney: I think, yes, I think it’s exactly right. I said just under 20% this quarter. I think last quarter, I said just slightly north of 20%. So — but it’s the very modest. Actually, the number in the fourth quarter would be very similar to the number we saw in the first quarter of 2022. There really hasn’t been a lot of change.
