Five of the last six have been aggregate insurance losses for natural catastrophes in excess of $100 billion. So while the risk-adjusted return proposition from a modeled situation looked very compelling this year, there was questions in our mind as to how is the year going to play out. We would benefit if it did play out well. We did grow and took advantage of the rate and pricing environment. And then it was a question of what will it look like going into 2024. Will the pricing environment be sustainable? Or would it sort of change after sort of one year. It does look like we should have stable but firm and constructive market pricing environment. So we have the ability to deploy more capital there should we choose to do so. We’ll look at that.
I’m not going to put a projection around that, but it’s certainly something that we would take a close look at back of a good year.
Andrew Andersen: Yes, and then maybe on the reinsurance side, the book has changed a lot over the years and so is the rate environment. How should we kind of think of like an updated target near to medium term for an ex-CAT, ex-PYD combined ratio? And maybe just with that, can you kind of give us a refresher of the type of GL and professional liability accounts you’re writing in this segment?
Jeremy Noble: Sure, so from a sort of a reinsurance platform standpoint, we are, first and foremost, focused on profitability, versus being focused on growth. Now it’s happened to be within the professional casualty and specialty lines the last few years, we’ve been able to take advantage of some pockets of growth opportunistically to offset some of the contraction that the portfolio experienced when we repositioned property through Nephila. From a profitability target standpoint and a combined ratio, we’ve kind of spoken in the last couple of years, I mean, we want that book to generate meaningful returns on — meaningful and appropriate returns on capital and pushing it towards the lower 90s or 90 even being a target is something that we are aspiring to sort of achieve.
And we’re certainly trying to price our deals and portfolio on the most recent underwriting years in that regard. But there’s just a lot of noise on the back here. And on long-tail lines within reinsurance, it takes a while to ultimately see where that book gets. We’re going to always reserve with an added degree of caution on long-tail professional and liability lines. So that will take a little bit of time. As far as the makeup of the book, it really can kind of change, and it really depends on the underlying clients. We have both quota share and excess of loss structures. These are often broad highly well respected, highly regarded insurance companies where we participate on a subscription basis on the accounts, and it’s a wide range of underlying risks.
It is more of a U.S. position book, but it does have some international exposure as well.
Andrew Andersen: Okay, thanks for the detail.
Operator: Your next question will come from the line of Scott Heleniak with RBC Capital Markets. Please go ahead.
Scott Heleniak: Yes, good morning. Just a question on the intellectual collateral protection line. Just wondering if you feel like you captured most of the impact there from some of the recent events that were in the headlines. And just how comfortable are you with, I guess the exposures there and also some of the changes. I think you touched a little bit on those are some of the changes you made to that book? [Indiscernible] to that book?
Jeremy Noble: Yes, sure. Scott, again Jeremy. So we previously disclosed — sorry disclosed that our exposure to Vesttoo was in the form of two fraudulent letters of credit, which were provided as reinsurance collateral to our Bermuda-based insurance carrier for intellectual property collateral protection insurance products. One was for $50 million. The other is for just under $78 million. During the third quarter, we had to pay a claim for the $50 million amount. That we otherwise would not have had to pay had the collateral been valid. And that’s where we recognized $25 million as far as credit loss. So we’re suggesting we believe there’s some degree of an ability to mitigate some of that exposure. But that would be a pocket of exposure.
We have assessed the likelihood around whether a claim may arise. It’s a claims-made product. So on that second exposure, there isn’t a claim yet. And just for familiarity on the product, you have to have both a claim. And then it has to be the case that the underlying assets, including the intellectual property, can’t — don’t have a value that it could offset against the loan that was in place. And so what we’re highlighting there is we have exposure and we’re flagging that it’s at least reasonably possible that, that could become a claim. And if it were to, we have additional exposure there. Clearly, in that situation, we will take every step that we possibly can to mitigate or remediate against that loss as well. So we’re actively pursuing remedies, including within the Vesttoo bankruptcy to reduce any losses that we incurred.
On the core product line, this was a relatively new product. It was a new product. It was brought to market I think sort of in 2020. We had — played an integral role in the inception of a sort of a nascent product. And undoubtedly, we’ve learned from the early years, if you analogize it to sort of R&D. And we’ve taken a number of underwriting actions within that book. But we’ve also contracted our premium writing significantly. And one of the things we’ve done is we shorten the limits that we issue. And clearly, we’re not fronting within that book, anymore either. So we’ll watch how the core book performs. But a lot of the exposure that is more meaningful to Markel come to that exposure to Vesttoo, which I covered off.
Scott Heleniak: Okay, and then just another question just on — you mentioned you’re increasing loss picks in certain lines, which I know Markel is a conservative company and has always been a conservative company. But is there any particular areas that you can point to? Or is that just kind of broadly just in casualty, just trying to pick up inflation and severity and those kinds of things? Just anything more to add on that?
