Carolyn Monroe: Okay. I don’t really think that the valuations will have much impact on our losses – reserves or loss ratios. They’re highly leveraged properties. And you have to remember that when commercial is done, there are so many attorneys involved and people involved looking at the properties, looking at the deals that I don’t – I just don’t think that’s going to – just because the properties get devalued that that will really affect our loss ratios.
Greg Peters: Fair enough. Well, thank you for the answers. I’ll let others ask questions.
Craig Smiddy: Thank you, Greg.
Operator: The next question is from Paul Newsome with Piper Sandler. Your line is open.
Paul Newsome: Good afternoon. Thanks for – hello, thanks for the call. The shift towards these businesses with a lower loss ratio, higher expense ratio, is that effect finished or should we expect new prospectively as well?
Craig Smiddy: I missed the very last part of your question, Paul. I’m sorry, it didn’t come through.
Paul Newsome: In the General Insurance business, you’re seeing a mix change that’s higher expense ratio, lower loss ratio.
Craig Smiddy: Right.
Paul Newsome: Should we expect that mix change to continue prospectively?
Craig Smiddy: Okay, got it. Thank you. Well, it’s a great question. And Greg was just pointing to some things in our financial supplement. And I might use that supplement to try to paint a clear picture here. And one of the things I would point out is that – what’s driving this is not just the new business we’re putting on into our portfolio that is shorter tail business that tends to be higher commission ratio business, but we also have the impact of workers’ comp. So, if you look at workers’ compensation that is one of the lowest commission ratio lines of coverage that we write. And if you look at that line in the financial supplement and you just look at the net premiums earned, you can see in 2018 we were over $1 billion of net premiums earned.
And then, by the time we get to 2022, you’re at about $800 million. So, as we’re putting on to the portfolio a shorter tail business in a very deliberate effort to diversify our portfolio into other lines of coverage. At the same time, workers’ compensation with low loss ratios was coming down. As matter of fact, workers’ compensation back in 2018 was about 31% of our portfolio. And today, that sits at 20%. So, you can see that the effects of both of those things happening at the same time are what has driven a good portion of that expense ratio up. While at the same time, you can look at our accident year combined ratios or loss ratios, I should say, on Page 4 of the release. And you can see since 2018, those loss ratios on an accident year basis have trended down from 72.2% and we ended the second quarter of 2023 at 66.9%.
So that’s a trade-off that we’re happy to make. And then now to get to your part about going forward. So going forward, we mentioned that we continue to place business into our portfolio from some of the new underwriting ventures that we’ve undertaken, Old Republic Inland Marine, Old Republic E&S, Old Republic Lawyer Specialty Insurance and those are lines that do have a bit higher of commission ratios. Now on the other hand, as you noticed, workers’ compensation has started to grow again. And if you look at – the numbers in the financial supplement, you can see that that growth returning. When you look at the net written premium, for instance, was $209 million in the quarter compared to $192.8 million in the same quarter of 2022. And we said that’s growing at about 8%.
So, at least, we’re growing in a lower commission ratio line again. So that will help mitigate this somewhat, but at the same time, we are putting on to the books more diverse lines of business that do carry lower loss ratios, but a bit higher commission ratios. So, hopefully, that answers your question.
