Carolyn Monroe: No. I mean, it’s just — for an agent they market to someone different. They’re marketing to a builder, rather than to a real estate client that type of thing. And it just depends on what market you’re in, whether an underwriter or a direct operation has a relationship with a builder. It’s a — our business is always relationship driven. So it’s really just about who has the relationship with the builder and who has the relationship with the realtor.
Paul Newsome: And then a question about reserves perhaps because I always want to put Frank in the hot seat. A lot of the companies are today and recently are reporting issues with accident years sort of in the casualty reserves for accidents or sort of 2016 to 2019. Obviously, you folks have had a great track record overall. I’m just curious if in some of your books you’re seeing some of that, or is that some of the differentiation amongst your book versus others that they’re seeing these problems during casualty lines in those years.
Craig Smiddy: Yeah. And the years where you say others are experiencing problems with unfavorable development are in accident years did you say 2016 to 2019 Paul?
Paul Newsome: Yeah. They’re sort of all the pre-pandemic years. Seems to be where the source of some problems are for a lot of companies.
Craig Smiddy: Yeah. Well, I think we are very different certainly on commercial auto. We have been very successful at identifying trends early, responding quickly and that started well before the pandemic five, six, seven, eight years ago. And achieving the necessary rate to offset those trends we were seeing. So while I know I’ve observed in the marketplace some of the — our competitors that are experiencing unfavorable development on commercial auto in those years. That is not the case for us, we’re actually — we have favorable development. And on general liability, it’s a little bit different. We are seeing some unfavorable development on general liability. And we’re — just like we did on auto we’re responding to that and some of the general liability growth in premium you’re seeing is because of increases in rates on a general liability to respond to any social inflation severity trend that’s leaking from auto into general liability.
Paul Newsome: I always appreciate the help. Thanks a lot.
Craig Smiddy: Thank you, Paul.
Operator: We’ll take our next question from Evan Tindell at Bireme Capital.
Evan Tindell: Hi. Thanks for taking my call. My question has to do with interest rates and competition in really all lines of insurance that involve flows. So I’m just generally you can obviously get much higher yield on insurance flow these days. Do you guys expect various lines to become more competitive over the next few years in terms of pricing? And relatedly, do you guys still think that 90% to 95% combined ratio in the General Insurance business is a good sort of range because you guys have been at 90 for a few years now, or do you think you guys could start to push into the 80s? Thank you.
Craig Smiddy: Sure. I’d be happy to address both of those. And actually I think your questions are related. In my 37-year career, I’ve experienced hard and soft markets some of them that have been driven by the issue of underwriting float and investment income that was given too much attention relative to underwriting income. So I understand your question. I think where we sit in this cycle, there is a far greater concern in the marketplace about social inflation, about general inflation, the need to continue with rate and rate increases that are commensurate with those trends that I don’t believe. And certainly we here are not adjusting our target combined ratios, because we’re achieving greater levels of investment income.
We think that is important to continue to target combined ratios between 90% and 95% depending on the line of business. And we say between 90% and 95%, because there is a little bit of difference if it’s shorter tail or if you’re receiving investment income on the longer tail business, so you can write it to a few points higher combined ratio. But generally speaking about competitiveness in the marketplace, I think there’s far greater concerns that outweigh the potential advantages of greater investment income. Of course, you could always have new entrants that come in and are disruptive and underpriced business. But generally speaking, the P&C marketplace is remaining very disciplined and more concerned about achieving appropriate levels of rate relative to inflationary trends.
And so therefore, like I said, I think the second part of your question was related, because that involves where do we set target combined ratios. And I can tell you that our target combined ratios will not change as we go into planning for the 2024 year and we’ll still be targeting combined ratios in the low 90s to 95. It’s — will we be able to move into the 80s and target something in the 80s. I think that is very difficult to do, because again there is some pressure that will inevitably come in the marketplace from the greater investment income. And typically when there’s greater investment income combined ratios go up. So being able to drive that down in General Insurance much further is unlikely. And then you also have to remember that a good portion of that is coming from favorable development.
And as we said on the earnings call, last couple of quarters but the current level of favorable development that we’re experiencing is not sustainable over the long-term 6-points is extremely robust. We try to err on the side of having favorable development ideally in the 2% range. But right now that, overall, calendar year combined ratio is reflective of some very strong favorable development that won’t continue. So we’re going to continue to target and the combined ratios that we currently are targeting on an accident year basis.
Evan Tindell: Okay. Great. Thanks. And one other question. Do you guys have an internal forecast for when you think autonomous vehicles might start to impact the commercial auto insurance market, or do you guys think it’s so far off that it’s not worth worrying about right now?
Craig Smiddy: Well we certainly keep an eye on it. We don’t have any type of internal forecast. But we think it’s a long way off before the public gets comfortable with autonomous driving. And for us, you really have to think about long-haul trucking and commercial vehicles. And because that’s the majority of our commercial auto exposure. We don’t have the personal lines or commercial exposure — ours is commercial not personal lines. So when it comes to commercial the idea of an 80,000-pound truck running down a highway without a driver is probably a long way off before the public is going to accept that kind of catastrophic potential. And then if you look at the other commercial auto business that we write across our companies, it’s commercial auto business that’s transporting workers and goods and those vehicles will always have drivers because they are the workers that we’re insuring.
So for us the autonomous question is not perhaps as relevant as it may be if you’re a personal auto carrier because again I think it’s a long way off for the type of exposures that we underwrite.
Evan Tindell: Okay. Thanks.
Operator: And that does conclude the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Craig Smiddy: Okay. Well, we again I appreciate everyone that has join the call and listen in and those that have asked questions, we are appreciative of that as well and I appreciate the support. And we feel good about the third quarter, and looking forward to reporting to you on our fourth quarter results. And until then thank you very much and have a good day.
Operator: And that does conclude today’s conference call. Thank you for your participation. You may now disconnect.
