I think last year, it was low-30s. I would expect a similar trend to play out in Q3 of this year as well. But similarly, over that — the next treaty year, I would expect very similar pattern to what you saw in our net earned premium ratio this year, really mostly dependent on what that renewal looks like. But in our model, we have a slight increase. So I would expect slightly lower net earned premium ratio compared to last year, but very close to what you saw this year — or over the last three years, excuse me.
Mark Hughes: Okay. And then, when we think about 2025, should that be migrating up a little bit, kind of offsetting some of the higher losses?
Mac Armstrong: Yes. Mark, this is Mac. I would say, some of that’s going to be driven, frankly, by Crop. So Crop right now is really more of a participatory front, as we described, with a 5% risk participation. Going forward in 2025, we will take it more meaningful. So, that would help drive it up. If reinsurance pricing starts to decelerate or decline, that would be a driver of it. So you should expect decent net earned premium growth this year and that ratio potentially to tick up in ’25 because our risk participation in lines like Crop and maybe a selective group of Casualty business that is beginning to mature and season more, that will help inform that as well.
Mark Hughes: Yes. And when you think about — when you say it’s going to step up 5%, what’s the trajectory on that? If all goes as planned, what’s the next step?
Mac Armstrong: I’m sorry, the 5% for Crop? Is that what you’re asking?
Mark Hughes: Yes.
Mac Armstrong: Yes. I would say 15% to 20% type participation. We’re bullish on the prospects for that line and think we can build a very meaningful franchise there and for what it’s worth. It was a very modest amount of premium that we wrote in 2023, but it was a very profitable book.
Mark Hughes: Yes, exactly. The commercial quake, is that — how much is that tied to just broader commercial property supply and demand, or capacity and demand? Is there a separate dynamic within commercial quake? Or does that tend to parallel the broader market?
Mac Armstrong: I think Earthquake is a unique line. For commercial earthquake, especially layered and shared business, you need to have that coverage for — to satisfy a large commercial loan. I think you’re writing in areas where people are very mindful of protecting assets that have considerable equity value. So I don’t think it mirrors the broader property market, especially because it is the tried and true layered and shared market, where you have multiple participants on a singular risk. If you have a $500 million property schedule, you’re not going to have one quake insurer. You’re going to have 10 to 15. So because of that nature, I think it’s pretty nuanced. And it does follow the cost of reinsurance to some degree and reinsurance pricing in the primary market, but not in the sense of coverage and participants.
Mark Hughes: Thank you, appreciate it. Thanks, Mark.
Operator: Our next question is from Peter Knudsen with Evercore ISI. Please proceed with your question.
Peter Knudsen: Hi, good morning. My first question is on midyear renewals. I believe you mentioned an increased expectation of costs in the prepared remarks. I’m just wondering if you could expand a bit on those updated views and how that’s shaping up.
Mac Armstrong: Yes. Happy to do so. Thanks for the question. What I would say is, again, our guidance for the year, the start of the year, and what we just affirmed assumes a, call it, 5% increase in the cost of reinsurance. We are in the midst of our placement right now, and we are encouraged by the prospects of, as I said, beating that number. We did renew two small treaties at January 1 that were down plus or minus 5%. We have bound some coverage in early April that incepts at 6/1 but is bound and covered, and that is plus or minus down 5%. So, that constitutes roughly 10% to 15% of the total tower. So there’s a lot more to do. So we want to be conservative in what we are assuming. But all indications, including with what we are hearing in the initial price-up that we put out in the market on our cap bond is — gives us confidence that we will certainly achieve that level, if not exceed it.
Peter Knudsen: Okay. Yes, great. That’s helpful. My second question is around the strong acceleration in the Casualty growth. I know you mentioned a little bit of the lines and the rate that was driving that. But I’m hoping you could talk a little bit more about the current market in some of those lines and how you guys are feeling about rate and loss trend in that space, and then, also if you’re expecting that same strong growth to continue.
Mac Armstrong: Sure. We do expect to see good growth from Casualty throughout the year. We’ve made considerable investments in casualty from, most importantly, a talent and leadership perspective. People like Ty Robben, Brian Pushic and Gerrit VandeKemp have come across with great pedigrees and great followings and great experience in the market. So we are investing in them from a system standpoint, from a balance sheet standpoint, from incremental underwriting resources, and want to build a meaningful franchise in these niche market segments. So what we — I would say right now, though, is we are going into the market, and we are doing so in a meaningful fashion but also a conservative fashion, conservative from a risk selection standpoint.
