Joshua Shanker: And the proportionality — again, the correction, I mean, you’re not passing the risk onto clients. Also, the clients are passing risk on to you in some ways, but they’re not passing on all the risks. Is there a sense we can make about as the loss increases to levels not before seen, the amount of risk that’s been transferred to RenRe versus the amount of risk that’s not yet been transferred?
Kevin O’Donnell: I think, what you’re asking — the biggest exposure we have to an event like you’re describing is our property cat portfolio, which is an XOL portfolio. So as the event continues to grow, losses will revert back to the primary companies once the limits are exhausted from the towers that they purchased. So, I think, the question you’re asking is, as the loss continues to grow, we tap out and become a lower percentage of the overall participation in the loss, as the loss continues to escalate beyond the tower purchased. Is that your question?
Joshua Shanker: Yes. That’s generally the point I’m getting at, since you don’t give us PML disclosure, trying to understand how RenRe exists in larger loss environments?
Kevin O’Donnell: Yes. The slope of our increase reduces with the size of the loss and as it reverts back to the primary company.
Joshua Shanker: Thank you. Appreciate it.
Kevin O’Donnell: Yes.
Operator: Our next question comes from Yaron Kinar with Jefferies. Please go ahead.
Yaron Kinar: Thank you. Good morning. I want to go back to your comments, Kevin, on the casualty market and how you feel that. Generally speaking, the market is keeping up with loss trends. I just want to square that with, when I look at the 10-K triangles there, we see that — I think, we saw a little bit of strengthening for accident year 2022, another liability. We saw the initial aspect for accident year 2023 up substantially year-over-year. So, how do I square those data points with the comment? Is it just extra prudence on your side or other drivers there?
Robert Qutub: Let me go ahead and start with that. Thanks for the question, Yaron. What you’re looking at is the triangles and the K, and you’ll see changes as we go through in the actuaries, we’ll true those up. What you see in terms of the earlier years or the more recent years, you’re seeing some of the short tail businesses, that benefit will come in. As far as development in prior years, you’re always going to see some movement in the curves as we get more information. But with respect to how we feel about the reserves, we’re very comfortable with our estimates that we have.
Yaron Kinar: Okay.
Kevin O’Donnell: To give a little bit of context, I think there’s been a lot of focus on reserves, and rightfully so. The majority of that focus is on probably years 2014 to 2018. When I think about our reserves, I think about the overall pool of reserves that we have, which is, I use round numbers, about $20 billion. When we break it down to the years that get the most attention, which are 2018 and prior, on a net basis, that’s less than 5% of our reserve pool. So, we think there are issues that will emerge in the 2014 to 2018 years, but those issues are not significant to us, because of the reserve balance that we have and the fact that we’ve decided to grow our casualty more substantially 2019 and forward. We have substantial protections on those years.
So, when I think about the reserve pool, I think there are always movements, as Bob mentioned, in specific years. But across the health of the portfolio and the health of the reserve pool that we have, I think we’re in significantly better position than the industry. And I feel very comfortable about the balance that we have as a company.
Yaron Kinar: Got it. And then with regards to the more recent accident years, maybe not 2020, just given the COVID lockdowns and whatnot, but as we look at 2021, 2022, 2023, you’re still very comfortable with loss picks. And not just your loss picks, but your cedents’ loss picks and those keeping up with loss trends?
Kevin O’Donnell: I’ll speak to ours. I feel great about ours.
Yaron Kinar: Okay. And my second question, just going back to the commentary around the expectations of an active hurricane season. So, I think, I understand your point of ultimately you’re not going to look to pass or, I guess, play with clients — your appetite for client risk, just given any year’s dynamic on the hurricane side. But at the end of the day, an active hurricane season does potentially depress returns. So, does that not factor into ultimate appetite into growing in property cat any given year?
Kevin O’Donnell: Yes. So, those are — thank you for asking for the clarification there. When we think about our book of business and what I tried to touch on is the value of incumbency, we look at the expected value of a client or the portfolio. That expected value is higher when we provide consistent coverage through elevated forecasts and reduced forecasts. Your second question is, how do we think about the risk and how do we think about our portfolios? We absolutely think about the portfolios and how we’re shaping the portfolios, how we’re managing the risk that we’re taking and the growth objectives that we have. We will not transfer that to people who have trusted us in the renewal book that we have. But when we think about growth, I mentioned in the Florida comment earlier, we have a high bar for us to want to continue to deploy into that.
A contemplation of that would be expectations for a trade, because many of the things that would be growth would be a trade, not a partner. So, it absolutely folds into our portfolio construction, but we don’t transfer it with availability of capacity to our partners.
Yaron Kinar: That makes sense. Thanks so much for the color.
Operator: Our next question will come from Brian Meredith with UBS. Please go ahead.
Brian Meredith: Yes, thanks. A couple questions here for you. First, Kevin, I know previously your intentions were to shift cat capacity to the cat reinsurance line and away from other property. Hard to see how much the actual organic growth was in other property. But is that still the case or you kind of change your views on what’s going in the other property area?
Kevin O’Donnell: That’s still the case. I think, we’re still getting excess return compared to the other property portfolio by riding property cat. So, we’re focused there. We also like the distribution that comes in from the — with the new attachment points in the cat portfolio, where there’s less attritional loss coming through the income statement, obviously with the cat book, which is an excess to loss book. So I would say our strategy on other property is relatively consistent. We have — are monitoring closely particularly the cat exposed other property portfolio. We think there’s good rate there and good opportunity. But on balance, the property cat opportunity still trumps that opportunity for us.
