Kevin O’Donnell: So I think of this one-one as being less similar to €˜06 and more similar to what happened in 2001, 2002, guess. The — because it’s broader geographically, there are far more attractive lines and far more hardening lines in the market. And so I don’t had to answer your question with regard to comparing it to €˜06. But when I think about what we’ve built in our ability to , it’s stronger now than it was €˜02. The fundamentals of the market are a little different, but the ability for us to harvest profit from the casualty portfolio, I think is increasing. We’ve got a much bigger Capital Partners business, which continues to contribute, investment returns look stronger. And then the property portfolio at the reset level is at extremely attractive levels.
Ryan Tunis: Got it. And again, just on the renewal, it did seem to kind of come together at the end. Any idea of just, I guess, whether it’s terms and conditions or rate, some aspects of that renewal that you wish would have potentially been a little bit more favorable than they were for the industry or for Ren?
Kevin O’Donnell: Late renewals work to our advantage and renewals often, because it’s a renewal where there’s been a dislocation that hasn’t been fully absorbed by the market, which means creating options and providing alternatives is a skill that can reap outsized rewards. We placed — we achieved a significant number of private placements by helping companies think about how to structure their programs. The one area where we’ve think it’s a delay, not a miss, is the capacity that we think — we thought would come to the market at one-one. We saw more capacity come to the market in Europe and some other places. The U.S. capacity, I think buyers ultimately made a wallet decision as to how much they wanted to spend. And I don’t think their appetite for how much they want to buy has diminished.
And I believe that what we’re experiencing is a bit of a delay in that limit coming to the market, which will add to the sustainability of the price hardness that we’re seeing. So when I look at it, I’d say that that’s an area that I’d say was a bit of a surprise to us on one-one. But again, I’m not concerned about it, because I do think the capacity needs to come to the market. And I think if it does come to the market, we’ve got the capital and the structuring capability to be able to service them.
Ryan Tunis: Got it. And then just lastly, with capital going more toward the property cat business away from other property. Other property obviously has quite a bit more premium. Any indication of I guess what top line could look like next year from another property perspective?
Kevin O’Donnell: Yes. It’s quite a deliberate change. And let me just — we’re getting very good rate increase in the other property portfolio, but it comes in more slowly than the losses occurring nature of the property cat portfolio. So leveraging into that, I think we’re making a smart trade as to how to put market. So I don’t particularly worry about one being up or the other. Our footprint in that market is exceptionally strong. And when the opportunity there begins to emerge as accretive again, we will leverage back into it. So — but right now, property cat is preferred, and we’re going to continue to emphasize the growth there. In the long and short of it, we’re going to grow property cap quite a bit, and we’re going to shrink a bit in other property, which I think is a good trade.
Operator: Our next question comes from Meyer Shields from KBW.
Meyer Shields: Thanks, I guess to begin with, it sounds like the casualty and specialty combined ratio expectation is flat on a year-over-year basis. In other words, picking in the mid-90s, Am I thinking about that correctly?
Rob Qutub: Yes. In my prepared comments — thanks for the question prepared comments, we did say that we expect that with the growth, we should still continue to maintain mid-90s as the range. This year, mid-90s was 95.3, and you saw us kind of move up and down in that range with events like earlier in the year, Ukraine losses. And I’ll point out this year, we had the loss on one-one. So it should move up and down, but we feel very comfortable about mid-90s.
Meyer Shields: Okay. No, that’s fair enough. I guess I was expecting a little bit more improvement, but I understand what you’re saying about the range. If you look back at the extended one-one renewal season, how do you I guess, compare the actual capacity deployed to your expectations going in.
Kevin O’Donnell: We did extremely well. I would say — again, the area where — I think that’s the most relevant question is for the U.S. property cat limit. And as I mentioned, we have about 50% of that yet to be renewed. So I would say that, yes, there was less demand that came to the market. That did not change anything with our strategy as to how much to deploy, it just meant we needed to be a little bit more nimble on how to get the limited with the customers’ hands, and we did that. So from my perspective, I feel really good about where we traded into the market, albeit the dynamics are a little bit different than we expected going back to December 1.
Meyer Shields: Okay. That’s helpful. And I guess last question, if I can, just to continue with that. You talked about expecting that demand to come back. Is that the higher or lower layers of coverage that you expect to come back?
Kevin O’Donnell: Yes, it’s a good question. It will be higher layers. I think at this point, companies are going to continue to — let me company — larger companies will continue to make the trade that they’d rather build balance sheet protections rather than have low-end income statement protections. And I think that’s — the income statement is going to need to be bolstered by them getting more primary rate. The one exception to that is in Florida. I think there’s sometimes some — there’s the way people think about the Florida market is to weather limits above or below the FHCF. I think there will be still a need for some purchasing of limits below the FHCF, which I be very low. But more broadly, the new limit purchased will be at the top end of programs.
Meyer Shields: Okay, fantastic. Thank you so much.
Kevin O’Donnell: Yes.
Operator: Our next question comes from Yaron Kinar from Jefferies.
Yaron Kinar: Hi, good morning.
Kevin O’Donnell: Good morning.
Yaron Kinar: First question, maybe going back to Elyse’s question on kind of how the ROE look in a normal cat year and realizing you can’t really prognosticate the precise ROE what exactly would look like in ’23, but maybe you can also help us with delineating how much of the improvement you see coming from NII versus the underwriting? Would, it be more weighted to underwriting, more weighted NII?
Rob Qutub: I’ve tried to point that. It’s a good question. I’ll help me try and break that. We’re seeing much more improvement, let’s start with net investment income. You started to see that over the course of the year, ending with $144 million and giving you guidance that we’ll probably look at $150 million in the first quarter here, give or take, subject to market moves. And we’re starting to see relative performance just on the management fees on — coming through from our capital partners going up by basically 40% from $25 million a quarter to $35 million, which is reflective of the capital that we’ve raised. The Casualty — Specialty business will improve based on the net earned premium that we bring through. So those are things that we look at as very stable.
And we look at that as something we continue to talk about in the content drivers of profit property should do better. As Kevin has pointed out, property should do better, but you can’t control mother nature. You can only structure the book to be able to adapt to it as well as you can. So that’s the picture that we’re trying to portray out there that there is a core stable, solid earnings stream that does support a level of return that we feel is above our cost of capital just to be in with.
Yaron Kinar: Got it. That’s helpful. And then in the underwriting book, maybe you can help clarify a little bit or sort some of the noise. And I don’t want to put words in your mouth, but it sounds to me like you’re saying that maybe more of the underwriting margin improvement would come from property cat, but maybe more of the growth — top line growth would be in the casualty and specialty in €˜23? Is that a fair summary?
Kevin O’Donnell: I didn’t mean to leave that impression. We are growing property cat substantially. We will — so other property as a whole will grow. Property cat will grow substantially, we’re going to reduce a bit on other properties. Again, talk a little bit about that as being kind of the trade and how to set up the portfolio. We will grow the casualty specialty portfolio. A good piece of that growth within the casualty portfolio will come from some dislocated specialty lines. The final thing I would say is just having an underwriting background, I’m focused on net-written premium just because we have a lot of changes at the third-party capital level and the managed premium level that are important. So being more specific there, it’s Upsilon.
We reduced the footprint of Upsilon into the market, because the product that Upsilon sold was better sold into RenRe and DaVinci, and that will change the gross written premium, but the net economics coming to us are better reflected in net written premium because of that shift.
Yaron Kinar: And does this shift or the — I guess, the parallel growth in casualty, specialty and property cat at the same time, how does that impact excess capital?
Kevin O’Donnell: So from a capital position, we are extraordinarily well situated going into the opportunity set that we’re seeing. Within casualty, within specialty and outside the U.S., capital is never an issue. We — the peak exposure within the portfolio going into this renewal was Southeast Hurricane. It will remain Southeast Hurricane, and we still have significant opportunity to grow the portfolio and deploy more capital should we choose to.
Yaron Kinar: Thank you.
Operator: Our next question comes from Brian Meredith from UBS.
Brian Meredith: Great. Thank you. Hey, just a couple of ones here for you, Kevin. I think, I just want to clarify what you just said there. So you should see some pretty substantial growth in cat premium retained net written premium growth.
Kevin O’Donnell: Yes.
