Bill Carcache: That’s very helpful Pat. Thanks everyone for taking my questions.
Operator: Thank you. [Operator Instructions] Our next question is coming from Mike Ward from Citi. Your line is now live.
Mike Ward: Thanks guys. Maybe just following up on Rob’s question, NII, how much of a headwind are you embedding? Are you assuming rate cuts?
Jeremiah Bickham: We are. We look at the forward curve to set our budgets, and it’s changed the assumption of I think it was five cuts a month ago. It’s three cuts that are embedded in the forward curve now. So, we’re taking into account a range of outcomes and all of the scenarios in our models our headwind. And like I said, we’re very happy that our plan has us overcoming them.
Mike Ward: Okay, thanks. And then just kind of curious what you are expecting in terms of property rate increases with respect to organic growth guidance? And I guess a similar question for casualty.
Tim Turner: Well, we’ll start with property. First of all, the flow into the channel continues to be double digit. So, we continue to see a lot of business being moved into the non-admitted market. And we’re seeing double-digit rate increases on cat property. So whether it’s coastal wind, wildfire, flood, convective storm business, predominantly what we see, there is double-digit rate increase continuing. Very little rate deceleration, very modest. In casualty, again, double-digit growth flow into the channel, stamping offices, the larger states have validated that once again. That kind of ebbs and flows depending on the narrow niches of high hazard business that we play in, but your usual strong classes of business like transportation, habitational, large venue risks, higher education, sports and entertainment, health care, social and human service business continues to flow into our channel.
So we are very well set up, as you know, with heavy brokerage, talent, deep bench and our underwriting platforms that are woven into these practice group verticals. We expect 2024 to be very strong.
Mike Ward: Awesome, thank you.
Operator: Thank you. Next question is coming from Ryan Tunis from Autonomous Research. Your line is now live.
Ryan Tunis: Hi. I guess just following up on that last question. You said that you are seeing solid rate in property, not much deceleration. But if I recall all of those cat-exposed property lines for new midyear. So how much – do you guys really have that much visibility on what’s going to happen from a pricing standpoint and property in 2024 at this juncture?
Tim Turner: We don’t. But what we can see so far is that the rates continue to increase. There has been, again, a very slight, hardly even measurable deceleration on certain classes of business. But again, we’re talking specifically about E&S high-hazard cat property and that – certainly not middle market or mainstream property business that does, in fact, have rate deceleration. So again, the overall high hazard part of our property continues to be very, very strong.
Ryan Tunis: And then I mean you’re still bullish, I guess, on property submissions. Can you just help me understand where incremental submissions come from? So 2022 happened, we had a huge hurricane like just about everything coastal admitted and non-admitted market. I’m not disagreeing that it’s going to stay there, but where is the incremental submission flow come from?
Tim Turner: Well, first of all, treaty reinsurance plays a big role here and limited capacity being produced by large risk-bearing companies, whether it’s here or Europe or Lloyd’s, London, shrinking lines much, much smaller net line capacity available for the cat business. So it requires a higher number of participants to deliver on the limits that are required. So, our non-admitted capacity even in smaller tranches is needed in a much – there is a much higher demand for that in accomplishing these limits that are needed. We don’t see a lot up in that. There is no one putting up big lines in cat property. It’s much more the other way. So, the new opportunities are really restructuring these towers and requiring, again, that expertise and more carriers to participate to accomplish the goals.
Ryan Tunis: Got it. And I guess just one last one with the contingent of the profit commissions. I’m not sure how that’s accounted for. But is there a noise that you see there from, I don’t know, maybe you got paid for something in casualty, 15 to 19 [ph] and now it’s developing more adversely. Is there a clawback mechanism for that, or is that not really a dynamic?
Miles Wuller: So Ryan, on this technical accounting side, there is no clawback on anything we book. We only book it when it’s fully earned and collected we don’t want any downside to what you’re seeing. I think broadly speaking, on average, it takes three or four years on average for a profit commission to be earned recognized, measured and paid. So, as I think I said in the opening, we’re pleased to see PCs materialize from some of the soft market years of four or five years ago, and we are optimistic of our underwriting performance that will materialize in PCs in the coming several years. But again, at the heart of your question, there are no clawbacks in what you’re seeing on our books.
Ryan Tunis: Thanks.
Operator: Thank you. We reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further closing comments.
Pat Ryan: Okay. Well, thank you. We appreciate you taking the time to join us today and certainly for your continued support of our firm. And we look forward to updating you on our progress next quarter, and probably we’ll be talking to several of you between now and then. Thanks for your interest and support.
Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
