John Marchioni: Ye, great question. There’s clearly been some change. Now, also, I’ll say this, I would say the significance of agency relationships from our perspective, and from the agents perspective is no different. I think how you build and maintain those has shifted, because like much of the US, our agents have modified in office schedules, and therefore, they’re in office on a less regular basis than they used to be. And that just changes the manner in which our field underwriters operate, but a balance of their time was always split between field work and office work from an underwriting perspective. And they just had to shift how they manage that balance. And then I think just the other point of this is having long standing relationships and being able to maintain those in a more heavily virtual environment.
I think it’s been a huge benefit for us. And I think a lot more of that in person focus, which is more limited than it used to be, is focused on building new relationships whether people within an existing agency relationship or for the newly appointed ones. So definitely a shift in how build and maintain those. But I would say there’s also been a significant efficiency gain on the part of our field underwriters, because of the virtual tools, they and our agents have become a lot more comfortable using over the last couple of years.
Operator: Our next question comes from the line of Mark Dwelle of RBC.
Mark Dwelle: Oh, yes. Good morning. A couple of questions. With respect to the 96.5 combined ratio guide, as Mark pointed out, that’s about 130 basis points of improvement relative to this year, I guess what I wanted to do was kind of drill down in terms of thinking about out of that improvement, what portion of that is loss ratio relative to expense ratio. And then similarly, just kind of what are the key levers that are driving your ability to get that improvement relative to last year.
Mark Wilcox: So this is Mark, maybe I’ll start and John, I am sure will jump in, there are a couple of different ways to think about the guidance for 2023. One is 130 basis points of improvement from actual in 2022 on an underlying basis, but it is also up about 100 basis points from our expectations a year ago, we’d expected an underlying combined ratio of 91 going into 2022. And then we felt the pressure, particularly as we’ve talked about all year on the short tail property lines that impacted the non-cat property losses. So that’s why we have a target of the 95 versus the guidance of the 96.5, we really feel like there’s more work that we need to do to improve the underwriting profitability of the organization. But when you think about the 96.5, we talked about the 4.5 of catastrophe losses.
That up a little bit from the four points we expected in 2022. We came in a little bit above that on the back of Elliott late in the year. But when you look at the more recent trend, particularly over the last five years of catastrophe loss activity, we do think there is an elevated level of frequency and severity of catastrophes. And so we raised the cat loss element to that. When you look at the expense ratio, we came in at 32.3 for 2022, I talked a little bit about the upward pressure on that in 2023, on the back of slightly higher reinsurance costs, as well as the impact of inflation. And I would say that the expense ratio, and better than that guidance is called at 32.6, there’s the dividend component, which was about 20 basis points in €˜22, we’re expecting that to come down a little bit to 10 basis points in 2023.
