So stability in commercial lines based on those major factors, I think would also be a good assumption. And then, as we’ve talked about and reinforced, we expect to have rate level written in personal lines over the course of this year, 2024, in that 20% to 25% range. Now, again, we don’t break down our loss trend assumptions by segment, but we’ve got a pretty healthy loss trend assumption in personal lines along with that rate level. This is not going to achieve our target margin in 2024, but we expect, as we continue to earn that rate increase over 2024 and into 2025 on both a written and an earned basis, and continue to transition that book and continue to refine our pricing models, that we will put ourselves on a good glide path to that target.
Unidentified Analyst: Thank you.
John Marchioni: Thank you, Grace.
Operator: Thank you so much. We will now move to the next question coming from the line of Scott Heleniak of RBC Capital Markets. Your line is now open. Scott, your line is now open.
Scott Heleniak: Good morning. Yes, just a quick question on the GL reserve development you had there. Is there any other detail you can provide on that, just in terms of some of the risks or the classes where you had the development? And did you see any in particular on the contractor side? Just curious, if you can give more color on that.
John Marchioni: Yes, I would say there’s nothing unique from a segment or class of business perspective. Now, remember, we are heavier in construction, we always have been. But there’s nothing that I would point to because the portfolio hasn’t shifted. And I think that’s also important to understand. We haven’t had a big shift in our portfolio in terms of limits profile, or industry classification that we have in that book of business, but it is more heavily weighted towards construction. But that’s been the case throughout the last few decades. So there’s nothing that shifted there. But I would say what we’ve seen on the severity side is pretty broad based. And again, I think as you would expect from a social inflationary perspective, that trend doesn’t differentiate between construction and other products type exposures.
Scott Heleniak: Yes, okay, that’s good. And then just on workers comp, you made a comment in the script about just seeing some higher medical trends, which I think there’s a lot of people in the industry that are talking about that now. But how are you feeling about the line just for yourselves and for the industry? And do you expect that rate increases will finally start happening for the industry this year in that book?
John Marchioni: Yes, I don’t think it’ll be this year. And I say that because we have a pretty good line of sight, as does everybody else, into what the filed loss costs were for the majority of states for almost the entirety of 2024. Those loss cost filings are still negative on a blended basis. They’re probably in the call it mid single-digit negative range across the entirety of our footprint. Now, our actual rate change has been well below that, running around 2% negative 1.5% on a full year basis. I do think as we look into 2025 and maybe even the latter half of this year, you might see those temper back to flat. But I do think there’s going to be a lag in the recognition of any movement from a loss experience perspective by the time the bureaus start to react to that.
But just another word on medical inflation. When you look at the component parts of the CPI inside of medical that impact workers’ comp the most, its hospital services, which actually have moved a fair amount from a CPI perspective, and then physician services, which is those two together are about 90% of the lost dollar. And then add in pharmaceuticals, which is the remaining roughly 10%. On a blended basis, it’s still running in the 3.5% to high 3% range and wages are still around 4%. So you still have a slight favorable gap there. I think the bigger question is at what point does the improved frequency that’s been happening year-after-year start to subside and level out? And I think that’s more of the open question. As you know, and you’ve seen in our performance, our growth in workers’ comp has been quite low, because we’ve been hesitant to get overly aggressive on pricing.
And the market continues to be very actively competitive in that space, and that’s really hurt our ability to grow. Margins are good, but we do think over time you’re going to see some pressure on those margins.
Scott Heleniak: Okay, that’s good. Yes, just the last one I had was just on the property tree. You took the retention up to $100 million from $60 million. Was that I mean I understand you’re talking about, it’s kind of in line with the exposure now, increased size of the book and everything. But was some of that rate driven as well? What kind of drove the $100 million to $60 million? Was there anything else beyond that? And what did you see for kind of rate increases at one-one onreinsurance?
John Marchioni: Yes. So just in response to the first question, I think generally speaking, the majority of reinsurers have established a threshold of one in 10 year attachment points. Generally speaking, they wanted to get out of the earnings volatility business and they generally didn’t want to play below one in 10. Our current attachment point is right around one in seven, so it’s still a little bit lower than where the majority of reinsurers like to play. But as we do every year for us, we’re evaluating expected seeded premium by layer versus expected seeded losses by layer. And that had been a good economic trade for us for a long time. And based on how pricing had moved, we decided to increase that retention last year.
Now, we also only placed about half of the first layer last year, so it was $60 million attachment, but we were taking half of the first 40x of 60. So really for all practical purposes it went from an $80 million retention to $100 million retention. And that’s really what drove it from our perspective was market capacity had started to get a little bit tighter at that attachment point and then the pricing from our perspective wasn’t as favorable. But all in, and I think this is Tony reinforced this point in his prepared comments, is we were able to eliminate all co-participations throughout the program. And in addition to increasing the limit and adding in that cat bond, our one in 250 impact to equity, one in 250 event impact to equity is now down to 4%.
And we feel good about that. The only thing I would say about pricing on the renewal is when you look across layers and even overall, I would say it was very much in line with where sort of industry prognostication was post one-one from an overall market perspective. So, I think we felt good about where it landed from a pricing standpoint.
Scott Heleniak: Great, appreciate all the answers. Thanks.
Operator: Thank you so much. We have the last person to ask the question coming from the line of Meyer Shields of KBW. Your line is now open.
