And yes, we are concerned. It is one of the reasons — and look, we beat the drum on this all the time. It’s one of the reasons that we are so, so focused on the people dimensions of our business. It is born from like a genuine interest, starting with me and the other members of our ELT that this is the kind of company that we want to have, a company that is very people-centric. But I also think there’s just like a practical competitive consideration, which is if we create a culture that people feel genuinely part of and connected to and personal owners in that is probably the best defense that we possibly can have. And I will say there is always — I mean, the MGAs are just — it’s crazy, right? There’s just spot market sort of pricing for talent that’s not rational when you look at the economics of our industry.
But that’s just the nature of the beast, if there’s a dearth of talent that’s going to happen. And then ultimately, we rely on the ecosystem that we’ve built. And I will tell you, and I really do encourage this, go look at our annual people report, it is — if you’re not part of our organization, it’s the best way to have a window into our organization. And I think that from that, you will understand why we’re certainly not — it’s not a topic that we’re ignorant of, but we’ve done the things that we should be doing to put ourselves in a great position as it relates to that.
Bill Carcache: Thank you. That’s very helpful. And then if I could squeeze in one last one. How focused are you on downside risk estimates from a lower rate environment? Is there a point, maybe if you could share any thoughts with us where you look to protect yourself from lower rates and the actions that you take to potentially lock in relatively more attractive higher rates?
Mark Haushill: So Bill, just for our clarification, you’re talking about on the asset side, investments correct?
Bill Carcache: Yes. That’s correct.
Mark Haushill: Bill, look, we kept our duration right at about four, no real interest in extending it. We’ll see how rates move during the year. But I think where we are in our duration, I like it, and I think the returns are fine. We’re not going to react immediately. We will just see how the interest rates play out.
Andrew Robinson: Bill, I’ll add one thing. We’ve had — we’ve been blessed with the interest rate environment that we’re in. And so as Mark has commented, every time we put our free cash flow to work in our core fixed income, it’s going to very, very, very high-quality, very high-quality assets. And so like if the rates start to back up, the first place that we would look is can we start to blend in slightly lower credit. And we’re not talking about jumping the jump, just like moving down the investment-grade credit and having a bit more of the lower end of that. And then if we ever, god forbid, find ourselves in that like 0% interest rate environment where new money yields were 2%, I think at that point, you both have to reconsider how you think about the way that you talk about your returns on capital because obviously, it’s a different cost of capital environment, but also you kind of reevaluate investment strategy in a different context.
But I feel like we have a long way to go before that and we keep growing our embedded yield. And even if interest rates were 4% in the medium term, that’s still an attractive place for us to continue to have an allocation to the high-quality core fixed income.
Bill Carcache: That’s very helpful color and thank you for taking my questions.
Andrew Robinson: Sure
Operator: Our next question comes from the line of Michael Zaremski with BMO.
Michael Zaremski: Hi, thanks. I think I can ask one more, a lot of good questions. So given the majority of our questions are on casualty inflation, you’ve given us some good color. Andrew, you talked about kind of — I think in your prepared remarks about pulling back some limits and tightening some terms, I believe that I’m assuming you guys have had excellent margin experience and reserve experience that’s more on the commercial auto side. But maybe you could clarify that or maybe it is just all casualty? And just also maybe more broadly from a macro standpoint, are there may be certain states that you guys feel are more social inflationary, if that’s the word, and you’ve looked to kind of pull back on or maybe any other gauges you guys kind of look at to try to keep social inflation in check?
Andrew Robinson: Great question. I think for us, my comments on the terms and limits actually were principally around the general liability and excess and, of course, excess, you’ll pick up both auto exposure as well as general liability, employer’s liability as well exposure. And so a lot of this is around things like additional insureds and where that comes into play. And so we’ve taken — obviously, like every good underwriter, right, you watch, you see, you look for early indicators, you try to turn the crank. If you see something that’s popping that you’re like, well, I want to make sure that we’re moving on that before everything is fully baked. And so that was really more of a reference to that. I think relative to auto, we’ve gone pretty far down the path of even on the things like in one part of our business, if you’re not using telematics has not turned on and an accident occurs that you get knocked back to the statutory minimum limit available.
We had things around reporting times and the deductible to the insured, because we write that on an E&S basis. So I think we’ve done pretty much what we can do on auto outside of risk selection and price. As it relates to venue, look, I think that in theory, every venue could be a political — or could be a judicial hellhole right, as opposed to the ones that are always publicized as judicial hellholes. Look, very few of our claims end up in front of a jury. But I think the truth is that there’s certainly great exposure to juries not being representative of how a particular jurisdiction is viewed on its level of conservatism. That said, I mean I saw a case yesterday where — and I say it was this week, I can’t remember the specifics, but I’ll pull it out for you where jury did like a crazy award, like a $30 million award.
And the judge basically pulled it back to a $1 million, to the coverage level of $1 million, right? So the kind of jury went wild and the judge kind of stepped in. That was in Pennsylvania. And so there’s certainly reasons to say that kind of the conservatism of the jurisdiction can really make a difference. And that’s an example. What I will say to you is that it’s not a state-by-state, it’s a county-by-county kind of thing at this point. And so it would be hard to enumerate it, but this is something that we absolutely watch and we’re trying to address in terms of where it is that we’re taking on exposure.
Michael Zaremski: Because it’s helpful color. That’s all I have thank you.
Andrew Robinson: Thank you.
Mark Haushill: Thanks, Mike.
Operator: That concludes today’s question-and-answer session. I’d like to turn the call back to Natalie Schoolcraft for closing remarks.
Natalie Schoolcraft: Thanks everyone for your questions, for participating in our conference call and for your continued interest in and support of Skyward Specialty. I am available after the call to answer any additional questions that you may have. We look forward to speaking with you again on our second quarter earnings call. Thank you and have a wonderful day.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
