Chris Swift : Josh, thank you for joining us. Yes, that’s the trade-off we’re making right now, lower retention for a more profitable cohort to get us back to that targeted profitability. So I don’t think it’s outside of the range of expectations that we’ve had as far as that trade-off. I think we’ve talked about sort of the PIF count decline compared to 2023 before. We still see that in that 4% range. So again, that speaks to our conviction to get the necessary rate in the book. And you’re right, I mean it’s a direct response business. I mean, it’s Middle America from a customer side. So there’s not a lot of, I’ll call it, financial engineering we’re doing vis-à-vis rate buydowns on auto or home, deductibles, things like that.
It’s pretty straightforward. We’re sort of — again, strictly in the admitted business, but I think generally, people understand the need to keep up with trend, the inflationary pressures, the weather patterns are changing, all the social litigation and legal abuse systems that we’ve talked about is keeping pressure on our loss cost. And again, we’ve been able to work with our regulators to get rates approved either on a pre-approved basis or file and use. So I think we’re executing well, and it’s still a very dynamic and challenged environment.
Josh Shanker: I don’t mean to belabor the point, but I’m just curious if the customers are giving you a chance to retain them, are they calling up and asking what can we do to help me? Or are you just getting a notification that they’ve left to a competitor?
Chris Swift : I think it’s more of the latter. I don’t think we’re having very many negotiations over the phone as far as our product and our offer. And we’re being empathetic when we talk to our customers, particularly the mature customers, but there’s not a negotiation.
Josh Shanker: Okay. Thank you for the clarification to answers.
Operator: We’ll take our next question from Mike Ward at Citi.
Mike Ward: Thanks. Good morning. I was wondering if you could maybe help us with some of the puts and takes driving the underlying loss ratio in commercial and I guess, across the commercial sub-segments?
Chris Swift: Mike, when you say puts and takes compared to prior year, what do you have in mind? What are you trying to get at?
Mike Ward: Yeah. Well, I think last year, you had mentioned, I think, commercial — Small Commercial was hotter. Just trying to see how the underlying is doing year-over-year.
Chris Swift: Yeah. I would just share with you from an expectation side, everything is pretty much right on line. I mean if you — obviously, you could see we improved slightly on a loss ratio basis from prior year our non-cat property is pretty consistent with prior year, and maybe even slightly ahead of our expectations. So I don’t want to avoid — I don’t want you to feel like we’re avoiding a question, but there’s nothing to call out.
Mike Ward: Okay. Thanks. And then maybe just on the loss trend. I know you said pricing was still ahead of loss trend. Just curious how loss trend assumptions if they’re steady in the first quarter relative to, I guess, 2023?
Chris Swift: Yeah, I would say generally, our views on loss trends from 2023 have increased modestly and that’s obviously reflected in what we’re trying to execute from a written rate side and the discipline we have there. And again, the guidance that we try to give our underwriters with appropriate discretion, but yeah, I would say loss trend is up modestly in 2024 compared to 2023.
Mike Ward: Okay. Thank you.
Operator: We’ll move next to Brian Meredith at UBS.
Brian Meredith: Yes. Thanks. Hi, Chris. I was hoping, could you give us what your E&S growth was in the quarter in your commercial lines space? And just maybe your thoughts, is that a market that you continue to expect to grow at a pretty healthy rate here going forward?
Chris Swift: Yeah, Brian, I’ll look to Mo to add any of his color. But I would — there’s two E&S components I’d have you think about. One is in Small, our E&S binding business, which we’ve called out and we’d like to try to get to that $300 million level. And then, obviously, all our E&S capabilities within global specialty, whether it be property or casualty, that is an important component of what we’re trying to do in the marketplace. But Mo, what would you add from an overall growth rate perspective?
Morris Tooker: Brian, I would say we’re excited about the flow in both of the channels that Chris talks about, both in that binding, which is the Small Commercial and the flow into our brokerage that continues to grow nicely. We continue to see the growth, as Chris called out in his prepared remarks on the binding side. And we’re seeing really good growth in the brokerage side, which sits in our global specialty business in both primary casualty, excess casualty that rate environment continues to accelerate, as I talked about earlier. We’re undersized in property brokerage and in global specialty, we’re undersized in inland marine, we’re undersized in auto. So we just see that, especially on the global specialty side, there’s plenty of opportunity and the flow is there to support it.
Brian Meredith: Great. That’s helpful. And then second question, Chris, bigger picture question here. Looking at your Personal Lines business and understanding that the last couple of years have been challenging from inflation stuff, but if I look at your homeowners business, it’s been close to a decade since you’ve grown unit volume there. In auto is probably six, seven years, maybe a blip here and there. I’m just curious, maybe what kind of was going on during that period? And is the Prevail product kind of the answer to that now, where maybe at some point here, we’ll see up — start to grow unit in the Personal Lines space?
Chris Swift: Brian, I appreciate the question. I’m going to spare the torture going back seven, eight years for everyone on what didn’t go right. But I think more importantly, and we’ve talked about it in the various settings that, the Prevail product and platform does give us a step-change in our abilities to effectively compete in our core market, which is a mature preferred segment through an AARP endorsement that will allow us to be more competitive in auto, in home and as much as I said, we do continue to expect PIF count, particularly in auto to decline this year by 4%. We’ve also talked about that we feel like we can start to grow PIF count modestly in ’25 and then maybe more meaningfully in 2026. So I think that’s where we’re at.
We’ve made the investment. We’re in 42 states. We should be in 46 by the end of the year. And couple of other states will lag a little bit. But I think it gives us every opportunity to be growth-orientated. And then we’ll see where we could take the Prevail platform. Right now, it’s obviously geared towards a direct response platform and channel, but maybe there’s others that we would explore getting into at the right time. Once we finish off the implementation of Prevail in the vast — or all the states feasible, we’ll start to think about the future a little bit differently. But we want to take care of the core right now. We want to get it back to overall profitability, particularly in auto, and then we’ll build from there, Brian.
Brian Meredith: Got you. And on the homeowners, the geographic constraints just given where a lot of your customers maybe as far as growth?
Chris Swift: No. I mean, we’re obviously in all 50 states on admitted basis. You know, we paused our new homeowners in California, which is a writing new homeowners business until the regulatory reforms get enacted to allow us to match price and risk appropriately. So that’s the only self-imposed constraint we had. There’s no other constraint besides our long-standing not writing any new homeowners business in Florida since 15, 16 years — almost 20 years ago.
Operator: We’ll go next to Mike Zaremski at BMO.
Mike Zaremski: Did you comment on what drove the pricing increases in Commercial? I think it came from Global Specialty. Any color there, if that’s a trend or just maybe something this mix one-off?
Chris Swift: Ask the question again, Michael, I don’t think I understood you.
Mike Zaremski: Sorry, the Commercial pricing, renewal written pricing increased ex comp from 8.3 to 9, I think that was driven by the Global Specialty segment. Could you comment kind of if there’s a trend there that’s causing pricing to move north?
Chris Swift: Yes, I would say that the components that are driving that is primarily global. Global had a good quarter. I’m looking at my sheets and all the casualty lines, property lines, international rebounded in a good way. So that’s what I would call out. But Mo, what would you add?
MorrisTooker: No, I think we are continuing to see moderation in the negative rates on public D&O. We’re certainly seeing a shift in our portfolio towards more of the management and professional liability. So, there’s a mix coming through there, that’s a part of it. I don’t want to get too nuanced on you, but just that’s the only additional detail I would give to Chris’ comments.
Beth Costello: The only other thing I would add to that is when you look at the Small Commercial side, ex-comp, definitely saw rate increase there coming from the Spectrum product. So, again, obviously, workers’ comp is a large portion of Small Commercial. But if you ex that out, that contributed to the ex-comp growth as well.
Mike Zaremski: Okay. That’s helpful color. And I guess lastly, just not trying to nitpick, but the — you mentioned in the prepared — or in your comments, Chris, that a larger end of, I think, Small, more competitive, yet you’re successfully accelerating growth on the business in Small Commercial. So, any kind of color you’d want to offer there on those dynamics?
Chris Swift: Well, the only thing I’ll say before Mo jumps in is our Small Commercial franchise is world-class.
Morris Tooker: Hard to build on that, but I will try. I think the nuance we’re trying to strike for you is that there are competitive spots in the marketplace, and we’re just really proud of how well our underwriters are navigating what is increased flow, and that increased flow doesn’t come as all business that we want to write, and that’s the same in Small, Middle and Global. The flow is up significantly in all 3 businesses, and we’re just trying to get underwriters to really pick our spots, and that’s what we’re trying to call out, Mike. Thanks.
Mike Zaremski: And I guess just is the Small — you brought up E&S many times and there’s different levels of different types of E&S, it’s been in your prepared remarks for a number of quarters. Is part of the E&S growth off of your Small Commercial chassis, which is kind of the world-class product? Or is it just — is it totally separate type of underwrite platform? Thanks.
Morris Tooker: No, that’s the beauty of the model, Mike. We’re taking all of the strengths that we’ve had in the retail channel and applying the same business model to the wholesale channel, and that’s why we’re so excited.
Operator: Next, we’ll move to Yaron Kinar at Jefferies.
Yaron Kinar: I think in your prepared comments and also in response to an earlier question, you talked about some of the pressure that you’re seeing in the Group Life sales, just given your mortality expectations. That said, I think we’re also seeing some slowdown in disability and voluntary. Can you maybe talk about the drivers for that slowdown?
Chris Swift: Yes, I’ll just give you my point of view, and then I’ll ask Jonathan to add. I don’t think — I think disability is performing exceptionally well, whether it be claim recoveries and terminations and getting people back to work. I think growth has been solid. The different levels are…
Yaron Kinar: I was – I was referring specific to the top line, to the NPE.
Chris Swift: Yes. I’m giving you all the good stuff, and then I’ll get to that.
Yaron Kinar: Sorry.
Chris Swift: No, thank you. So again, I want you to feel like the book is healthy. And the top line, as I tried to address in my commentary, is a little challenged. Some of that is exceptional 2023 we had, but some of it is challenged, as we mentioned, due to our views on life insurance and how we’re going to be disciplined there. Jonathan, can give you additional color, so should be – what would you say?
