Chris Swift: Greg, one last point. Remember, that 6% to 7% we’ve commented upon before turns into a 14% to 15% tangible ROE. So again, it’s another rising – reason why we like this business so much. Margins are generally steady predictable and our ROEs are very contributory to us, particularly on a tangible basis.
Gregory Peters: Got it. Thanks for the detail.
Operator: Your next question comes from the line of Mike Zaremski from BMO. Your line is open.
Mike Zaremski: Hey great. Thanks. On the Commercial Lines guidance to kind of keep underlying margins consistent for 2024 versus 2023, that obviously would be a – margins are at a great absolute level and that would be a good outcome. But just kind of curious what your thoughts are? Any details on kind of social inflationary lines, a lot of your peers have been kind of embedding a slightly higher loss costs trend on the go-forward, getting some IBNR. Just curious kind of within that outlook, any context around kind of the puts and takes other than workers’ comp, which you talked about during the prepared remarks?
Chris Swift: Yes. Mike thanks for the question. Yes, those are a reality of our society today, right? Social inflation, legal system abuse, however you want to call it. So it’s alive and well. It’s nothing new for many, many industry participants, but it is still something you have to be aware of, particularly in the umbrella in the excess liability lines. I’ll ask Mo to add his commentary. But I think we’ve been thoughtful about the trends over the last couple of years and the need to stay on top of those trends with rate. And that’s why I say particularly, we’re looking for an element of consistency with 2023. Because in a lot of those long-tail liability casualty lines we need high-single to low-double digit rate increases to stay on top of the trend assumptions that we have.
So yes, it’s all part of managing multiple product line approach. But again, in aggregate, I think the setup is very similar to last year’s setup at the time when we talked about it is that there’s going to be some slight pressure on comp. And we’re going to try to maintain and expand margins where possible in other lines of business. But Mo, what would you say specifically in the casualty world?
Mo Tooker: Yes. Mike, we’re watching these trends closely, and we think the performance has been good. But that being said we continue to work hard on rate. Chris referenced wholesale casualty accelerated throughout the year. So we’re trying to make sure we’re keeping rate on top of or at least not ahead – if we can, ahead of trend. The same thing happened in our Middle Market GL book, rate accelerated throughout the course of the year. So we’re working hard on rate. At the same time, we’ve talked to you about it a couple of times now. We’re making sure that the underlying exposure we continue to adjust. So for the past three, four years we’ve been working hard in the jurisdictions we’re in, our customers are in. We’re working hard on the limits we’re deploying. So there’s some long-term strategies playing out here that give us some confidence in our ability to navigate, which is a difficult environment.
Mike Zaremski: Okay. That’s helpful. And my follow-up is just on capital management. I see the guidance there. Just curious, top line growth has been fairly robust, which is obviously a good thing. If the top line growth kind of continues at similar-ish levels in 2024, which I assume as a capital user, I mean, should we be toggling maybe down the buyback levels a bit or am I splitting hairs here?
Chris Swift: Yes. I’ll let Beth add her color, but I think you’re splitting hairs. So our opcos are well capitalized. You see what we have left in authorization through the end of 2024. Our intention is to complete that on a timely basis. But Beth, I don’t want to take any more of your thunder.
Beth Costello: Yes. No, I think you said it well, Chris. I mean we – I talked about our expectations for dividends from the operating companies in 2024, which is up slightly from 2023. In the past, I’ve talked about that we typically target about 70% to 80% of the earnings to dividend out of the subs, and that provides us with enough room to fund the growth that we’re expecting, so really no change in how we’re managing the balance sheet and balancing those items.
Mike Zaremski: Thank you.
Operator: Your next question comes from the line of Brian Meredith from UBS. Your line is open.
Brian Meredith: Yes. Thanks. Chris, just curious, looking at the Small Commercial business, rate renewal pricing looks good. What do you think about exposure kind of the growth there as we look going forward? Is – what are you kind of seeing in that business? Do you think it’s going to start to slow here in 2024 and could have an effect on top line?
Chris Swift: Brian, I know what you’re trying to triangulate to. So all I’d say qualitatively on any top line point because we’re not going to give a precise number in aggregate or by line of business is, I think the macro sets up well. I think the economy is performing well. You saw the jobs report this morning, and unemployment remains low. You could see the Fed as being a little cautious on how quickly it cuts rates, which actually we support. So I think the macro sets up well. All I would tell you is that what we saw in January, early indications are much of the same coming out of 2023 and sort of that double-digit range in commercial. So one-month does not make a trend. But I think the environment will be fairly conducive to continuing going forward. So we perform very well when the economy is performing well, and I think that’s the general view I have heading into 2024.
Brian Meredith: Great. That’s helpful. And then just another one here. There was another company that announced some reserving actions and specifically related to the construction liability business. I know Navigators used to write that. Maybe you can talk a little bit about your exposure to that business. Is that an area of concern? Just put maybe a little color around that?
Chris Swift: Yes. There’s always things to be concerned about and worry about. That’s not one of the top ones and principally because bluntly we’ve been there done that. Part of our integration and activities with the acquisition we did years ago was to deal with sort of with those balance sheet reserving issues that we knew were there and saw. So I think we’ve tackled that appropriately. I think we’ve made the adjustments in those older years, adjusted our loss picks and trends going forward. So I feel very comfortable and confident we got our arms around that issue a couple of years back. Would you add anything, Mo?
Mo Tooker: No. Brian, I’d just say there is an underwriting element here that, so when we made the changes and when we had the Navigators book come in, we shifted some of the underwriting in response to some of these trends. And that would have been two, three, four years ago. So we feel good about the go-forward book as well.
Brian Meredith: Got you. Thank you very much.
Operator: Your next question comes from the line of Elyse Greenspan from Wells Fargo. Your line is open.
