There is also clearly an uptick in catastrophe activity this year, so last year–I think last quarter, I think Alan maybe gave the statistic that in the 91 days of the quarter, there were 88 days in which there was a PCS event occurring. In the third quarter, there were 92 days in the quarter; on 91 of those 92 days, there was a PCS event occurring, so the increase in catastrophes is the combination of several factors: one is there do seem to be more storms more frequently; two, more people have moved into harm’s way in terms of where the demographic spread of risk is; and three, inflation has resulted in the impact of those costs being higher.
Paul Newsome: Is there any way to think about whether or not that would have an impact on the underlying combined ratio [indiscernible] the cat designation from the underlying?
Dan Frey: You know, Paul, sometimes we do see that in the quarter, where it’s bucketing, where things will spill over into the cat number that would have otherwise been an underlying. That was not a big factor this quarter. It’s not like there were a bunch of close calls that, because of inflation, spilled over into a cat designation. This was a significantly higher number of severe convective storms for a third quarter that created a bunch of catastrophes, so this was not a definitional bucketing close call issue. That does happen sometimes, but it didn’t happen this quarter.
Operator: Your next question comes from the line of Michael Ward from Citi. Please go ahead.
Michael Ward: Thanks guys, good morning. I was curious about personal auto. Just wondering if there was an impact from current year reserves on the underlying result, and if you could maybe expand on the frequency and severity trends.
Michael Klein: Sure Michael, it’s Michael. You know, in terms of CYPQ, not a significant amount. I mean, we called out the earned impact of pricing – that really is the driver of the improvement in underlying, and then as respects frequency and severity, frequency largely coming in, in line with expectations. If you look at external indices, miles driven is up 2% to 3%, it’s pretty consistent with the trend it’s been on, and so not a lot to talk about on the frequency side. Then really, the moderating trends that I described are really coming from severity as we continue to see in particular physical damage severity moderate quarter over quarter over quarter as we go through 2023.
Michael Ward: Thanks, and then on commercial property, just wondering how should we think about the impact of the growth on PI margins, and if there’s more volatility in non-cat property, might that affect your growth appetite next year?
Dan Frey: Mike, it’s Dan. I think we’re very aware and cognizant of the amount of property that we’re putting on the books, where we’re putting it on the books, and what that’s doing to our total exposures. We price property with a risk load, given the uncertainty and variability that can come with it. In terms of the margin from how much property you’re writing, there can be a mix change over time if you think about the relative loss ratios of the lines, and some of that’s driven by the duration of the liability in the lines. Property historically tends to run a lower underlying loss ratio than, for example, workers’ comp, so you could get a mix change over time. Tell me if that’s not responsive to your question.
Michael Klein: The one thing I’d add to that also is when you look at our property growth, the thrust of that growth really is being driven based on rate and exposure change. Clearly, we’re being active and very selective on the new business front, but when you look at what’s driving the net written premium change, it does start with rate and exposure change.
Alan Schnitzer: And strong retention.
Operator: Your next question comes from the line of Meyer Shields from KBW. Please go ahead.
Meyer Shields: Great, thanks. A question to start for Jeff. We’ve seen G&A expenses rise significantly faster than written premium every quarter this year, and I was hoping you could talk to what’s going on there.
Jeff Klenk: Yes, absolutely. This is Jeff – thanks Meyer. The question on expenses is we’re definitely making strategic investments to support our future success. I think broadly speaking, I’d give you two buckets: it’s employees and it’s also technology investments and tech platform, but I’d remind you, all in the context of while we’re delivering [indiscernible] returns.
Meyer Shields: Yes, that’s fair. Thanks, that’s very helpful. Second question, and I’m obviously shooting a little bit in the dark, but it looks like last year and this year, the run rate of workers’ compensation reserve releases was a lot higher than preceding years. I was hoping you could talk through what that change is – is it just COVID-related frequency benefit, or are there other factors?
Dan Frey: Hey Meyer, it’s Dan. You know, comp has been pretty consistently for a number of years a pretty favorable development story, and when it is, it’s across a number of accident years. That’s continued to be the case in 2022 and 2023. We’re really just reacting to–you know, we’ve had this conversation before, you’ve got to be really careful with your assumption around medical cost trend, given the duration of the liability. A quarter goes by, a bunch of claims close, you see what actually happened in terms of severity relative to what you had previously allowed for, and you make an adjustment. We’re really just following the numbers in that regard. We’ve certainly not become any more aggressive in the way we’re reserving for workers’ comp, it’s just the mathematical output of the changes that we’ve seen.
Operator: Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead.
Alex Scott: Hey, good morning. First one I have for you is on casualty, and specifically I wanted to ask you about some of the comments that have come out of the larger reinsurance companies. I mean, it sounds like they’ve gotten a bit more cautious in their stance on U.S. casualty in general, and I guess the social inflation trends and so forth. Certainly you guys sound like you saw a little bit of that in general liability in commercial lines, but I just wanted to see if you could provide perspective on how big of an issue do you really think that is for the industry at this point, and is there anything unique about your exposure that sort of insulates you, whether it’s the size of business that you tend to write and that kind of thing.
Alan Schnitzer: Yes Alex, it’s Alan. We think that commentary is well placed and, frankly, we’ve been on that bandwagon since, I don’t know, 2018 or something like that. We think we rang that bell very, very early. We think we’ve reacted to it consistently, even during the pandemic when you might have looked at the data and thought that things were improving. We’ve said consistently, we don’t believe it. We think it’s here, we think it’s at higher levels, we think it’s inflating faster. What we’ve seen is inside the underlying–the combined ratios that we’re reporting in business insurance, so we do think that it continues to be an important issue to watch. We’ve taken a lot of price in part in response to that, so it’s an issue and we think we’re on top of it.
