Todd Bryant: Sure. That’s good.
Operator: Our next question comes from Andrew Andersen of Jefferies. Please go ahead. Your line is open.
Andrew Andersen: Hey, good morning. Looking at the underlying loss ratio in the Casualty segment that increased a few points year-over-year, can you kind of help us think about the drivers here? I know you called out mix shift, but perhaps also just a change in loss trend or maybe some non-cat weather here?
Todd Bryant: Yeah, I’ll speak to that. This is Todd. You do see on the Casualty about a little over 300 basis point increase in the fourth quarter on the current accident year, to your point, underlying. Jen talked a bit about the frequency up a bit in the personal umbrella. We have seen a little bit increase in severity on transportation. And so, we did — as we looked at the accident year and thought about those trends, we just thought it would be prudent on [indiscernible] base to add a bit of IBNR, about $6 million, $6.5 million in the fourth quarter on the current accident year and just see. I mean, I think we tend to react rather quickly if we’re seeing things that may be signs so that was action we took in the fourth quarter.
It didn’t move the full year Casualty loss ratio up about a point. And we’ll see, if it turns out as time moves on here that, that action wasn’t necessary. Obviously, we don’t move too quickly on — from a good news perspective, but we just thought it made sense to add to the current accident year.
Andrew Andersen: Okay. And with the increased frequency and severity that you called out, are you incorporating a higher Casualty loss trend in ’24 than how maybe you were thinking about it previously?
Todd Bryant: I think we have moved our Casualty trend up maybe about 1 point. I mean we’re going to look at — the actuaries are going to look at both trend. They’re going to take out, do they need to extend the tail at all. Those things are all going to be under consideration certainly.
Andrew Andersen: Okay. Great. And then maybe one more. Jen, you kind of talked about still these rate increases that are coming through and still an opportunity near term for growth in the Casualty segment. If I look at second half and maybe making some adjustments for the runoff of this energy book about like 8% gross growth, is that kind of a good indicator of where we could see maybe the first half of ’24?
Jen Klobnak: We don’t really look forward in new top-line budgeting. Our underwriting teams are compensated on the bottom-line. So, we kind of ignore the budgeting process within the business units. Having said that, we do see a lot of opportunities to get momentum from the investments we’ve made. And so, a lot of our business is individually underwritten and we’ll have to see how the competition behaves as well. So, I think we have room for growth, but I’m not going to put a number on it.
Andrew Andersen: Got it. Thank you.
Operator: [Operator Instructions] Our next question comes from Meyer Shields of KBW. Please go ahead.
Meyer Shields: Great. Thanks so much. So Jen, I think you touched on this, but I’m not sure I fully understand it. I understand that within Property, there was a lot of ceded premium in the third quarter because of the reinsurance reinstatement. But I’m not sure I understand why the ratio of net to gross premiums in the fourth quarter was lower than in the first half of the year.
Jen Klobnak: Yeah. So if you recall, on June 1 of ’23, we repurchased an additional $150 million of cat treaty cover, and so there’s obviously a cost to that, as well as we filled out a little bit more of our first layer cap, which is a $50 million excess, $50 million layer, again, as of June 1 of ’23. So, the first five months — if I’m doing the math right, first five months of ’23 had a lower ceding premium number versus the last six months, and you see that as our net retention went down a little bit in the second half of the year for that as well.
Meyer Shields: Okay. Perfect. That’s helpful. And one of the question on Casualty reserves, and I know we’re probably overtaking this, but were there any increases to recent accident years loss rate?
Todd Bryant: Hey, Meyer, it’s Todd. I think in the totality, I mean, outside we talk specifically about the 2023 year. In totality, there aren’t increases on current — other more recent accident years. I think if you were to look at commercial auto, you may see a little bit and even the ’15, ’16, ’17 years, but not a lot. And in total, those accident years are still redundant. I mean you do have the leases.
Meyer Shields: Okay. Fantastic. And that leads to the last question, if I can. Is there any upward trend in, I guess, commercial auto or maybe typically transportation in terms of pricing that you’re seeing?
Jen Klobnak: Yeah. So, I can jump in on that. The transportation rate change for the fourth quarter was 11%, and it was 8% for the year. Now, that business can be chunky. We have some large accounts in there that can skew quarterly results. So — and all of that business pretty much is individually underwritten, too. So, you have to look at what is our starting point, where we think we’re at in terms of rate adequacy, and then individually underwriting each account and seeing what we need going forward. However, the team would say they recognized loss trends continue, but they’re in an environment where their competitors are not throwing out the 2020 accident year, they’re not throwing out the 2021. So people in that marketplace, for some reason, are giving people credit for that as they loss rate those accounts.
And we recognize that the exposure was down too. So, we try to properly rate that business and we need adequate rates because there are, in fact, claims all the time in that business. So, I think the rate environment there should be positive going forward, but we’re going to continue to look at it really on an individual basis.
