Bryan Salvatore : Yes. And maybe I’ll just give you a couple of additional data points on what Jack is talking about in the smaller to middle, right? So if you think about our policies, right, 70% of our policies are with customers that have $5,000 or less premium, right? So these are smaller policies. We’re just really, really good at servicing those policies and that’s why we’re able to accomplish this, right? That helps us a lot. That even helps us in the E&S space. We stay focused even in the E&S space, even with our wholesale business on middle to smaller accounts. And the volatility there has not been a significant and the ability to achieve rate has been quite good. So when I think about our ability to achieve rate across our books, literally, I think almost every business area that we have, achieved rate at or above trend for the quarter, for the year.
And frankly, areas obviously like surety don’t get rate, right? And areas like marine, we measure it in terms of new money and that well exceeded our plans. So in our space, in this environment, we’re still able to achieve that rate and we do see our growth next year in — moving up into the higher single digits as the underwriting actions that we take wind out in this year and we just have really good momentum. We have really good growth across our marine business, our health care business, our surety business and our E&S business, too. So I think we’re in a good place.
Operator: Next question comes from Grace Carter with Bank of America.
Grace Carter : Looking at the homeowners book. Obviously, it’s had a little bit more volatility in the past few quarters than historically. But just kind of looking back over several years, I mean, in the mid-2010s this book — the core loss ratio around in kind of the low- to mid-40s and that’s gradually increased over the past several years. I guess I’m just kind of wondering how we should think about sort of the target run rate underlying loss ratio for this line? And I mean, I think if we looked at peer results, we would probably see a pretty similar trend and just kind of a slow increase over time. And just your thoughts on whether the run rate earnings power of homeowners for the industry has changed over time?
Jack Roche : Grace, this is Jack. I’ll just make a couple of comments on that. First of all, you’re right on top of this and thinking about it the same way we are that this homeowners used to be kind of the profit leader in our Personal Lines book. And as we addressed auto profitability and got that into a much better place pre-pandemic, clearly, there was some slippage in our home performance, some of which was driven by the environment and some probably driven by some relative pricing. But going forward, our expectation is that we can, particularly given the pricing environment, get homeowners back in to the loss ratios that you’re describing that would ideally make our account strategy really a true asset. So do you want to build on that, Dick?
Dick Lavey : We are absolutely at an inflection point here in this line of business. It needs price, it’s getting price. You can see [23%], [24%], going to [28%], we’ll start to see pretty significant improvement quickly. It does raises questions for us like how do we feel about the underlying book. We still feel very good about the quality, the high-quality nature of the portfolio really hasn’t changed over time, and we’re also going to get better with the actions that we’re talking about. It frankly — it need the price that we’re talking about. And so we’re — that said, we’re still very careful about new business, tightening our qualifications criteria for acceptability. We’re using — we use aerial imagery extensively through the book to help us understand the risk and places where we need reprice more potentially.
So we’re getting out in — with — in a multipronged approach. But I’m with Jack, this line business will get back to its historic level of profitability once this rate turns in.
Grace Carter : And I guess, looking at Core Commercial, the underlying loss ratio there has obviously improved quite a bit this year with really good results in the middle of the year. I mean, I’m wondering the extent to which kind of 2Q ’23, 3Q ’23 results are sustainable, and the extent to which kind of the ongoing remediation in the middle market book has yet to earn in, and I guess, the degree to which we might even see some potential improvement there going forward?
Jack Roche : Grace, this is Jack again. I think that the efforts that we’ve made, particularly in middle market will continue to help us improve that book of business. If you look at our growth patterns, our small commercial growth is twice our middle market growth year-to-date. Our underwriting actions that we took in ’22 and into ’23 are clearly showing benefits. The pricing is still very firm. I think 1 benefit we have that goes along with some of the pain that we’ve suffered is that the more property in your mix, the more likely you are to get sustainable price increases and deductible improvement changes. So we have a very deliberate plan to continue to improve that middle market book of business and grow a very profitable small commercial book of business.
I think the combination of those 2 things plays very well into our projections that we’ll obviously update after the — on the Q4 call relative to guidance for 2024. But very bullish on Core Commercial into the future.
Operator: Our next question comes from Meyer Shields with KBW.
Meyer Shields : So I wanted to sort of compliment you because your report is not only detailed but it’s really helpful. And under the principle that no good deed goes unpunished, I’m trying to understand the divergence between pricing increases and rate increases in Personal Auto because as far as I understand it the exposed unit is always just a car and a driver.
Jeff Farber : Meyer, are you asking why the price is higher than the rate because of some actions like tickets and things like that? Why we get more renewal price change than rate for Auto?
Meyer Shields : Yes. In other words, why it’s been such a significant gap over the last 1 or 2 quarters?
Dick Lavey : Yes. Yes. So just looking at the data, I think, that you’re looking at. So there would be things like number of fractions, tickets, DUI, things that would hit a driver’s record, which we would then, in part, surcharges on. That’s one way that, that plays through. But also assembling years of the upgrades the — losing my words, the — as cars get older, as your fleet turns over, you’re buying newer vehicles. And so that will play into your rate structure here, too. So those are some things that will be driving it.
Meyer Shields : Okay .That’s very helpful. Second question, this is sort of like a broad industry issue, so we’re asking everybody. Are you seeing any inflection in actually in the paid medical claims for workers’ compensation?
Jeff Farber : Not really. At this point, medical inflation across the book, and particularly in workers’ comp has been very benign. And that really hasn’t driven much increase in the paid so far. We’re watching it. And as you know, we’ve been very conservative in how we’ve historically booked workers’ comp and we’ve allowed that favorable development to come in slowly. And I think that has served us well and will continue to serve as well as we go forward, Meyer.
