Mark Hughes: Understood. How about the property reinsurance market, had a little slower growth this quarter compared to the last couple of quarters, what do you see happening there?
Rob Berkley: Yes, I wouldn’t read too much into that. There’s just a fair amount of seasonality, if you will, to how that business is written. There is still a good opportunity there and our colleagues I think are very focused on it.
Mark Hughes: Appreciate it. Thank you.
Operator: We’ll take our next question from Alex Scott with Goldman Sachs.
Rob Berkley: Hi, Alex.
Alex Scott: Hi, Good afternoon. So I wanted to ask you about the paid loss ratios. I mean, you know, I think in 1Q is 48%, it sounds like it’s around that level now still. Can you help us think through like how much is that benefiting from the growth in the business, just with insured values and so forth going up, you know, how does that compare over like a longer period of time ex, you know, sort of those items? I’m just trying to think through, I mean it seems like that’s an important part of why you’re so optimistic on the future. And as you all know, there is a fair amount of criticism of some of the older accident years. I’m just trying to think through order of magnitude, that dynamic, and sort of how seasoned the older stuff is. I mean, anyway you can help me think through all that.
Rob Berkley: Sure, so maybe a couple of comments. First off, as far as the growth and the benefit of the growth, I would encourage you to go back and look at how much growth has occurred because of exposure, if you will, versus how much is the growth has come because we are just charging more for each unit of exposure and I would tell you a lot of it is driven by that. In addition to that, as far as reserves and how they develop out, the average duration of our loss reserves is give or take 3.5 years and that’s paid. So what my point is, is that the years that perhaps are viewed as more challenging. I think you should have some level of comfort and sense of where those are coming out at this stage.
Alex Scott: Got it. That’s helpful. Second question I had for you is, I guess on general liability, other liability, and maybe the preference between primary versus reinsurance, you know, I’m just noticing the casualty reinsurance has been declining a bit and we’ve heard some more cautious commentary from some of the global reinsurers. I just want to understand what you’re seeing there that’s causing you to favor the primary versus reinsurance exposure?
Rob Berkley: Well, I think there are a couple of things, first off, a lot of it is not necessarily that the underlying business is less attractive and maybe about the ceding commissions that they are able to command, and at some point, maybe we think the underlying business is okay, but the ceding commissions that our competitors are willing to play on the reinsurance side, that they don’t make sense to us. In particular, I would call out some of the professional liability space, but I’m not going to get into more detail on that. As far as on the liability side on the direct or insurance front, you know, it’s just where we see opportunities and we like what we see in much of the marketplace, particularly Specialty, and if you want to get even more granular much of the E&S market.
And as you and others are aware, we’re one of the largest players in the E&S space and in particular in the liability lines. So this is just a good moment, and again, what’s going on with the reinsurance isn’t necessarily that we just think the market has gone to hell as far as the primary, we just may not agree with what some others are viewing as an appropriate feed. You know, I have heard as of late from some reinsurers commenting on social inflation, and all of a sudden they discovered this thing called litigation funding and, you know, kind of, makes you scratch your head and wonder where they’ve been for the past decade, because these are not new phenomenon, these are things that those of us that are in the marketplace, at least in the weeds, we’ve been not just talking about the dealing with for an extended period of time.
So there’s nothing new there. I think it’s great that they’re focused on it, maybe they’ll bring more discipline to the marketplace.
Alex Scott: Got it. Thank you.
Rob Berkley: Yes.
Operator: Our next question comes from Josh Shanker with Bank of America.
Rob Berkley: Hi, Josh, good afternoon.
Josh Shanker: Good afternoon, thank you for taking my call. Hope everyone’s well. Can we talk a little bit short-tailed lines, lot of growth there, you know, I mean, that, you know, that says to me there’s property in there, but short-tail is a pretty big catch up for a lot of things, a lot of growth instead what you’re finding there and what the opportunities are?
Rob Berkley: Lion’s share of its property. There is a little bit of auto physical damage in there and, you know, on both fronts, particularly in the property, I think you know the story as well as we do. There is a need for rate, there is an opportunity for rate, and we are trying to make the most of it.
Josh Shanker: And do you have — obviously, your reinsurance costs are up a little bit, you’re not a huge buyer of reinsurance, are you able to take on some of that increased price to the benefit of the shareholders or some of that getting passed off the reinsurance market.
Rob Berkley: The short answer is, Josh, that we are trying to ensure that the additional cost of that capacity that we rent is being passed on to the client and I think we’re doing that reasonably well. Not a perfect indicator, but you can see that in the difference between the gross and the net and part.
Josh Shanker: And then, look, it’s down a lot from where it was in 3Q ’22 but the cat loss in the reinsurance segment was somewhat high. I don’t think your big Hawaiian right, but maybe there’s some homes in Hawaii you write the Albo in the Panhandle in Florida, just doesn’t seem like that would have been a big area for you. Can you talk about the cat loss a little bit in the reinsurance segment?
