Q4 2023 Skyward Specialty Insurance Group Inc Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to the Skyward Specialty Insurance Group fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Good day and thank you for standby welcome to the Sky Specialty insurance group fourth quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is free. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Natalie Schoolcraft, Head of Investor Relations. Please go ahead.
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Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Natalie Schoolcraft head of Investor Relations. Please go ahead.
Natalie Schoolcraft: Thank you, Shannon. Good morning, everyone, and welcome to our fourth quarter 2023 earnings conference. Today I am joined by our Chairman and Chief Executive Officer, Andrew Robinson, and Chief Financial Officer, Mark Hosch. We'll begin the call today with our prepared remarks, and then we will open the lines for questions. Our comments today may include forward-looking statements, which by their nature involve a number of risk factors and uncertainties that may affect future financial performance. Such risk factors may cause actual results to differ materially from those contained in our projections or forward-looking statements.
Thank you Shannon good morning, everyone and welcome to our fourth quarter 2023 earnings Conference call today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson, Chief Financial Officer, Mark Hassel will begin the call today with our prepared remarks, and then we will open the lines for questions.
Our comments today may include forward looking statements, which by their nature involve a number of risks factors and uncertainties, which may affect future financial performance.
Such risk factors may cause actual results to differ materially from those contained in our projections or forward looking statements.
Natalie Schoolcraft: These types of factors are discussed in our press release and in our 10-K that was previously filed with the Securities and Exchange Commission. Financial schedules containing reconciliations of certain non-GAAP measures, along with other supplemental financial information, are included as part of our press release and available on our website, skywardinsurance.com, under the Investors section. With that, I will turn the call over to Andrew.
These types of factors are discussed in our press release as well as our 10-K that was previously filed with the Securities and Exchange Commission.
Financial schedules containing reconciliations of certain non-GAAP measures along with other supplemental financial information are included as part of our press release and available on our website Skyward insurance Dot com under the investors section with that I will turn the call over to Andrew Andrew.
Andrew Robinson: Thank you, Natalie. Good morning, everyone, and thank you for joining us. We closed out 2023 strong, reporting adjusted operating income of $0.61 per diluted share. Grocery and premiums grew 21% in the quarter, and our combined ratio of 90.7% for the quarter included less than a half a point of cat loss. While it was a quiet cat quarter for the industry, we continue to be at the low end of our peer group, even though over 25% of our business is property. Operationally, rate, retention, and submission flow in the quarter continue to be strong. I will talk more about this later in the call. Altogether, the execution of our ruler niche strategy continues to be excellent, and our aim to deliver top quartile financial returns is visible in our growth, underwriting profitability, shareholder returns, and balance sheet strength. With that, I'll turn the call over to Mark to discuss our financial results in greater detail. Mark
Thank you Natalie and good morning, everyone and thank you for joining us.
We closed out 2023 strong reporting adjusted operating income of 61 cents per diluted share.
Gross written premiums grew 21% in the quarter and our combined ratio of 97% for the quarter included less than a half a point of cat losses.
While it was a quiet cat quarter for the industry. We continue to be at the low end of our peer group, even though over 25% of our business is property.
Operationally rate retention in submission flow in the quarter continued to be strong.
I'll talk more about this later in the call.
Altogether, the execution of our rural or niche strategy continues to be excellent and our aim to deliver top quartile financial returns is visible in our growth underwriting profitability shareholder returns and balance sheet strength.
With that I'll turn the call over to Mark to discuss our financial results in greater detail Mark.
Mark Douglas Hughes: Thank you, Andrew. For the quarter, we reported net income of $29.3 million, or $0.74 per diluted share, compared to $20.4 million, or $0.63 per diluted share, for the same period a year ago. On an adjusted operating basis, we reported net income of $24.3 million, or $0.61 per diluted share, compared to $11.6 million, or $0.36 per diluted share, for the same period a year ago. In the quarter, gross written premiums grew by approximately 21 percent, and our transactional E&S captive, Industry solutions, and professional lines divisions each grew over 20 percent. Only global property and agriculture did not grow in the quarter, which is expected given the seasonality of this business.
Thank you Andrew.
For the quarter, we reported net income of $29 3 million or <unk> 74 cents per diluted share.
Compared to $20 4 million or <unk> 63 per diluted share for the same period a year ago.
On an adjusted operating basis, we reported net income of $24 3 million or 61 cents per diluted share compared to $11 6 million or <unk> 36 per diluted share for the same period a year ago.
In the quarter gross written premiums grew by approximately 21% and our transactional E&S captives industry.
Industry solutions and professional lines divisions, each grew over 20%.
Only global property in agriculture did not grow in the quarter, which is expected given the seasonality of this business. We continue to see excellent opportunities for this division in 2024.
Mark Douglas Hughes: We continue to see excellent opportunities for this division in 2024. Net written premiums grew by approximately 19% to $214 million in the quarter, compared to $180 million in the fourth quarter of 2022. Fourth quarter 2023 net premium retention was approximately 67%, versus 68% in the fourth quarter of 2022. Year-to-date, net premium retention was approximately 62% versus 59% a year ago. The fourth quarter is when we renew our Professional Workers' Compensation and Excess Reinsurance Program. All of these renewals were orderly, and we are satisfied with the terms and structures of these programs for 2024.
Net written premiums grew by approximately 19% to $214 million in the quarter.
Compared to $180 million in the fourth quarter of 2022.
Fourth quarter 2023, net premium retention was approximately 67%.
Versus 68% in the fourth quarter 2022 year to date net premium retention was approximately 62% versus 59% a year ago.
The fourth quarter is when we knew our when we renew our professional workers compensation and excess reinsurance programs.
All of these renewals were orderly and we are satisfied with the terms and structures of these programs for 2024.
Mark Douglas Hughes: Turning to our underwriting results, the fourth quarter combined ratio of 90.7% improved 1.7 points compared to the fourth quarter of 2022. The 2.3 point improvement in the current action year non-cap loss ratio to 60.9% was principally driven by a changing mix of business. During the quarter, catastrophe losses were minimal and accounted for less than half a point on the combined ratio compared to the fourth quarter of 2022, which was impacted by 1.2 points of cat losses from Winter Storm Elliott. Excluding the deferred benefit from the LPT, there was no net impact from prior year development.
Turning to our underwriting results for the fourth quarter combined ratio of 97% improved one seven points compared to the fourth quarter of 2022.
The 2.3 point improvement in the current accident year non cat loss ratio to 69% was principally driven by changing mix of business.
During the quarter catastrophe losses were minimal and accounted for less than half a point on the combined ratio compared to the fourth quarter of 2022, which was impacted by 1.2 points of cat losses from Winter Storm Elliot.
Excluding the deferred benefit from the L. P. T. There was no net impact from prior year development.
Mark Douglas Hughes: We continue to maintain a conservative position with respect to our loss reserves as our actuarial central estimate at the end of 2023 indicated that we are in a more redundant position than at the end of 2022. The expense ratio increased slightly compared to the fourth quarter of 2022. We've talked in prior quarters regarding our business makeshift and investing in the business, so this is in line with our expectations and a target of a sub-30 expense ratio. Turning to our investment results, net investment income was $14 million in the quarter, an increase of $8.7 million compared to the same period in 2022. Consistent with our investment strategy to deploy all free cash flow to core fixed income, in the fourth quarter, we put $118 million to work at 6.5%. The net investment income from our core fixed income portfolio almost doubled to $10.7 million from $5.9 million in the prior year quarter, driven by improving portfolio yield and a significant increase in the invested asset.
We continue to maintain a conservative position with respect to our loss reserves as our actuarial central estimate at the end of 2023 indicated that we are in a more redundant position than at the end of 2022.
The expense ratio increased slightly compared to the fourth quarter of 2022.
We've talked in prior quarters regarding our business mix shift and investing in the business. So this is in line with our expectations and a target of a sub 30 expense ratio.
Turning to our investment results net investment income was $14 million in the quarter.
An increase of $8 7 million compared to the same period of 2022.
Consistent with our investment strategy to deploy all free cash flow to core fixed income.
In the fourth quarter, we put a 108 hundred $18 million to work at six 5%.
The net investment income income from our core fixed income portfolio almost doubled to $10 7 million from $5 9 million in the prior year quarter, driven by an improving portfolio yield and a significant increase in the invested asset base.
Mark Douglas Hughes: Our embedded yield was 4.5% at December 31st, 2023 versus 3.7% a year ago. Our core fixed income portfolio is now over $1 billion, a $410 million increase from a year ago. Net investment income in the fourth quarter of 2023 and 2022 was impacted by negative equity mark-to-market adjustments in our opportunistic fixed income portfolio.
Embedded yield was four 5% at December 31.
2023 versus three 7% a year ago.
Our core fixed income portfolio is now over $1 billion of $410 million increase from a year ago.
Net investment income in the fourth quarter 2023, and 2022 were impacted by negative equity mark to market adjustments in our opportunistic fixed income portfolio.
Mark Douglas Hughes: Just a reminder that last quarter we provided a redemption notice on $42 million of the Opportunistic Fixed Income Portfolio. Given the actions that we have already taken, and inclusive of that notice, of the $172 million in the Opportunistic Fixed Income Portfolio, as of December 31st, 68% was in redemption. We anticipate reinvesting the proceeds from this part of the portfolio into our core fixed income portfolio. As of December 31st, we had approximately $270 million in short-term and money market investments, resulting from a strong operating cash flow of over $335 million.
Just a reminder, that last quarter, we provided a redemption notice on $42 million of the opportunistic fixed income portfolio.
Given the actions that we've already taken and inclusive of that notice of the $172 million in the opportunistic fixed income portfolio.
At December 31, 68% was in redemption, we anticipate reinvesting the proceeds from this part of their portfolio into our core fixed income portfolio.
At December 31, we had approximately $270 million in short term and money market investments.
Results from style strong operating cash flow of over $335 million during.
Mark Douglas Hughes: During the quarter, our yield on short-term investments continued to be north of 5 percent. We will continue to deploy this liquidity into our core fixed income portfolio. During the quarter, we executed a successful upsized follow-on offering of 5 million shares of common stock. Skyward sold 2.2 million, and Westingham sold approximately 2.8 million, reducing their ownership to approximately 17%.
During the quarter our yield on short term investments continued to be north of 5%. We will continue to deploy this liquidity into our core fixed income portfolio.
During the quarter, we executed a successful upsized follow on offering of 5 million shares of common stock.
Skyboard show sold $2 2 million and West AME sold approximately $2 8 million, reducing their ownership to approximately 17%.
Mark Douglas Hughes: We continue to see strong interest from our existing and new shareholders, and we appreciate their support for our company and our strategy. In terms of how we look at 2024, we expect full-year adjusted net income to grow over 30 percent to between 105 and 110 million based on a combined ratio between 91 and 92 percent, inclusive of two to two and a half points of cash. With that, I'll turn the call back over to Andrew for his concluding remarks. Thank you, Mark.
We continue to see strong interest from our existing and new shareholders and we appreciate their support for our company and our strategy.
In terms of how we look at 2024, and we expect full year adjusted net income to grow over 30% to between 105 and $110 million based on a combined ratio between 91 and 92% inclusive of two to two five points of cat.
With that I'll turn the call back over to Andrew for concluding remarks.
Thank you Mark.
Andrew Robinson: Our fourth quarter results capped off what was truly a defining year for Skyward Specialty. Operationally, we had another great quarter as we grew double digits in seven of our underwriting divisions, and continued to realize pure pricing increases in the high single digits, which is above our estimated loss costs. Our new business pricing was up again over our Enforce book, and retention, too, remained strong in the low 80s. All are strong indicators that the attractive underwriting margins that we are generating should continue.
Fourth quarter results capped off what was truly a defining year for sky response specialty.
Operationally, we had another great quarter as we grew double digits in seven of our underwriting divisions, we continue to realize pure pricing increases in the high single digits, which is above our estimated loss cost trends our.
Our new business pricing was up again over our in force book and retention to remains strong in the low eighties.
All are strong indicators of the attractive underwriting margins that we're generating should continue.
Andrew Robinson: We also continue to see strong submission activity, which is up over 34% from the prior year, the largest year-over-year increase we have ever achieved. Our full year results are also notable, particularly in the context of the lead up to our IPO. During that period, we communicated core metrics and committed to building a company that consistently delivered top quartile performance. Our 2023 results demonstrated our progress toward this commitment. For the year, we delivered record growth of 28%, a combined ratio of 90.7%, and adjusted operating income of $80.8 million. And we achieved a return on equity of 15.99% and grew fully diluted book value per share by 24% from $12.87 to $15.96.
We also continue to see strong submission activity, which is up over 34% from the prior year the largest year over year increase we have ever achieved.
Our full year results were also notable particularly in the context of the lead up to our IPO.
During that period, we communicated core metrics and committed to building a company that consistently delivers top quartile performance.
Our 2023 results demonstrated our progress towards this commitment.
For the year, we delivered record growth of 28% a combined ratio of 97% and adjusted operating income of $88 million and we achieved a return on equity of $15 nine 9% and grew fully diluted book value per share by 24% from $12 87.
$215.96.
Andrew Robinson: The year marked a significant underwriting achievement for us, as we now have all eight of our underwriting divisions producing more than $100 million as compared to five at the end of 2022. Each division is now at a scale that can substantially contribute to the company's earnings. The three divisions that reached $100 million this year were surety, transactional E&S, and professional liability.
The year marked a significant underwriting achievement for us.
As we now have all eight of our underwriting divisions, producing more than $100 million as compared to five at the end of 2022 each.
Each division is now at a scale that can substantially contribute to the company's earnings.
The three divisions that reached $100 million this year, where charity transactional E&S and professional liability.
Andrew Robinson: In just three years, we've grown these three businesses in aggregate from $44 million to $383 million, driven by significant investments in talent and technology. All three are generating outstanding returns and have added meaningfully to the diversification of our. While each division is delivering at or above our minimum target returns on capital, we continue to capitalize on market opportunities to grow both top line and margins and ensure that we shape our portfolio to those areas that offer the best risk-adjusted returns on capital. As such, we have ongoing investments in new underwriting areas, product adjacencies, teams, and, of course, technology. As I reflect on the progress following what was a remarkable year for Skyward Special, I find myself energized and inspired by what we have accomplished in such a short period of time and also the possibilities for 2024 and beyond.
And then just three years, we've grown these three businesses in aggregate from 44 million to $383 million driven by significant investments in talent and technology Ultra.
All three are generating outstanding returns and have added meaningfully to the diversification of our earnings.
While each division is delivering at or above our minimum target returns on capital. We continue to capitalize on market opportunities to grow both top line and margins and ensure that we shape our portfolio to those areas that offer the best risk adjusted returns on capital as such we have ongoing investments and new underwriting areas.
Product Adjacencies teams and of course technology.
As I reflect on the progress following what was a remarkable year for skyward specialty I find myself energized and inspired by what we have accomplished in such a short period of time and also the possibilities for 2024 and beyond.
Andrew Robinson: And, of course, we remain laser focused on executing a rule or any strategy and our progression towards generating top quartile returns at all parts of the market cycle. Finally, I'd like to thank my 510 colleagues for their excellent performance in 2023 and their commitment and drive to achieving our shared goals for 2021. I'd now like to turn the call back over to the operator to open it up for Q&A. Operator.
And of course, we remain laser focused on executing our <unk> strategy and our progression towards generating top quartile returns at all parts of the market cycle.
Finally, I'd like to thank my 510 colleagues for their excellent performance in 2023, and their commitment and drive to achieving our shared goals for 2024.
I would now like to turn the call back over to the operator to open it up for Q&A.
Operator: Thank you. As a reminder, to ask a question, please press star one on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Later.
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Operator: Please stand by. We'll compile the Q&A roster. Our first question comes from the line of Matthew Carletti with Citizens JMP. Your line is now open. Please check your mute button.
Please standby, we will compile the Q&A roster.
Our first question comes from the line of Matthew <unk> with citizens JMP. Your line is now open.
Matthew Carletti: Can you hear me? Yeah. Good morning, Matt. Hey, Matt.
Matthew Your line is open please check your mute button.
Can you hear me, yes, good morning, Matt Hey, Matt Good morning.
Matthew Carletti: All right. Good morning, Andrew. Andrew, I was hoping I could kind of go 30,000 feet per second.
Andy I was hoping I could kind of go at 30000 feet per second.
Matthew Carletti: And if we rewind a year ago, when you guys were out on the IPO roadshow, technology was a big theme about how you guys embrace it and use it to empower your underwriters, claims, so on and so forth. And I was hoping you might be able to kind of fast forward a year. And what has changed there? I mean, we hear a lot about AI and things like that. Is that something you're working on embracing?
If we rewind a year ago. When you guys are out on the IPO Road show.
Technology was a big theme about how you guys have embraced it and use it to empower your underwriters claims so on and so forth and I was hoping you might be able to kind of.
Fast forward a year and what has changed there I mean, we hear a lot about.
And things like that is that something youre working on embracing just maybe a quick bringing us up to speed just on.
Andrew Robinson: Just maybe a quick bring us up to speed just on, you know, how big a role that plays in your organization and how that might have changed over the past year. Um, yeah, well, I think that probably we're moving at, like, a very, I would say, a very, very rapid, rapid pace, right? So a lot of stuff's being done very quickly. And yeah, I would just say to you that nearly in every part of our business, you know, next week, we have our board meeting, and, you know, the first session is claims. And, you know, as part of our claims presentation, our data scientists are going to show how we've been able to isolate on, you know, the claims that have the highest propensity for reserve development.
How big a role that plays in your organization, how that might have changed over the past year.
Yeah, well I think that probably we're moving at like very I would say very very rapid rapid pace right. So a lot of stuff being done very quickly.
And yes, I would just say to you that nearly every part of our business.
Next week, we have our board meeting in the first session is claims and.
As part of our claims presentation, our data scientists are going to show.
How is it that we've been able to isolate on the claims that have the highest propensity for reserve developments of the managers can be watching those with greater intensity.
Andrew Robinson: So the managers can be watching those with greater intensity, you know, kind of separating out the 20% that account for the potential 80% of movement. And all that is kind of like turning the crank on the intelligence that we're trying to bring to the desktop of our, you know, in this case, our claims professionals, as well as our underwriters. And look, I, it's not one single thing.
Separating out the <unk>.
One 8% that account for the potential 80% of movement and all of that is kind of like the just turning the crank on the intelligence that we're we're trying to bring to the desktop Av or in this case our claims professionals.
As well as in our underwriters and look it's not one single thing.
Andrew Robinson: A great example right now is that, you know, we've completely flipped within the auto industry the notion of using telematics. You know, if there's a G-force event, we're not waiting for a first notice of loss to come in. You know, we're outbound reaching out to the risk manager of the entity that had this G-force event to determine whether there was an accident. And if so, then we can rapidly respond off the back of that. And that that just fundamentally sort of turns things upside down.
Great example, right now is that we've completely flipped within auto.
The notion of using telematics.
As a G force event, we're not waiting for a first notice of loss to come in.
We're outbound reaching out to the risk manager.
Of the of the FCC that had the Street G force event to determine whether there was an accident and if so then we can rapidly respond off the back of that and Thats, just fundamentally sort of turned things upside down and so all of those little angles right than I am.
Andrew Robinson: And so all those little angles, right, that, that, that I'm describing, these are just things that we, you know, we've got a long list of things that we can be doing. We're always trying to figure out what the stuff is that we can really make an impact in our business. And, and, you know, it's just a, it's a big part of our DNA.
Describing these are just things that we we've got a long list of things that we can be doing we're always trying to figure out what's the stuff that we can really make an impact on our business in <unk>.
It's a big part of our DNA.
Those two examples there is equal number of examples on product on underwriting et cetera et cetera.
Mark Douglas Hughes: And, you know, those two examples, there's an equal number of examples on product on, you know, underwriting, et cetera, et cetera. Thank you, that's helpful. And then if I could just sneak another one in for Mark.
Great. Thank you that's helpful.
And then if I could just sneak another one in.
That's a remark.
Mark you mentioned, Bob at year end, 68% of the $172 million of Western funds are in redemption.
Mark Douglas Hughes: Mark, you mentioned that at year end, 68% of the 172 million West End funds are in redemption. Can you help us with a timeline of kind of how long that usually takes? Is that kind of a quarter or 90 day process? Or can it take longer for those funds to be redeemed and reinvested?
Can you help us with the timeline of kind of how long it usually takes that kind of a quarter or a 90 day process are going to take longer for those funds to kind of be redeemed and reinvested sure.
Sure Matt.
No it won't be it won't be a quarter.
I am looking for about 30% of it to be redeemed in 2004 time will tell.
Mark Douglas Hughes: Sure, Matt. No, it won't be a quarter. I'm looking for about 30% of it to be redeemed within 24.
But I think that's what I'm looking for 30% ish in 'twenty four and the rest of it in 'twenty five we'll let you know, but it will take a little bit of time and Matt. These are just these are we're just letting the loans mature right. So.
Mark Douglas Hughes: Time will tell, but I think that's what I'm looking for, 30%-ish in 24 and the rest of it in 25. We'll let you know, but it'll take a little bit of time. And Matt, we're just letting the loans mature, right? So they were reasonably well laddered, but it's not sort of 50-50, 50% in the first year, 50% in the second year. And the average duration was around two years, a little under two years.
They were reasonably well ladder, but.
It's not sort of 50 50, 50% in the first year of 50% in the second year and the average duration was was around two years, a little under two years correct.
Perfect all right thanks very much.
<unk>.
Thank you. Our next question comes from the line of Mark Hughes with Truest. Your line is now open.
Mark Douglas Hughes: Perfect. All right. Thanks very much.
Good morning, Mark.
Good morning, Andrew Good morning, Marc Michael as well.
Mark Douglas Hughes: Thank you. Our next question comes from the line of Mark Hughes with Truist. Your line is now open.
Good.
Mark the guidance for 105 to 110, that's coming off of the.
Mark Douglas Hughes: Good morning, Mark. Morning, Andrew. Good morning, Mark. Mark, the guidance, the 105 to 110, that's coming off of the 2023 base. Is it 81 million?
2023 base or is it $81 million might seem that properly.
Yes, Sir you are.
Okay and that seems like a pretty pretty strong result.
Anything you can say in terms of the contribution from net investment income.
Mark Douglas Hughes: Am I seeing that properly? Yep. Yes, sir, you are.
Andrew Robinson: Okay, and that seems like a pretty strong result. Anything you can say in terms of the contribution from net investment income and the top line as you think about that guidance? Yeah, Mark. This is Andrew.
And the top line as you think about that guidance you want to do that yes. Mark. This is this is Andrew I think.
Leave it to you guys to put your models together, but with the guidance that Mark gave on combined ratio.
Andrew Robinson: I think you know, we'll leave it to you guys to put your models together. But with the guidance that Mark gave on the combined ratio between 9192, you know, in the cat portion of that, you can now you know what our gross net is. You know, I'll just say to you that, you know, that should be pretty consistent. And so you can work your way through it by just taking our written premium in 2023. You know, put your premium for 2024 in and kind of fill in the blanks.
Between 90, 192, and the cap portion of that.
You can you know what our gross to net is.
I will just say to you that that's.
Should be pretty consistent.
So you can work your way through it by just taking our our written premium.
In 2023 earned premium for 2024 and kind of fill in the blanks.
I will say that our plans, if you're asking specifically about growth.
We don't want to give guidance on growth our internal plans are for 15% that's what we're planning for.
Andrew Robinson: I will say that our plans, you know, if you're asking specifically about growth, we don't want to give guidance on growth. Our internal plans are for 15%. That's what we're planning for.
That's based on the market conditions that we see and.
And the investments that we've made I would also say to you that it was our view and we said this a number of times that a measure of us during a.
Andrew Robinson: That's based on the market conditions that we see and the investments that we've made. I would also say to you that it was our view, and we've said this a number of times, that a measure of us during at least what I would describe as a functioning market is that we should be able to double the growth of our competitors. And again, our competitors are the guys you can directly compare us against and that we compete against in the public company specialty space. But it also includes the primary insurance divisions of the diversified Bermudan companies and a handful of others. And we've consistently been at 28% growth, more than doubled the growth of that cohort this year. And we believe that 15% growth is in line with doubling the growth of that cohort next year. That's what our plan is.
What I would describe a functional market is that we should be able to double up the growth of our of our competitors and again our competitors are the guys, who can directly compare against and sort of the that we compete against in the sort of the public companies specialty space, but it's also includes.
The primary insurance divisions of the diversified Bermuda, and geis and a handful of others and we've been consistently at 28% growth more than doubled up the growth of that cohort. This year and we believe that kind of 15% growth is in line with sort of doubling up the growth of that cohort next year. That's our plans we'll leave it to you guys.
Figure out whatever you want to put into your models, but that's what our plans call for.
Mark Douglas Hughes: We'll leave it to you guys to figure out whatever you want to put into your models. Okay. And then, Mark, anything on net investment income that's relevant. You know, Mark, we just talked about a billion dollar fixed income portfolio with it having a yield of four and a half. You and I can do the math. I expect that to continue throughout 24.
Understood and then Mark anything on the net investment income.
Yes.
Relevant here.
Mark we just talked about $1 billion of fixed income portfolio with it with a yield of four and a half you and I can do the math.
I expect that to continue throughout 2000 and for the.
Mark Douglas Hughes: The other components can be a little bit more variable, so I'll leave it to you to model out the portfolio in terms of fixed income with the rest of it. You know, time will tell.
The other components can be a little bit more variable. So I'll leave it to you to model out the portfolio in terms of fixed income with the rest of it.
Just.
Mark Douglas Hughes: We've done well on opportunistic, but it has moved around a little bit, as you know, in 23. You guys are asking me to do a lot of work. I can help you with that. If you want to send us your models, we can, we can, we can fill out your models. How about that?
Time will tell but we've done well on opportunistic but it has moved around a little bit as you know in 'twenty three.
You guys are asking me to do a lot of work.
I can help you with that.
If you if you want to send US your models. We think we can we can fill out your models all of that yes.
Mark Douglas Hughes: Yeah, I'm joking about global, global property. I hear what you're saying. It's not a seasonally strong quarter, but even on that basis, it was down a little bit year over year. You had a lot more meaningful growth earlier in the year. Anything going on in particular in the fourth quarter? I genuinely, Mark, will tell you don't read it. It would give you a false negative if you looked at it like that. It's a very, very light quarter.
Okay.
Global Global property.
Here, we're just saying, it's not a seasonally strong quarter, but.
Even on that basis, it was down a little bit year over year.
You had a lot more meaningful growth earlier in the year.
Anything going on in particular in the fourth quarter.
I genuinely Mark will tell you don't read it.
Is there is it would give you a false negative if you if you look at that.
A very very light quarter.
Andrew Robinson: I think we let one account go. We also rolled Agra into that division. There was no premium written for Agra in the fourth quarter.
Sure.
I think we let one account go.
We also roll Agora into that division and there is no premium written for AG in the fourth quarter.
Andrew Robinson: Honestly, I can stay with great confidence already knowing how we started the year that you don't let that give you a false negative. Obviously, the property market is I think it's either at its peak or maybe past its peak. I feel very good about where we are and both the profit as well as the growth opportunities that are available to us given our discreet focus there. I appreciate that. Thank you. Thank you. Our next question comes from the line of Andrew Anderson with Jeffries. Your line is now open.
So I honestly.
I can I can I can say with great confidence already knowing.
How we started the year that.
Don't let that sort of give you a false negative look obviously the property market.
Is.
I think it's either at its peak or maybe past its peak, but I.
I feel very good about where we are.
And both the profit as well as well as the sort of growth opportunities that are available to us given our discrete focus there.
I appreciate that thank you.
Thank you.
Our next question comes from the line of Andrew Anderson with Jefferies. Your line is now open.
Andrew Anderson: Good morning. Hey, good morning. Looking at the GPW growth from professional lines and transactional E&S, can you kind of help us think about the source of growth there and how much of that is retained net? Yeah, well, without knowing the sort of context of your question, I can only assume that given everything that's being talked about in the D&O market, and particularly the public D&O market, that probably underlies it a little bit. First off, everything that's claims made rolls into our professional underwriting division. So our main driveline there is our miscellaneous professional, which, you know, quite honestly, is a relatively small face value, less than a million and a half dollars average limit. All types of classes, you know, included in that as well are things like employed lawyers, tech E&O, our excess lawyers offering, as you saw; we also did a media liability offering, including the professional portfolio as well as our architects and engineers book of business.
Good morning, welcome to the Hey, good morning.
Looking at the <unk> growth from professional lines and transactional E&S can you kind of help us help us think about the source of growth there and how much of that is retained net.
Yeah.
Without knowing the sort of the.
The context for your question I can only assume that given everything we've talked about in the D&O market and particularly the public D&O market that probably underlies it a little bit.
First off everything its claims made rolls into our professional underwriting division. So are our main driveline, there is our miscellaneous professional which.
Which.
Quite honestly is rare.
Relatively small face value less than 1 million and half dollars average limit.
All types of classes included in that as well are things like.
Employed lawyers, Turkey.
Our excess.
Lawyers.
<unk> as you saw we also did a media liability offering including the professional portfolio as well as our architects and engineers book of business.
Andrew Robinson: It also does include management liability, which I'll come to in a second, and really, what's been a big growth line for us is in the healthcare, the healthcare professional market, for management liability, just to maybe get in front of a conversation. Look, I feel great about our management liability book, but I think it's probably noteworthy that, you know, that almost all of that today is, you know, a private company; less than a quarter of that is public. And of that, 70% is side A, and 30% is side ABC.
It also does include management liability, which I'll come to in a second and really what's been a big growth line for us.
He is in the healthcare.
The health care professional market.
For management liability just to maybe get in front of a conversation look.
I feel great about our management liability.
Book, but I think it's probably noteworthy that.
That almost all of that today is.
Is.
Is private company.
Less than a quarter of that is public.
And of that 70% is side, a and 30% is.
Andrew Robinson: It probably has a 50% retention rate, but we've been letting it go. And on the positive side, on our management liability, we're ninja assassins going after very niche areas, right? So we've been very successful in areas like Web 3, cannabis, amongst others, which are true sort of specialty risks where we have some pretty darn legitimate expertise as compared to the rest of the market. So our professional sort of growth and our portfolio are very atypical of maybe how it is you would compare us against others. And then lastly, to your question, because our average limit is so low, we are principally keeping it net. It's not entirely net, but it's principally net. Very helpful, thank you.
ABC.
It probably is a 50% retention rate we've been letting it go and and on the positive side on our management liability like we are we're ninja SaaS, it's going after very niche areas right. So we've been very successful in areas like what three cannabis amongst others, which are true sort of specialty risks, where we have.
Some pretty pretty darn legitimate expertise as compared to the rest of the market. So so our professional sort of growth and our portfolio is very atypical of baby. How it is you would compare us against others and then lastly to your question because our average limit is so low we're principally keeping it net.
It's not entirely but it's principally.
Mark Douglas Hughes: And maybe thinking about casualty loss picks here, can you kind of give us some color on how accident years 16 to 19 are developing, both for business within the LPT and non-LPT business? Sure, Andrew, good question. Look, so I'm glad you brought it up. We, the industry, are talking about the 19 and prior years. As a reminder, the LPT covered policy years 2017, which would, of course, include part of the 18 accident year. Before we went public, we took the LPT up to the co-participation limit. We're not seeing any surprises on inflation and or loss costs.
Very helpful. Thank you and maybe thinking about casualty loss picks here can you kind of give us some color on how accident years 16 to 19 are developing both for business within the LPT and non LPG business sure. Andrew Good question look so I'm glad you brought it up.
The industry is talking about the 19 in prior years.
Good reminder, the LPT covered policy years 2017, which of course would include part of the 18 accident year.
We went public we took the LPT up to the co participation limit.
We're not seeing any surprises on inflation and or loss costs, we've talked about that our rate increases have exceeded.
Mark Douglas Hughes: We've talked about that. Our rate increases have exceeded what we think our inflation and loss cost trends are, and Andrew, we haven't pulled that through in terms of our income statement. We've been conservative, meaning with loss picks, we're not taking full credit for rate increases. Does that answer your question? Yes, that's helpful.
Exceeded what we think our inflation and loss cost trends are.
And Andrew we haven't pulled that through in terms of our income statement.
<unk> been conservative, meaning with loss picks we're not taking full credit for four rate increases does that answer your question.
Mayor Shields: Thank you. Thank you. Our next question comes from the line of Mayor Shields with Keith Brouillette Lewis. Your line is now open.
Yeah. That's helpful. Thank you.
Yeah.
Thank you. Our next question comes from the line of Meyer Shields with Keefe Bruyette, Chris Your line is now open.
Mayor Shields: Great, thanks, and good morning. Good morning there. One quick question, I guess on the catastrophe load.
Great. Thanks, and good morning, good morning there.
One quick question I guess on the catastrophe load I know, it's really really light.
Andrew Robinson: I know it's really, really light compared to most of your peers, but it's also at least the upper range is higher than what you guys have produced in worse pricing. I was wondering, is this intentionally a conservative outlook, or is it something changing in terms of the overall mix of cat exposure? No, our cat, what we use for our cat number is a combination of AL and 10 year history.
Compared to most of your peers, but it's also at least the upper range.
Higher than that you guys are produced in worse.
Pricing.
Environment. So I was wondering if this intentionally a conservative outlook or is there something changing in terms of the overall mix of cat exposure.
Our cat what we use for our our cat number is a combination of al and 10 year history. So.
Andrew Robinson: So we feel like we're giving an appropriate sort of recognition to the cat that's in our book. And then it's our job to be able to sort of continue to successfully grow our property portfolio in a way that ensures that we're not, you know, we're not adding a lot of concentrated aggregate, which, you know, when you're talking about two or two and a half points of caps in total, you know, that's where you can really get yourself messed up, is you have a, you know, you It may be, it may be, you know, a hurricane, but it might be, you know, convective storms or something else.
We're we feel like we're giving appropriate sort of recognition to the capex in our book.
And then it's our job to be able to sort of continue to successfully grow our property portfolio in a way that ensures that we're not we're not adding a lot of concentrated in aggregate.
Which.
When you are talking about two or two five points of cats in total.
That's where you can really get yourself messed up as you have you have.
A lot of aggregate in a small area and some of that happens it may be it may be.
Our team what it might be convective storms or something else and so we're really good at our duration management and yes, I think that I think that what you saw him probably given our book of business. If you looked over five years, it will probably be in that 2% to five point range, which is a pretty darn good outcome given the.
Andrew Robinson: And so we're really good at aggregation management. And, and yeah, I think that, given our book of business, if you looked over five years, we'd probably be in that two and two and a half point range, which is a pretty darn good outcome given the amount of property that we have in our portfolio overall. Okay, no, that's very helpful.
<unk> property that we have in our portfolio overall.
Okay, No that's very helpful.
Andrew Robinson: You also mentioned property growth. Does that include increasing exposure along with rate increases? Yeah, well, you know, look, there's obviously, just growth in, you know, in values given inflation; there's growth in values related to, you know, business interruption. And depending on what part of our portfolio, all that's true in our global property, you know, in our transactional E&S business, like, you know, we might massively sublimate business interruption; we are likely doing actual cash value on the buildings. And so a lot of that, you know, you're not seeing a lot of exposure growth, per se, given how we oftentimes structure those, those, you know, those policies, but that's not to say that, you know, we're not seeing sort of maybe the equivalent increase in price running through rate that, that theoretically should be assigned to exposure for those kinds of risks. Does that, does that help? It does, yes.
You also mentioned property growth prospects does that include increasing exposure along with rate increases.
Yes.
Look there is there is obviously not just growth in.
In values given inflation there is growth in values related to.
As I said, our option and depending on what part of our portfolio all of that's true in our global property.
And our transactional E&S business.
We might not.
Sub limit.
Business interruption, we are likely doing actual cash value on the buildings.
And so a lot of that youre, not theres not a lot of exposure growth per se.
Given how we oftentimes structure those those those policies but.
But that's not to say that we're not seeing sort of maybe the equivalent increase in price running through rate that that theoretically should be assigned to exposure for those kinds of risks.
Does that does that help.
Yes, and one last question if I can.
Andrew Robinson: We've been seeing a lot of reserved issues burble up around the industry, and I'm wondering what that implies for maybe talent becoming available at competitors, or from competitors? That's a really good question. I don't I don't know if I can see a correlation to it, to be honest. Look, not that this is going to sound a little bit flippant, but I would believe that we probably would not want the talent to be flushed out of an organization due to adverse development. Okay, now, right, sometimes the reaction is a little bit imprecise, which is what I was asking about, but I completely get what you're saying.
Been seeing a lot.
Reserved issues verbal up around the industry and I'm wondering what that implies for maybe talent becoming available at competitors.
Or from competitors.
That's a really that's a really that's a really good question.
I don't know I don't.
Don't know if I can see a correlation to it.
To be to be honest.
Look.
This is going to sound a little bit flippant, but.
I would believe that we probably would not want the talent, we flushed out of an organization due to adverse development.
Okay, alright, sometimes be reaction to it a little bit.
Precise which is b what are they asking about but I completely get what youre, saying, yes.
Andrew Robinson: Yeah, well, one thing I will say, though, which has been the case for, you know, my three and a half years here, is that we've been very targeted and intentional with our recruiting, right? So we tend to have a very good view of the people that we're recruiting, their track records, their underwriting, their distribution following, etc, etc. And so, like, I wouldn't say that we're not recruiting from a general pool; we're recruiting in quite an intentional way. And the media liability announcement.
Well, one thing I will say, though.
Which is which has been the case for Microgrid half years here is we've been very targeted and intentional with.
With our recruiting right. So we're.
Okay.
We tend to have a very good view of the people that we're recruiting their track records they're underwriting.
And their distribution, following et cetera, et cetera, and so.
I wouldn't say that we're not recruiting from a general tool, we're recruiting quite intentional way.
And the media liability announcement.
Andrew Robinson: You know, a few weeks ago was a great example that that has been an area of focus for us for a long time, and we were only targeting one of three teams. And so when we were able to move on one of those teams, we did so really fast. Okay, I completely understand. Thank you. Thank you. Our next question comes from the line of Paul Newsome with Piper Sandler. Your line is now open.
A few weeks back was a great example of that that has been an area of focus for us for a long time, and we were only targeting one of three teams and so when we are able to move on one of those teams we get so really fast.
Okay completely understood. Thank you.
Thank you.
Our next question comes from the line of Paul Newsome with Piper Sandler Your line is now open.
Paul Newsome: Good morning, Paul. Good morning. Sorry, I only cleared about half of that. Thank you. There are a couple of questions that I think I want linked.
Good morning, Paul Good morning.
Yes, sorry, I only get about half of that leaves me.
Just a couple of questions.
Thank you.
Couple of questions and then I think I want linked.
Paul Newsome: One is I want to ask your response to the concerns that the competitive environment has gotten a lot, at least significantly worse, over the last year and maybe even more recently. And I would like, I was wondering if this is sort of the second question, if you could combine that with a conversation of what you think about what's happening from a rate versus inflation perspective, because my sense is that the fear is in these specialty lines. The combative environment has just gotten to the point where, the baseline is you're sort of flat with respect to what you're getting from rate versus inflation, and of course, the fear is that somehow that continues to turn over, but you know what your response to that, and you know what you see as you're looking both in your own book and outside of your own book that you know may or may not line up with those fears?
I wanted to ask.
Your response to.
The concerns that the competitive environment has.
<unk> gotten a lot.
We significantly worse over the last year and maybe even more recently.
And I would like I was wondering if a certain second question. If you can combine that with the conversation what are you thinking about this happening from a rate versus.
<unk> perspective.
Because my sense is your fear is in specialty lines.
The competitive environment has just gotten to the point where.
The baseline is youre sort of flat with respect to what you are getting from rate versus inflation.
And.
<unk> appears that somehow that continues to turn it over.
What's your response to that and what do you see as you look into <unk>.
And outside of your own book.
May or may not line up with the spheres.
Paul Newsome: Okay, well, let me first just make a couple industry observations. You know, not to not to not sort of take too much of the time on that, but, You know, if you follow what's been going on, I will tell you that there's no consistent theme you're hearing in some instances, discussions on professional. When the earnings season before the earnings season started, there was a very large announcement around, you know, that was driven a lot by professional. Then you hear, you know, you've And so there's no clear theme.
Okay, well, let me, let me first I'll make a couple industry observations.
Im not.
That's not to take too much of the time on that but.
If you follow whats been going on.
I'll tell you that Theres a theres no.
Distant theme you are hearing.
In some instances discussions on professional.
When the earnings season before the season started there was a very large announcement around that was driven a lot by professional then youre hearing <unk> been hearing the drumbeat of order for a long time now, it's GL and excess weight, making its way into the next and so theres no clear theme.
Andrew Robinson: You know, really great companies, of which there are some fantastic competitors that we see, you know, like everyone's been talking about rising loss costs here for a long time. It feels like a combination of the media and the analyst community, and the investment community said, well, now's a good time to do, you know, dump your kitchen sink in the, you know, this quarter. And, you know, some companies did that, but I think a lot of the great companies who have been talking about, you know, the inflationary environment on liability, you know, have recognized that in both how it is that they're writing risk and how it is that they're booking their loss ratios. For our part, you know, listen. Nothing's ever perfect, but to Mark's point, you know, in the third quarter of 2022, We've been incredibly conservative, not released a dollar of reserves since I joined, right?
I think really great companies of which there are some fantastic competitors that we see.
Aaron has been talking about rising loss costs here for a long time.
It feels like.
Combination of the media and the analyst community investment community said, well now's a good time to do to dumping dump your kitchen sink in this quarter and some companies did that but I think a lot of the great companies, who have been talking about.
Just the inflationary environment on liability have recognized that in both how it is that they are writing risk and how it is that they're booking their loss ratios.
For our part.
And nothing's ever perfect, but to Mark's point in the third quarter of 2022.
We move to take our LPT reserve position to the top of the Copa Alright.
Been incredibly conservative not released a dollar of reserves since I've joined and we've reported out very consistently about our pricing above loss cost trend.
Andrew Robinson: And we've reported out very consistently about, you know, our pricing above the loss cost trend, our new business pricing, and all that to ensure that our balance sheet is strong and getting stronger period over period. You know, other companies' decisions about what to do in this quarter. I feel like that's just a.
Our new business pricing and all of that's to ensure that our balance sheet is strong and getting stronger period over period.
People's other other companies' decisions about what to do in this quarter.
Andrew Robinson: To me, that's a little bit of a conundrum. It seemed like it was a kitchen sink for some, but the competitive environment, you know, certainly feels like it has consistently been a relatively rational environment. There are some crazies out there.
Just.
To me, that's a little bit of a conundrum. It seemed like it was a kitchen sink for some.
But the competitive environment, certainly feels like it has consistently been a relatively rational environment. There are some crazies out there. The reason, we're not doing anything in public D&O, it's because the people who are writing that business, particularly a lot of the mga's are nuts.
Andrew Robinson: The reason we're not doing anything in public D&O is because the people who are writing that business, particularly a lot of the MGAs, are nuts. We, you know, we see something similar in, you know, certain areas within auto. Occasionally, you know, I ask my underwriters to send me examples of stupidity that are happening in the market where a competitor is just undercutting for no reason at all on what is likely a challenging, you know, kind of exposure area. And I, you know, of course, get a handful of those every week.
We see something similar on uncertain areas within within auto.
Occasionally I asked my underwriters to send me examples of stupidity that are happening in the market, where our competitors just undercutting for no reason at all on what likely is a challenging kind of exposure of course get a handful of those every week and so you see kind of silly behavior, but in aggregate it feels like the.
Andrew Robinson: And so you see kind of silly behavior, but in aggregate, it feels like the market this quarter, the market last quarter, and the quarters before were relatively orderly and constructive. And that's showing through in our results. A 34% increase in submissions in the quarter is absolutely astonishing. Now, some of that's because of the talent that we brought with us, but that tells me that there's plenty of opportunity.
The market this quarter the market last quarter, the quarters before a relatively orderly and constructive and and that's showing through.
In our results, 34% increase in submissions in the quarter is absolutely astonishing now some of that's because of the talent that we brought with us but that tells me that theres plenty of opportunity. The fact that we grew by 21% versus proportional to the submission flow.
Andrew Robinson: The fact that we grew by 21% versus proportionally to the submission flow also tells me that our underwriters are doing a fantastic job of weeding through and picking out the things that, you know, really suit us at terms that suit us. So when I look at this, I feel like it's been a kind of a rational, orderly market in aggregate. You know, some of the areas that have been talked about for some period of time and the actions that folks have taken in the fourth quarter, it feels like, I don't know, there was almost an escape hatch that was created that occurred in the fourth quarter that some took advantage of.
Also tells me that our underwriters are doing a fantastic job of leading through and picking out the things that really suit us at terms that suit us.
So.
I look at this I feel like it's been a kind of a rational orderly market in aggregate.
<unk> some of the areas that have been talked about for some period of time and the actions that folks have taken the fourth quarter. It feels like I don't know there is almost an escape hatch, though was correct.
That occurred in the fourth quarter that that some took advantage of and.
Paul Newsome: And, you know, we're just trying to be, you know, more consistent, more orderly about how we're approaching things and holding onto our reserves, and allowing ourselves to have a position where we can consistently see the seasoning and the redundancy play out, and at that point, you know, we would move. Great. That's really good content.
We're just trying to be more consistent more orderly about how it is that we're approaching things in holding onto our reserves.
Allowing ourselves to have a position where we can consistently see the seasoning and the redundancy play out and at that point, we would move.
Great that's really.
Paul Newsome: I appreciate it. Thanks. Thank you. Our next question comes from the line of Bill Karkash with Wuke Research Securities. Your line is now open.
Good good context I appreciate it thanks.
Thank you.
Thank you.
Our next question comes from the line of Bill <unk> with Wolfe Research Securities. Your line is now open.
Bill Karkash: Thanks. Good morning, Andrew and Mark. Good morning.
Thanks, Good morning, Andrew Marc Hey, Bill Good morning.
Bill Karkash: Following up on your investment portfolio commentary, what's your latest thinking on the possibility of extending the duration of the core fixed income here ahead of the rate cutting cycle that most expect to begin in the coming months? You know, we're not, right now, looking to extend duration. Our duration is right at about four and has been for quite some time. Not really, honestly not really interested in extending it out just yet.
Following up on your investment portfolio commentary, what's your latest thinking on the possibility of extending the duration of the core fixed income here ahead of the rate cutting cycle that most expect to begin in the coming months.
We're not.
Right now we're not looking to extend duration our duration is right at about four.
It has been for quite some time.
Not real honestly not real interested in extending it out just yet we will see how things play out but not right now.
Mark Douglas Hughes: We'll see how things play out, but not right now. Understand? That's helpful. And separately, if I may, Andrew, at a high level, can you speak to how focused you are on the risk that some of the ENS business that you've written could ultimately move back to the admitted markets over time? How much exposure do you think you have there? I, you know, it's hard to sort of partition, and it's also about what you believe.
Understood.
That's helpful and then separately if I may Andrew at a high level can you speak to how focused you are on the risk that some of the E&S business that you've written.
You could ultimately move back to the admitted markets over time, how much exposure do you think you have there.
Hi.
It's hard to sort of partition and it's also about what you believe is at an industry event last week with some big topic of conversation.
Andrew Robinson: You know, I was at an industry event last week. It was a big topic of conversation. What I can tell you is that within our transactional E&S unit and within our global property unit, and I'd say in most parts of our professional unit, we're not writing what I would describe as kind of E&S lite. I think that the stuff that we're seeing is very sticky into the E&S market, and so I feel good about that, but that said, right, you know, the challenge around it is it's not just whether that is true E&S business, if there's less flow into the E&S marketplace, there's more competition for the business that's there, and so, you know, it does obviously have a second order effect, but I would be, I'd be surprised if, you know, if it's more than a small percentage of our business that ultimately will end back up in the admitted market.
What I can tell you is that within our transactional E&S unit and within our global property unit.
And I would say in most parts of our professional unit, we're not we're not writing what I would describe as kind of an E&S light I think that the stuff that we're seeing.
Is very sticky into the E&S market.
And so I feel good about that but that said right.
The challenge around it is it is not just whether that is true E&S business. If there's less flown in the E&S marketplace Theres more competition for the business is there and so it does obviously of a second order effect, but I would be I'd be surprised if if if it's more than a small percentage of our business that ultimately will end backup in.
Andrew Robinson: We, I would describe ourselves as a true, true E&S writer, you know, we're looking, when I give you examples, right, try to write, you know, a great example while we're being very thoughtful around where we write management liability and we're doing only private company, you want to do a Web3 risk or you want to do a cannabis risk, well that, that's not going into the standardized markets anytime that I can imagine, and it takes real expertise that, you know, tends to be the domain of a small number of people, and that's generally true across our business. That's very helpful context.
The admitted market.
I would describe ourselves as a true true E&S writer.
We're looking when I give you examples where I tried to write Great example, while we're being very thoughtful around where we are right management liability and we're doing only private company you want to do a web three risk or you wanted to do a cannabis risks.
That's not going into the standard lines markets anytime that I can imagine and it takes real expertise that.
<unk> tends to be the domain of a small number of people and that's generally true across our business.
Bill Karkash: Thank you for taking my question. Thank you. Our next question comes from the line of Gregory Peters with Raymond James. Your line is now open. Hey, good morning. This is sit on for Greg.
That's very helpful context, Thank you for taking my questions.
Thank you.
Our next question comes from the line of Gregory Peters with Raymond James Your line is now open.
Hey, Good morning. This is Sid on for Greg Good morning.
Gregory Peters: Good morning. Oh, yeah, good morning. When we look at your growth over the last two years, it looks like it's really been broad-based, but more specifically in global property, transactional E&S, and professional lines. So, you know, just hoping you can comment on the outlook from here. Should we expect the growth to be more balanced across your book? Or do you still see some more attractive opportunities and certain underwriting divisions versus others? Yeah, I there's no question about it that we will, first of all, be big believers in micro cycles, right that, you know, while the market is orderly and aggregated, as I mentioned, there are certain areas where things just aren't rational, right. And, and, and, you know, no matter how good you are, you're going to have reduced opportunities to compete there.
Yes, good morning, when we look at your growth over the last two years it looks like it's really been.
Driven broad based but more specifically in global property transaction, we announced some professional lines. So.
Just hoping you can comment on the outlook from here should we expect the growth to be more balanced across your book or do you still see some more attractive opportunities in certain underwriting divisions versus others.
Yes, there's no question about it that that we will.
First of all big believers in micro cycles right that debt.
While the market is orderly in aggregate as I mentioned, there's certain areas, where things just aren't rational.
And no matter how good you are.
Youre going to have a reduced opportunities to compete there what I'd say to you is we certainly have taken advantage of the property market. You had mentioned two areas surety as being another area that we've seen a lot of growth.
Andrew Robinson: What I'd say to you is that we certainly have taken advantage of the property market. You mentioned two areas, sureties being another area that we've seen a lot of growth. And I feel that sort of our plans for this year are relatively widespread across our business, and maybe less spikes in a particular area or particular areas. But inevitably, I think one of the sort of strong features of this organization is that we're really good at when we see a market opportunity to kind of reallocate our resources and jump on top of it. And so I suspect that, you know, while the best laid plans are sensible, they're probably not how the year is going to play out for us. And, And I'm sure that we'll reflect back on 2024 with, you know, an era or two where we had better growth than we expected. And we'll have a couple areas where we had worse growth growth because the, you know, the marketplace changed on us. I tend to find that our execution is not the reason that we're not, you know, like, we've always been very good at execution. So it tends to be more marketplace driven.
I feel that sort of our plans for this year.
Our relatively widespread across our business and maybe less spikes in <unk>.
Particular area or particular areas, but inevitably I think one of the sort of strong.
<unk> of this organization is that we're really good at when we see a market opportunity to kind of reallocate our resources and jump on top of it and so I suspect that while the best laid plans are sensible it probably not how the year is going to play out for us and I'm sure that will reflect back on 2024 with.
And air or two where we had.
Better growth than we expected and we'll have a couple of areas, where we had worse gross the growth because the the marketplace changed on us.
I tend to find that our execution is not the reason that we're not like we're always we've always been very good at execution, so tends to be more marketplace, driven but as I said I think it's more more balanced and more widespread sort of is our working assumption for this year.
Gregory Peters: But as I said, I think it's more balanced and more widespread as sort of as our working assumption for this year. All right, thank you. Thank you. Our next question comes from the line of Michael Zawrimski with BMO. Your line is now open. Hey, good morning, this is Jack. On for Mike. Oh, good morning, Jack.
Alright, thank you.
Thank you. Our next question comes from the line of Michael <unk> with BMO. Your line is now open.
Hey, good morning, Jack Entre much okay. Good morning, Jack good.
Michael Zawrimski: How's it going? Morning. Questions on reinsurance seating levels. I know there was some growth in net premium lumpiness last quarter. I guess, longer term, is the current 35% plus seating level the right percentage to think about? Would you expect those levels to fall over time?
Good morning.
Question is on reinsurance ceding levels.
I know there were some gross to net premium lumpiness last quarter, I guess longer term as the current 35% plus ceding level. The right percentage to think about where do you expect those levels to fall over time.
Andrew Robinson: Yeah, I think that for, this is Andrew, for 2023, I believe that our growth to net number was, I'm not looking at that, 62.7, I believe, in aggregate for the quarter, for the year. Excuse me, I could be wrong in that, but right around that number. And I think our general expectations are that that's a good number, you know, rolling into next year, a regional planning number. I think as you do, given our outlook for 2024, when you just run the numbers and you kind of apportion underwriting income and investment income, I think you'll sort of tie back to that kind of low-60s growth in net. Okay, great.
Yes, I think Thats for this is Andrew for 2023, I believe that our gross to net number was not looking at a 62 seven I believe.
In aggregate for the quarter for.
For the year excuse me I could be wrong in that but right around that number and I think our general expectations are that that that's a good number rolling into next year, a reasonable planning number I think as you do given given our or our outlook for 2024. When you just run the numbers and you kind of a portion of underwriting income.
And investment income I think you'll sort of tie back to that that kind of low <unk> gross to net.
Michael Zawrimski: Thank you. And then, when thinking about 2024, can you talk about how business mix will impact the loss ratio? I know that in 2023, a shift toward property put downward momentum on your attritional loss ratio. I was just wondering about it in Keller for 2024.
Yes.
Okay, great. Thank you and then I guess thinking about 2024.
Can you talk about how business do you expect this mix to impact the loss ratio I know that in 2023, a shift toward property put downward momentum on your attritional loss ratio just wanted to add any color for 2024.
Andrew Robinson: Yeah, so, implied in our view is a relatively consistent, you know, loss ratio underlying. Just sort of back out what we've said about expenses and then take out the cat and so forth. You'll, you'll find that we're broadly in line. And, you know, from a mixed perspective, we have definitely been shortening up our, our, our portfolio. So this, at this point, at the end of 2022, I believe that 49% of our business or thereabouts was what we call short duration, less than two year liabilities. This year, it's 53%.
Yes so.
Implied in our view as a relatively consistent.
Loss ratio underlying sort of back out what we've said about expenses and then take out cat and so forth youll find that were were broadly in line.
And from a mixed perspective, we have.
We've definitely been shortening up our our portfolio. So this at this point at the end of 2022.
Believe that.
49% of our business or thereabouts was what we call short duration less than two year liabilities. This year, it's 53%.
Andrew Robinson: I think that as we look forward to 2024, it might go up a little bit more towards short sale liabilities. But really, you know, there's not really much going on here in terms of mix that's driving our underlying accident year. And there's also not much going on in terms of our recognition of rate, you know, over lost cost trend going in there as well.
I think that as we look forward to 2024 and might go up a little bit more towards shorter tail liabilities, but.
But that really there's not really much going on here in terms of mix, that's driving our underlying accident year and there's also not much going on in terms of our recognition.
Right.
Over loss cost trend going in there as well. We're we're we're we're planning our working assumptions are for <unk>.
Natalie Schoolcraft: We're, we're, we're, we're planning our, our working assumptions are for something that's relatively consistent. Thank you. Thank you. I would now like to hand the conference back over to Natalie Schoolcraft for her closing remarks. Thank you, everyone, for your questions, for participating in our conference call, and for your continued interest in and support of Skyward Specialty. I'm available after the call to answer any additional questions that you may have. We look forward to speaking with you again on our first quarter earnings call. Thank you, and have a wonderful day. This concludes today's conference call. Thank you for your participation. You may now disconnect. Thanks for watching!
Something that's relatively consistent.
Thank you.
Thank you I would now like to hand, the conference back over to Natalie Schoolcraft for closing remarks.
Thank you everyone for your questions for participating in our conference call and for your continued interest and support of Iron specialty I'm available. After the call to answer any additional questions that you may have it look forward to speaking with you again on our first quarter earnings call. Thank you and have a wonderful day.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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