Question-and-Answer Session
Operator
Your first question comes from Matthew Carletti – Fox-Pitt, Kelton.
Matthew Carletti – Fox-Pitt, Kelton
Looking back to the first quarter casualty you bumped up the accident year loss ratio kind of given pricing trends and what you saw in lost costs and since then it’s been kind of a slow but steady improvement it seems both in 2Q and 3Q to slightly better accident year loss ratios. Could you just comment on what you’ve seen over the past six or nine months that has led you to bring that ratio down? What’s gone on with loss costs?
Joseph E. Dondanville
It’s basically favorable development because there’s nothing that you can do as far as making up the deterioration and the losses on price other than looking at our historical performance and that the base that we’re building off of our loss picks has continuously improved beyond what we originally estimated.
Matthew Carletti – Fox-Pitt, Kelton
So in other words it kind of lowered the bar, prior years are better than you thought and it lowered the bar for current business?
Joseph E. Dondanville
Yes.
Operator
Your next question comes from Bijan Moazami – FBR Capital Markets.
Bijan Moazami – FBR Capital Markets
This question is for Mike Stone. I’m trying to get an understanding of exactly what happened during last quarter. On one hand a lot of brokers were saying that AIG were cutting rates as much as 40% in the wholesale brokerage market and now it seems that that has somewhat cut back into normal. On the other hand, I’m a little bit worried about any increase in unemployment rate what the impact of that would be, what the impact would decrease in the stock market. Will it be under D&O losses?
And also with the November election, with Democrats probably taking over would that increase the probability of some of the regulation going the wrong way? I’m just trying to understand the dynamic of the pricing in the context of what you guys think about loss costs going forward.
Michael J. Stone
Bijan I’ll try to answer that multi-part question the best I can. I think certainly on the AIG front it’s been a bit of a mixed bag I think from that perspective. We’ve seen them be very competitive in some areas and not as competitive in some other areas. I think they’re certainly being competitive in the surplus lines arena. But they have been competitive for the foreseeable past, so it’s really not any great change there. But it’s certainly not seeing them increase rates.
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