Q3 2019 Earnings Call
29, <unk> financial results conference call.
At this time all participants are in listen only mode. After the speakers presentation will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone keypad. If you require further system press Star Zero I would now like to hand, the conference over to your speaker today Keith.
If you you may begin your conference.
Good morning, Thank you for joining our third quarter 2019 financial results conference call yesterday after the market.
We issued our quarterly release, if you didn't receive a copy. Please call me a 44123 943 zero and we'll make sure to provide you with one.
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Today's call is also available through the Investor information section Www Dot rent <unk> dot com and will be archived on Renaissance Reis web site through midnight on November Thirtyth 2019.
Before we begin I'm obliged to caution that today's discussion may contain forward looking statements and actual results may differ materially from those disgust additional information regarding the factor shaping these outcomes can be found in Renaissance Reis se SEC filings to which we direct you.
With us today to discuss results for Kevin O'donnell.
President and Chief Executive Officer, and Bob Qutub, Executive Vice President and Chief Financial Officer, I'd now like to turn the call over to Kevin Kevin.
Hi, Steve.
Good morning, and thank you for joining todays call will open with a discussion of our third quarter performance. Bob will then highlight some of the quarterly results. Finally, I will address our segments and the loss activity for the quarter before taking your questions.
This was an active period for natural disasters globally.
In September Hurricane Dorian devastated the bomb it which is still in early stages of recovery.
Japan, typhoons facts and Hagibis.
Caused widespread wind and flood damage throughout the Tokyo region.
We extend our sympathies to all those impacted by these catastrophes and are working closely with our customers to quickly pay claims, which we hope will aid in rebuilding and recovery effort.
We released earnings last night.
And we performed well given the large loss events of the third quarter.
Good morning annualized return on average common equity of 2.8% an annualized operating return on average common equity at 1%.
We grew our book value per common share my little less than 1% of tangible book value per common share a bus accumulated dividends by just over the same amount.
Year to date, we have grown tangible book value per common share plus the change in accumulated dividends by 17.1%.
Although this was an active quarter I remain pleased with the growth and profitability that we achieved so far this year looking forward I remain optimistic about the market and sustainability of recent rate increases.
Bob will discuss the estimated net negative impact of type food Hagibis on our fourth quarter results and obviously I will touch on its impact more extensively during our next call.
Hi, landfall Hagibis was somewhat weaker than fact side, but it's winfield was much more expensive.
Hi, good its tracked over much of the same territories fact side, it's angle of incidents brought it further inland for a longer period of time.
It also dropped an enormous amount of rain onto mountainous territory with some areas receiving over 37 inches in 24 hours.
This resulted in an extensive flooding devastating both mudslides and multiple Dan failures.
We think facts I will approach they $10 billion industry event, and Hagibis will be approximately 15 billion.
In total during the past two years 10, tropical psych loans have made landfall in Japan. So in aggregate, Japan as experienced upwards of 50 billion of insured loss from the recent storms.
I raised these Japanese type two losses now because they highlight several issues our industry continues to struggle with.
Climate change.
Sufficient modeling for underwriting losses creep and trapped capital.
2017, and 2018 with the largest back to back last years for insured natural catastrophes in history and 2019 this continuing the trend.
With Dorian coming within 90 miles of this.
In Florida landfall it could have been much worse.
We believe that the frequency and severity of natural catastrophe says increased our team of scientists meteorologist and engineers and or whether predicts subsidiary for studying this issue and while it is difficult distinguish between permanent climate change from transit climate variability in over ever expanding body of scientific research suggests.
But these trends are in fact manmade.
With each additional record breaking hurricane typhoon flooding fire.
The evidence.
Continues to amount that we live in a world where climate change is influencing the frequency and severity of catastrophes if correct.
This trend will not revert to the me, but we'll continue to worsen the insurance industry needs to adapt to this new reality.
I'm a change will make extreme events more frequent in more severe we can expect an increase in wind and rain rents from tropical cyclamates.
A higher proportion of storms will reach extreme category, four and five wind levels.
Level rise driven by climate change will increase storm surge and as we are currently experiencing the extraordinary trends in California wildfire will persist with an expected increase in annual Northern California burn area.
For my point of view the market is missing the point on the mounting influence of climate change on catastrophe risk.
Rather it remains focused on the impacts of social inflation, social inflation undoubtedly remains a problem, one which I have addressed on multiple occasions and for the last several years that has materially increased on model Blas.
Having had a cat social inflation makes the loss worse, but it does not make the cat any stronger or any more likely.
Until recently the damage functions, but most CAD models had not sufficiently captured the impact of social inflation and that is one of the reasons for substantial post event lost Creek I.
I believe the social inflation trends is now more accurately reflected an increase down in functions and CAD models.
On the other hand.
It is becoming more and more evident that the relatively inactive 10 year period. Prior to 2017 was an extreme outlier the current frequency and severity of catastrophic events are more typical and are being driven by climate change. Unlike social inflation climate, driven frequency and severity changes affect the hazard function of cat.
Yes, they make.
The cats stronger and more likely.
I'm not convinced that industry hazard functions reflect this new reality.
One of the advantages of having an independent view of risk is that we are quickly able to adapt our proprietary models.
Reflect this client climate paradigm for example, our internal models reflects storm surge in wildfire at levels well above all vendor models.
Before handing the call over to Bob I wanted to point out that it has been one years since we announced the TMR acquisition.
Bob will speak more about TMR, but when I think about what we set out to do I couldn't be happier with their progress against our goals in such a short period of time.
Today, the renewal of the TMR book has gone as expected and we're optimistic regarding our prospects for the January one renewal.
Moving on I'll discuss our business back to segments recent losses and future opportunities in greater depth, but first I'd like to turn the call over to Bob to update us on our financial performance.
Bob.
Thanks, Kevin and good morning, everyone.
Today, well discuss our consolidated financial performance for the quarter review our segment results.
The investment portfolio returns and then our capital activities.
Starting with our consolidated results were annualized return on average common equity was 2.8% benefiting from mark to market gains in the investment portfolio.
On an operating basis, we posted annualized operating return on average common equity of 1%.
Reported net income for the quarter of $37 million.83 per diluted common share.
Our operating income was $13 million or 29 cents per diluted common share, which excludes 32 million of net realized and unrealized gains on investments attributable to shareholders.
And $4 million, a transaction integration and compensation expenses associated with the TMR acquisition.
We had an underwriting loss for the quarter of $3 million and reported an overall combined ratio of 100.4%.
Net premiums earned for the quarter were $907 million up $375 million, where 70% from the comparable quarter last year.
With the second quarter. This growth is a combination of organic growth and the impact of the TMR transaction.
We recorded an operating income we report recorded in the operating income net foreign exchange losses of $8 million this quarter.
Well, we do experience quarterly volatility in our FX positions, our practices to hedge material exposures and year to date, our FX losses in operating income are less than $2 million.
As a reminder, we incur noncontrolling interest adjustments related to our fully consolidated joint ventures, primarily deventci Mcgeachy and Vermeer.
This quarter, we reported $62 million in profits attributable to non controlling interest compared to $6 million in the comparable quarter last year.
Of the $62 million $31 million relates to davinci.
$15 million to the DG and 16 million to Vermeer.
Vermeer rights risk remote U.S. business. So it was not affected by losses this quarter.
We did she has a cap on fund that enjoyed a strong quarter relative to last year, and finally dementia experienced $35 million of prior year favorable development, mostly from wildfire subordination recoveries.
Reinsurance recoverables were down $427 million versus the second quarter. This largely reflects collections for prior losses in the quarter.
We accrued $4 million, an income tax expense this quarter, mostly related to capital gains in our investment portfolio. We now have multiple balance sheets located in taxable jurisdictions and as these businesses generate profits, including investment income on their invested assets they will be subject to income tax.
Now before moving to our segment results I'd like to briefly update you on our operational efficiency for our direct expenses, which are the some of our operational and corporate expenses totaled $67 million for the quarter, which is down from 84 million in the second quarter, where a decrease in $17 million.
This downturn expense trend demonstrates our continued progress on synergies related to the TMR acquisition.
Adjusting for the impact of the $4 million in the transitional Tamar costs incurred during the quarter direct expenses would have been $63 million.
Moving forward once you back out transitional TMR costs, our corporate expenses are running about $10 million per quarter.
As I previously discussed direct expenses have been increasing as we invest in the business and integrate TMR I am pleased to report that the ratio of direct expense to net premiums earned improved this quarter to 7% driven by higher net higher levels of net premiums earned relative to our operational expense base.
Yeah.
And finally, here's a brief update on Tamar, where we remain on track to realize anticipated synergies on TMR expense base.
We continue to project an after tax earnings run rate contribution from TLR at least $100 million.
And by January 1st we will have renewed more than $700 million it TMR premium.
Now moving to our segment and starting with our property segment property gross premiums written in the first quarter grew by $13 million or 4% over the comparative quarter to $314 million.
This growth was driven by an increase of $123 million from other property with a large component of that amounts from TMA.
Gross premiums written in property cat declined by $110 million due to timing differences and the renewal of the large bespoke deal we booked in the third quarter last year.
In total our primary about property segment reported an underwriting loss of $8 million on a combined ratio of 101.7% in the third quarter with property catastrophe reporting 90 combined ratio and other property reporting a 116 combined ratio.
Reported $155 million, a net negative impact due to the 2019 catastrophe events.
This broke down to $103 million from Tyson facts, I and $52 million from Hurricane Dorian.
Cat losses, and also impacted both current and prior year development in our other property classes business.
20 points of the current year loss ratio attributable to Hurricane Dorian.
And the 13 points at tighter adverse development coming primarily from catastrophes.
Reported a low percentage of ceded written premium for the quarter. This was largely driven by $26 million in negative premium adjustments related to a third party capital fronting business, we acquired from TMR.
Served a decrease both gross and ceded premiums by that amount.
After normalizing for this adjustment we see it at about 32% of net written property premiums for the quarter, which is consistent with the comparable quarter last year.
I should also briefly mentioned type antagonists.
We currently estimate that it will have a net negative impact of $175 million. Our Q4 financial result, we also continue to monitor the California fires as well as the tornadoes in North Texas.
Now moving onto the casualty segment, where our gross premiums written were up $222 million were 69% in the third quarter 2019 over the comparative quarter.
This reflects a good mix of organic growth and the contribution from TMR.
We reported underwriting income of $4.5 billion and a combined ratio of 99% for the quarter.
The current accident year loss ratio for the casualty segment was 69%, which was 5.4 percentage points higher than the prior year quarter.
As you know TMR brought us more traditional casualty business with higher average loss ratios and you're seeing this reflected in the numbers as Kevin will discuss we are seeing positive rate trend in this business as we renew.
And moving to fee income were total fee income was $32 million for the quarter, we're $25 million and management fees and 7 million and performance. These.
Relative to the second quarter, our fee income was down.
Which is due to the reduction of performance fee income driven primarily by the third quarter 2019 catastrophe events in the structured reinsurance products.
Turning now to investments where for the quarter, we posted total investment results of $146 million, which includes mark to market gains of $32 million.
The return on our fixed maturity and short term investments was $98 billion and overall net investment income was $114 million.
Net investment income was down $2 million from the second quarter due to lower yields.
Of the 114 billion of net investment income roughly one quarter was attributable to third party investors. For example, the majority of the $23 million in other investments relates to our Mcgeachy Cat Bond fund.
Well, we fully consolidate the DG given our minority ownership, we only benefit Ford from 14% of its results were $3 million.
We distinguish our investment results between our managed investment portfolio and our retained investment portfolio. Our retained investment portfolio is a subset of our managed investment portfolio and only includes those assets that contribute to our net income.
As a reminder, our managed and retain investment portfolios include our fixed maturity and short term investments, but excludes our equity investments and other investments as well as investments and other ventures.
In the third quarter, our managed investment portfolio reported yield to maturity of 2.2% and duration of 2.8 years.
Assets at $15.5 billion, well, our retained investment portfolio reported yield to maturity of 2.3% and duration of 3.5 years on assets of $11.1 billion.
The significant falling treasury yields in the first half a 2019 continued into the third quarter, which has led to a decrease in the managed portfolios yield of about 100 basis points here today.
Our returns in 2019 have been strongly supported by the fallen treasury yields. Unfortunately, this near term relatively strong performance May Act as a drag on future earnings as the yield on the portfolio has declined.
For the quarter, we grew our total investment portfolio by $561 million. This growth was driven mainly by the $427 million of reinsurance collections for prior losses.
And now ending with capital management during the quarter, we increased the size of our flagship balance sheet Renaissance reinsurance limited by $250 million to bring total face capital to $2.25 billion.
Increasing the size of this balance sheet. Following in M&A transaction is consistent with past practices such as following the platinum acquisition as in line with recent premium growth.
We did not repurchase any of our shares during the third quarter. Our priority has always been to deploy capital into the business moving forward I anticipate additional opportunities to deploy capital ended the business, which is consistent with our previously stated preference.
And with that I'll now turn the call back to Kevin for more details on our segments.
Thanks, Bob.
Ill divide my comments between a property segment in our casualty segment, starting with property.
We have now passed all the major renewal dates for 2019 and the vast majority of the 2019 underwriting book has already been written.
Consequently, this into the time of year, when we pivoted to prepare for the January January Onest renewal season.
On balance we paid the positive set of opportunities.
Our client and broker engagement remains strong due to the platforms and teams we have built.
As we've discussed one of our key strategic.
Advantages is our ability to continue to deliver shareholder value under any market conditions.
Bob touched briefly on the financial impact of the recent catastrophic events and I'd like to provide some additional details related to these offices.
Starting with Hurricane Dorian in August door installed over the Bahamas with sustained wind speeds of 185 miles spin out per hour, making it possibly the strongest land falling Atlantic Hurricane on record.
Morning, and subsequently tracked up to South East Coast, eventually, making landfall in the outer banks of North Carolina.
It will take many years for the areas of the Bahamas worst it by the storm to recover and we currently estimate the industry loss will be around 5 billion.
Typhoon facts I made landfall in southern Tokyo on September nine with wins beings in the range of a strong cat too.
The wind gusts measured during its passage, where some of the strongest recorded in Tokyo in modern times, because 930000 power outages with some last thing as long as two weeks.
Were 42000 residences were damaged and as I mentioned, we currently estimate.
The industry loss will be around 10 billion.
I should highlight we are in the early stages of our estimation process for the Japanese events as I've discussed in the past, we typically take both the top down and a bottom up approach to loss estimation. Currently however, we have limited information from our Japanese customers restricting the bottom up.
Approach. We also expect that the interaction between typhoons fact died and Hagibis will exasperate demand surgeon complicate claims adjusting consequently, our estimates are subject to a higher degree of uncertainty.
We continue to monitor development on prior year event, specifically those related to 2017 in 2018.
As anticipated there has been some.
Moving on with 2017 developing favorably in 2018 adversely putting the and they were roughly offsetting and in aggregate. However, we saw a favorable development in the property segment this quarter.
There has been a lot of speculation in the market about wildfire sophistication and its expected impact on results.
We do not book recoveries in anticipation of possible separation payments, but rather wait for such payments to be more definitive.
Even if we receive disaggregation recovery however, its impact on our financial results is likely to be minimal.
Retrocessionaries benefit from separation payments, just as we do and a large fraction of each dollar recovered will likely belong to our partners.
A number of factors are positively impacting property insurance pricing.
The primary property insurance market is experiencing healthy rate increases due to enhanced underwriting discipline broadly deployed by primary markets recognizing they need rate to improve results.
Retro program losses, combined with prior year adverse development in trapped third party capital, our leading to a decrease in supply.
Losses in the second half of this year will only accelerate this trend.
This will likely result in a higher price retro market in 21.
The reinsurance market sits between these two spaces. Our view is that reinsurance rates must increase as well reinsurance price increases are lagging both primary and retro ultimately however, arbitrage opportunities do not persisting competitive financial markets reinsurance will not lag the improving insurance markets for long.
As if it does markets will further shift resources to writing better rated retro and CNS.
Until a new equilibrium is achieved.
Given these market dynamics, we expect that we will grow our in words retro book, we will grow access to Ns insurance and other property business, our core reinsurance business will realized price increases and if rates start to move up we will grow.
We will likely by less outwards retro consistent with our past practices of exposing more of our capital as rates improve.
We continue to execute on our gross to net strategy and as we contemplated or exceeded our ceded placements. We recognize we will need to pay more for our coverage.
While we maintain strong relationships with existing capacity, we are not in a need to buy position, we will offer renewal with our retrocession errors, but we'll do so in a disciplined manner.
We also have the option to sell protection and have access to multiple forms of efficient capital to do so such as our Upsilon joint venture.
As I said, if the rate environment develops as we expect we are likely to ship to be a larger seller of retro.
Our market leadership and third party capital management is a large part of the reason, we can pip pivot effortlessly from buying to selling retro. We're one of the largest managers of capital and have along and successful track record for us to cover the current environment is an opportunity.
We're already seeing a flight to quality with investors requiring managers to demonstrate superior underwriting and modeling capabilities as well as strong governance practices.
Expect this trend will accelerate in 2020.
Moving to other property, we reported 116 combined ratio another property this quarter.
Year to date, however, or other property business remains profitable.
As Bob discussed our performance this quarter was due to catastrophes. Other property is and always has been exposed to catastrophic events.
We distinguish between property cat and other property based primarily on how we take risk expected loss ratios in other property are also generally higher as we are taking both cat risk in attritional exposure as opposed to just cat risk in the catastrophe class of business.
Moving now to casualty.
We grew our casualty segment gross written premium by 69% year on year in the third quarter.
Well over half of this growth is due to the TMR acquisition.
The portfolio, which we acquired from TMR has enabled us to increase our participation undesirable business that is aligns to our risk appetite oftentimes deepening our relationships with existing clients.
The impact of social inflation on the casualty business has been receiving a lot of attention lately and deservedly. So it affects many aspects of casualty, although commercial auto and excess casualty up in ground zero with med Mal and public Dino also experiencing difficulties.
For example, the U.S. commercial auto industry experienced adverse development of over 2 billion in 2018.
With the seventh year in a row of aggregate adverse development.
Similarly, the excess casualty market is seeing higher frequency of high severity losses.
There has been.
Trend towards large us jury verdicts, which have increased two unprecedented levels individual jury awards between 100 200 million are becoming increasingly prevalent something has definitely changed for the worse and its impact is strongly resonating in the casualty market.
From our perspective.
We have largely avoided where have been reducing our exposure to the classes of business that had been most impacted by social inflation. For example, we have limited exposure to commercial auto except for.
What we acquired from TMR, which we have been actively in materially reducing.
We have similarly reduced our relative exposure to excess casualty and they constitute less than 5% of our casualty segment premium.
In 2015, we began shifting our professional liability portfolio away from public Dino and more toward transaction liability and as a result, we are more insulated from the trends in the do you know market.
In addition, approximately one third of our casualty reserves are from TMR and protected by the adverse development cover providing us additional layer of protection against both current and prior year adverse development.
We approach casualty risk with the same focus on our three superiors as we have in the property segment, which has helped us to underwrite the most.
Challenging business superior risk selection in constructing our portfolio is particularly important as well as diligence and how we monitor loss trends.
Not all the casualty risks are created equal.
It takes extensive underwriting expertise and robust benchmarking models to differentiate me differentiate among the best risks.
Results are often not apparent for three to five years or even longer.
Because of this we have invested in tools to track our performance at both the individual deal as well as the portfolio level.
These tools combined with the expertise of our underwriters and actuaries have enabled us to spot trends early and as mentioned avoid the most troubling areas.
Our integrated system is particularly critical as it takes coordination between underwriting pricing claims and reserving to identify these trends early and act on them expeditiously.
Takes many years for differentiated results to emerge in a portfolio of long tail risk and we believe our casualty portfolio will outperform over the long term.
This portfolio is well diversified but as such it is subject to risks for many types of losses. These losses range from shock losses from major disasters like deepwater horizon, where the California wildfires two systemic losses like.
Opioids to changes in inflation, which can be correlated across reserving classes.
Our reserving actuaries you sophisticated monitoring tools to determine our best estimate of reserves at any given time.
While the ultimate effects that social and solution will not be known for many years, we will continue to monitor loss emergence across the portfolio and we'll make adjustments diving ours necessary to maintain the balance of stability and responsiveness that is appropriate for actuarial estimate.
All of these proactive measures on our casualty book have resulted in stable diversifying earnings stream.
Supply and demand dynamics in casual in casualty look better now than in the previous quarter supply is constrained with certain markets cutting back and fewer oversubscribed programs. This is resulting in positive rate movement in casualty market double digit in some cases and at least equal to trend.
If not exceeding it.
We believe that we have the scale in resources necessary necessary to improve the profitability of our casualty portfolio going forward and to take advantage of market opportunities.
We are optimistic we'll present themselves.
So I'm pleased with the overall performance this quarter the bulk of the TMR integration has been completed and the parts that remains continued to progress on target. While we experienced multiple large catastrophe. These were earnings rather than capital ovens, we and our strong position going into one one renewals and are approaching the market as one company with a defined.
And consistent risk appetite I'm extremely confident.
Talented team and our ability to capitalize on opportunities in the market.
We remain committed to executing our strategy has the most effective means to maximizing value.
Thank you and with that I'll turn it over for questions.
I'd like to remind everyone in order to ask a question. Please press star and the number one on your telephone keypad. Please limit yourself to one question and one follow up question. If you have more please re queue.
Your first question comes from the line of Meyer Shields from KBW. Your line is open.
Yes.
Great. Thanks, Kevin I was hoping we could talk a little bit more about the worsening trend in casualty lines in terms of when they actually started.
Deteriorating.
And how much exposure in let's say the pre 2015 public the notebook.
Rents on path.
Sure. Thanks for the question.
It's difficult to put a specific time on win.
Trends are identified is that first they can look like just just an early start on the curve I would focus our.
Book with the growth that we were having in the book in the credibility we have because of the size of the portfolios that we started noticing things probably as early as 2015.
So I wouldn't say that theres, a specific date that targets it and it's different by line of business, where if you look back though they mentioned the classes that are most affected our excess casualty and.
Thank you you know I would say excess casualty was probably a little bit more transparent and 15, but it was a couple of large events. So that was what I would say people are referring to is the beginning of the higher frequency of high severity within the auto in the Dnos books, it's been a slower trend because the losses aren't as exceptional is what we saw in 15.
So I don't have a specific date, but it's not as if it's just in 17 and 18, it's going back from that.
Okay, that's very helpful.
And that's again quickly is really quickly. So there was more reserve release in de Vinci then on a consolidated basis is there a different schedule for when these vehicles reserves or review.
So no for dementia.
Remember that any risk thats into Vinci isn't run rates of by reviewing in run rate were de facto revealing it for da Vinci. The big difference in this quarter is the sub litigation payments that we received and the reason that those are different is because we are within those words specifically for cash.
California, wildfire and we are within a reinsurance protection layer within Renren limited. So our partners are benefiting from the subjugation payment where into Vinci, our shareholders are benefiting from the segregation payment.
Okay. That's perfect. Thank you for that.
Sure.
Again like does good question, Please press star and the number one on the telephone keypad.
There are no further questions at this time I'll turn the call back over to presenters.
Oh, we do have a question from Josh Shanker from Deutsche Bank. Your line is open.
Thank you very much. Thank you for taking my question.
I was curious if we go back to 2004 2005, when there was Charlie Ivan Francis and gene and the next year, we had read a wilma and God and country and of course, it felt for the 2006 renewals that buyers felt something hedge.
Ranged in the market and I don't know maybe you did maybe it didn't we went through a decade without any hurricanes per while so who knows do you feel the in conversations that there is a sensibility both with type.
And maybe as wild fires that something has changed in the market or at least.
I guess the fear factor is or is there any is there is there any.
I guess in terms of the attitude on buyers.
[laughter].
It's a great question I think.
Let me talk a little bit of what happened in all four to five and I'll talk a little about this is a good Mike My perspective, all for another five or coming off a quiet period wed obviously lots of storms in all four and a couple of big ones in all five with that the modeling firms came out and substantially adjusted their hurricane models and.
That was reflected through pricing and we all know what happened to the markets. After those events what we're seeing now is.
Increased frequency in the typhoon.
Who landfalls theres always a lot of typhoons going to the Pacific I think the big differences. What you touched on is fear I think there's there's an uncertainty as to why things feel different than they are and I don't have a specific reason to point to I think as time passes.
The ability to see climate change around the edges becomes more transparent. So I think that is a component of the fear factor.
I also think if you look at the wildfires and you look at what is forecast with climate change and what is occurring in California, particularly the 2017 wildfires or kind of a textbook example of future expectations. So I think there is just a general migration of opinion from it being normal climate variability to this being something more substantial and being manmade.
Climate change I think it's important for us dimension that its manmade Cline changed because if it is just seasonal just climate variability one would expect that a reversion to the mean could occur where what we're seeing is or what we believe we're seeing is that this is a permanent shift in the climate paradigm and with that there'll be no reverse.
And I mean, and what we're seeing now is likely to have normal variability, but an inflated rate.
And then do find that mode. That's your view do you find that clients have that view as well I mean, obviously you know look you have an incentive to walk through to want people to be concerned about these things do people want to be concerned about these things.
I think everybody's concerned about these things whether it's reflected in the models. This is a separate discussion.
We we two things I mentioned in my comments is that we hold our wildfire curves and our surge curves associated with hurricane higher than any vendor model. So yes, you can say that that is in our interest to do to sell but ultimately we have one view, we don't have near term medium term views at risk. We have one view of risks that we need to take.
Into account when we think about exposing our capital and it's our best estimate of what are we think the world is we think the world is that a higher level of risks and what many of the vendor models are representing.
Okay and then one quick thing you might have mentioned it earlier I apologize there are a lot of calls this morning.
Ed or shabby pick how old over the past 12 months.
So for the quarter, our JV picking a mentioned theres been some moving our JV Tech was about flat on a net basis and going through times, our net JV numbers, our net negative impact from JV has been.
There's always some of it been remarkably stable.
Okay I apologize for re ask that question. Thank you.
Appreciate the question Thanks, Josh.
Again, we'd like to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line of Meyer Shields from KBW. Your line is open.
Segments was fell off another you know if this is quantifiable, but given the floor is what is the catastrophe loss trend that emerges from from your models currently on a global basis or maybe in particularly vulnerable regions.
Let me restate the question and see if this is what you're asking is is when we look at how our models have changed over time can we described.
In the form of trend.
It's slightly different when you look at what you I mean looking at the current models that I see more are the most updated I assume that there's a level of assumed insured loss increase.
Because of the environmental factors and I was hoping you could describe that to us or quantify it.
So.
It's a good question. It's a complicated question. So what I mentioned in my comments is if you break the model into.
The hazard.
And the damage function. The damage function, we think is done reasonably well, reflecting social inflation. So I mean, if my house is damaged how much as a cost to fix it and a component of that cost will be in Florida, whether its assignment of benefits are just demand surge, we think thats in the models. The other side is how likely is a catastrophe compared to.
The historic trend and then can you measure the differences and assign it to climate change I think the the way I would think about that it's it's difficult to parse between as I mentioned climate variability in climate change, what we do and built building our models as we rather have false positives and false negatives in our model. So.
We are taking the view that what we're seeing is likely to persist and we're adding non historic.
Components to the model.
So.
Taking out a little bit more transparent and workable manner.
If you take Callow, if you take Atlantic Hurricane, We don't think Atlantic Hurricane you can simply shift the curve.
Higher loop the curve to the right what you need to do is think about how.
The variables affecting storm will change.
The types of storm, one expects to see so as I mentioned, we expect to see wetter storms, we expect the frequency of cat fours and fives higher.
That doesn't mean the category, one twos and threes increased at the same rate as the frequency of fours and fives. So it's a much more.
Nuanced way to think about it but it's one in which I think.
Recognizing if you're simply extrapolating from an historic curve, you're probably we believe there's miss factor that doesn't contemplate the way the world is changing with regard to climate change.
Okay. That's very helpful. Thank you.
Sure. Thanks.
Sure No further questions at this time I turn the call back over to the presenters.
I've done the call for many years and this is the first time, we finished so quickly so hopefully we answered.
All your questions and provided the transparency you deserve I'd like to say thank you for joining the call and we look forward to speaking with you next quarter.
This concludes today's conference call.
Yes.