Q2 2020 Everest Re Group Ltd Earnings Call

[music].

Please standby.

Good day and welcome to the Everest re group's second quarter 2020 earnings Conference call. Today's conference is being recorded and now at this time like to turn the conference over to Mr. Jon Levenson. Please go ahead Sir.

Thank you Cody and welcome to the average to regroup limited 2022nd quarter earnings Conference call.

Yeah first executives, leading todays call, our 108, President and Chief Executive Officer.

Howie EVP and Chief Financial Officer.

John Doucette, EVP, and president and CEO the reinsurance division.

We're also joined rather members of the at risk management team.

Before we begin I'll preface the comments on today's call by noting that average does he see filings include extensive disclosures with respect to forward looking statements.

Management comments regarding estimates projections in similar are subject to the risks uncertainties and assumptions as noted in these filings.

Management. They also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement.

With that I turn the call lever to one underwriting.

Thank you John.

Good morning, everyone and thank you for joining the call.

The world the struggling with the greatest public health threat in the last century.

Which has resulted in economic and great personal suffering.

At the same time individuals or why keep calling for positive social change and seeking an enter racism and then a quality.

First we stand together with our colleagues around the world against racism and discrimination.

We have an unwavering commitment to supporting diversity equity and inclusion in our workplace.

In the context at this public health economic and social environment adverse to serving our customers and providing the strength and stability, but they have come to rely on for almost five decades.

Our business is running smoothly, they're performing well and our people continue to demonstrate the passion and resilience that differentiates Everest.

The health and safety of our employees and customers are Paramount.

Im very proud of our team and very thankful for their hard work and perseverance and delivering the solid results will be reporting today for the second quarter and for the first half of 2020.

Our ability to leverage our capital position, our global platform and our success in executing against our objectives, even under adverse conditions positions us very well for continued profitable growth.

We have strong and broad base forward momentum across both our reinsurance and insurance divisions.

Our growth stems from a combination of new business opportunities, resulting from our strong financial ratings.

Distribution and diverse portfolio as well as increased rate levels and high retention rates.

Sequentially improved their underwriting profitability in the second quarter, we continued to demonstrate strong structural expense management discipline.

Our industry, leading expense ratio continues to give us operating flexibility.

We also reported significantly improved net income compared to the first quarter as we benefited from the upswing into capital markets during the second quarter.

And our shareholders equity grew to a record 9.3 billion as of June Thirtyth.

Our book value per share was $232.32 up 8% from the first quarter of 2020 and up 4% compared to year end 2019.

Our axis capital position remains a source of strength as evidenced by eight plus financial strength ratings recently affirmed which stable outlooks.

Ever assess the capital to play office in this market.

If we work to identify need for additional capital are low debt ratio gives us high degree of flexibility.

Our capital position, our focus on execution, our people and our emphasis on solving problems for our customers keep was well positioned to pursue all business opportunities that meet our underwriting appetite.

Before I, specifically address our second quarter results, let me share how we're driving to company forward.

Our focus just on sustainably growing a balanced and diversified insurance and reinsurance portfolio by line of business and geography through the relentless execution of our strategies to deliver consistent underwriting profitability.

We're nimble we report domestic we're capturing current market conditions that meet our return requirements.

The revenue side, just about creating greater optionality and diversification across our entire business.

With a broad mix of products.

Customer segments distribution and selective local presence, we're capitalizing on growth opportunities around the world and balancing the highs and lows of our industry and economic cycles.

This is why having vibrant reinsurance and insurance businesses is a key element of our strategy.

The growth of be insurance Division.

With gross written premiums now exceeding 3 billion on a trailing 12 month basis, what sustains attritional profitability is vital to greater balance in the organization.

But this growth is not at the expense of our reinsurance division.

Today, we are a top 10 global reinsurer it growing specialty insurer and we are building on these positions in this market.

I suppose we are playing offense to improve and further solidify our position with the best mix of talent products and services.

We are enhancing and sharpening the strategy and tightening de execution and operating with them.

We are deploying are sizable balance sheet and diverse capital base to expand our relevance in our chosen markets.

On the margin side the focus just on underwriting profit, we are maintaining and enhancing our underwriting results with active portfolio management strong risk governance, an excellent analytics.

We are reducing exposure in areas not meeting the right risk return profile and good dynamically deploying that capital to areas that.

Our strategic utilization of alternative capital will enable us to further diversify the portfolio.

We are focused on planes management to deliver consistently accurate outcomes with superior service.

We are maintaining our expense leadership through more efficient and scalable operating models enabled by the latest technology.

Putting artificial intelligence and natural language processing tools.

On investments, we continue to generate strong cash flows but are invested in conservative high credit quality portfolios.

Remains well diversified.

All of this will deliver growth and earnings over time, resulting in book value per share growth.

Turning to the second quarter of 2020, we demonstrated continued momentum across the group with 11% growth in growth in gross written premiums excluding the impact of foreign exchange.

The growth was broad based across both our reinsurance and insurance businesses with gross written premium growth of 11% and 10% respectively also excluding the impact of foreign exchange.

We continued to benefit from improved insurance and reinsurance market conditions during the quarter, which I will discuss in a moment.

Excluding catastrophes and the pandemic impacts.

Our I'd be in our loss provision and a small amount of associated credit impacts our attritional combined ratio for the group at 88.5 and each of our segments reinsurance at 86.7 and insurance at 93.7 are reflective of the strong underwriting performance across the group and do earnings generating power of this franchise.

Yes.

Underwriting profitability remains at the core of everything we do.

On a six month year to date basis adverse has grown 15% and delivered an 89.1 attritional combined ratio excluding pandemic impacts.

Our reinsurance segment had strong growth for the quarter, we continued to successfully execute our strategies to underwrite a high performing book of business with higher economic returns at the important April one June one in July one renewals.

We continue to see excellent reinsurance opportunities in several areas such as facultative risk.

Operating and in certain territories, including the U.S., Canada, Latin America and Asia.

This environment gives us the opportunity to better shape, our book toward deals with better terms and pricing and walk away from others that did not meet our pricing hurdles.

Traditional capital from highly rated carriers like catalyst has become more relevant and supplies tight, particularly given the more limited availability of alternative capital.

We see this favorable pricing environment, continuing for the foreseeable future, even with pandemic related economic headwinds.

Reinsurance profitability was also strong for the division with a 95.3 combined ratio, including code that impacts and an 86.7, excluding the cold that impacts.

John Doucette will provide additional details on market conditions.

Our insurance section that segments growth remained strong for the quarter with 10% and with improvement in underlying performance.

The attritional combined ratio, excluding depend demick impacts improved to 93.7 for the quarter compared to a 96 into second quarter of 2019.

We are strategically managing the insurance portfolio to build a more diversified business and steer our mix Stuart's product lines that we expect to earn higher margins long term.

The maturation of several new product lines launched over the last several years, that's what else are wide market footprint give us access to significant opportunities.

For the quarter the main insurance growth drivers were.

Strong and widespread great momentum, excluding workers comp of plus 18% and including workers compensation of over plus 12.

This is the highest overall rate change we had seen in a long time.

Insurance written rate also continues to exceed loss trend across our core PNC lines of business.

We also saw continued strength in the excess and surplus line space, we had strong renewal retention in both our retail and DNS businesses.

This growth is offset by pandemic related headwinds in lines heavily impacted by lower payrolls and lower business activity.

Turning to investments net investment income decreased to 38 million for the second quarter.

The drop was after double the negative returns from our limited partnerships, which as we mentioned in our first quarter call report on a one quarter lag.

Given the lag this drop reflects the market turmoil, which occurred in March.

The second quarter recovery in the public markets provides a basis for expecting an improvement in limited partnerships, which will be reported in the third quarter.

The amount that the recovery, it's difficult to predict given the ongoing uncertainty caused by the pandemic.

Regarding cobot 19 impacts as per our July 20, Threerd announcement, we have taken 816 million dollar loss provision in the second quarter made up substantially of IP NR.

The majority of this loss provision 130 million west for the reinsurance business.

These losses relate to event cancellation or postponement business interruption and workers compensation.

We've also increased our IP NR for allocated loss adjustment expenses based on anticipated cost to investigate and defend some portion of claims.

We are taking a measured approach to a loss estimation process that is based on credible and supportable information.

This is an ongoing event in very different than a natural catastrophe.

We are continuously monitoring this evolving situation and recognizing potential exposure based on the most up to date information available.

Our second quarter estimate was based on a refreshed analysis updated with the latest information from our clients.

While our analysis continues to include all aspects of our global portfolio.

Our estimate does not take into account legal.

Regulatory or legislative intervention that could retroactively mandate or expand coverage provisions.

Well, it's a $30 million loss provision for the second quarter in our specialty insurance business. The majority was from event cancellation and postpone and policies as the nature and duration of the pandemic has increased the likelihood of cancellations into early 2021.

Smaller portion of the insurance loss provision was predominantly loss adjustment expenses for business interruption policies.

As stated last quarter, our property follow CCEP unambiguous policy language, but requires direct physical loss for business interruption coverage to be triggered.

Additionally, the majority of the property policies in force contain a virus exclusion.

Only a very small number of policy seven door something that makes that would offer b. I cover its four notifiable human disease. These exposures have already been recognized as part of the overall I'd be in our estimate.

Workers' compensation represents the smallest portion of the insurance provision in the quarter, we have refreshed our analysis based on the industry profile for businesses, which have now been BNP essential by many states. However, this is not a significant amount.

Our portfolio has no known exposure to first responders and very minimal exposure to frontline healthcare workers.

With regard to the reinsurance loss provision we have updated our analysis based on information from Cedents and brokers.

It is important to reiterate that extra reinsurer, our analysis will be very fact specific to each situation in each contract.

We've also updated our review of our mortgage reinsurance contracts based on our current view of the macroeconomic situation.

They did flight information and our internal modeling, we remain comfortable with our exposure and with our loss reserves.

We will continue evaluating this business has the economic situation unfolds.

In summary.

First continues to gain traction and forward momentum, despite the macroeconomic uncertainty and to rapidly changing external environment.

Our operating smoothly with the health and safety of employees and their families top of mind.

I'm optimistic about our future you have a talented team a global platform and a strong capital position, which allows us to capture the improving opportunities in front of us.

Lastly, I want to welcome Mike Krimbill deleverage to the call today as you saw in our recent announcement I am pleased to introduce Mike That's a new CEO of our insurance Division.

Mikes promotion isn't acknowledgement of the key role he played into growth at the insurance business over the past several years and provides continuity so adverse can execute on our winning strategy.

It will be available to answer your questions. Today now, let me turn it over to crack to provide additional details on the financials.

Thank you on and good morning, everyone remembers delivered another solid quarter of financial results for the second quarter 20, Twond every reported net income of $191 million.

This compares to net income of $17 million in the first quarter 2020, and $333 million for the second quarter of 2019.

On a year to date basis, net income was $270 million compared to $687 million for the first half two HM.

Net income included $22 million of net after tax realized capital losses, compared to $100 million or capital gains first half of 20 <unk> team.

These results were driven by a strong underwriting performance across the group.

Stable investment income from fixed maturities and low catastrophe losses, partially offset by a cobras 19, and then wants us to min $310 million and maybe there's limited partnership investment returns.

The overall underwriting gain for the group was $51 million for the second quarter, <unk> 80 million hours for the first half compared to underwriting $393 million in the first half of last year.

The company continues to grow premium in 2020.

Year to date gross written premium was $4.9 billion EUR $646 million were 15% compared to the first six months appointment.

This week reflects growth in both segments with insurance up 20 person and reinsurance up 13% compared to last year.

In the second quarter of 20 Twond.

The company reported $15 million catastrophe losses related to the civil unrest in the U.S.

Although there were a number of loss events in the quarter, notably U.S. storm ovens, none of these events breach or $10 million catastrophe threshold and as such included in our Attritional loss estimates.

On a year to date basis, the results reflect the catastrophe losses of $45 million compared to $55 million during the first half of 21 team.

The group combined ratio was 98.1 person through the first six months compared to 95.5 person for the full year of 21 team.

Excluding the catastrophe losses and the impact from the covert Hmm and then the comfortable combined ratios were 89.1 person for the first six months of 2020.

84% for the full year 2019, mostly attributable to business mix changes that impact the attritional loss ratio.

Excluding the pandemic wants us and then the group Attritional loss ratio was 60.7% up from 60.2 person for the full year 20 million team.

Primarily due to the continued change in reinsurance business mix.

For the reinsurance segment, the Attritional loss ratio, excluding the pandemic loss estimate was 59.0 person up from 52% for the full year 2019.

This increase was related to the continued shift towards more pro rata business, which requires a higher wants there when allows us to benefit directly from the phone in primary market.

Pro rata premium is less volatile than access premium and we will see the benefit earn into our results as we left the loss picks season over time.

When the insurance segment, the Attritional loss ratio, excluding the impacts from a pandemic was 65.4 person down compared to 66.0 person for the full year 2000.

The U.S. franchise, which makes up the majority of our global insurance business.

Seems the run and Attritional combined ratio in the low ninetys, excluding the pandemic loss estimate.

The good commission ratio of 22.4 person was down compared to the prior year due to business Miss and working ceding Commission received insurance segment.

Group expense ratio remains low at 5.8% in second quarter and 6.1% for the first half of 20, Twond Moneygram expectations.

During the second quarter, we saw reduced expenses for new hires travel entertainment and conferences.

I'm loss reserves, we completed several reserve studies during the quarter relating to some smaller classes of business.

Overall indications were not material enough to warrant any action on new studies during the second quarter.

For investments pretax investment income was $186 million year to date on or 21.6 billion dollar investment portfolio.

As one mentioned in his remarks investment income in the second quarter was impacted by $88 million alumina partnership losses.

The fixed income portfolio remained stable and produced $272 million of investment income year to date.

So the $253 million for the same period last year.

The pretax yield to maturity on investment portfolio was 3.4% stable compared to 3.4% one year ago.

We've been able to maintain consistent yield to maturity without a dramatic shift in the overall investment portfolio.

We are expecting anything on asset allocation and conservative well diversified high credit quality bond portfolio with conservative duration.

For investment grade portfolio, the new money rate was 2.7% for the quarter.

Other income and expense included $24 million, a foreign exchange losses during the first six months of 20 Twond.

On income taxes.

Year to date tax benefit of $14 million included a $31 million tax benefit related to the carriers that we reported in the first quarter.

Excluding this benefit the effective tax rate on operating income was 11%.

And with our expected tax rate for the full year.

Positive cash flow through things with record operating cash flow $1.1 billion for the first half of 20, twond compared to $854 million in 2000 team.

This increase reflects our growth in premiums and a lower level catastrophe losses in 20, twond compared to 20 million team.

Shareholders' equity for the group was $9.3 billion at the end of the second quarter, a new record forever.

From $9.1 billion at year end 2019.

The increase in shareholders equity in the first there are 2020 is primarily attributable to the $207 million as net income and the significant recovery in the fair value will be investment portfolio.

Mark to market impact on the fixed income assets improved from an unrealized loss of $248 million in the first quarter through an unrealized gain of $545 million in the second quarter 20 Twond.

Evers continues to maintain very strong capital position with industry low debt leverage in high liquidity and or asked investment portfolio.

Thank you now John Doucette will provide a review of the reinsurance operations.

Thank you Craig good morning.

Having now finished our June and July renewals, we are increasingly optimistic about the reinsurance market in our position as a global provider of reinsurance solutions.

The flight to quality by reinsurance buyers continues and highly rated reinsurers like Everest with solid financial strength and global underwriting capabilities will do well in this market.

The expanded opportunities that allowed us to improve our portfolio across virtually all geographies and classes of business.

As was stated earlier adverse market positioning combined with healthier market conditions led to strong growth in gross written premiums for this quarter and for the first half of this year.

For net written premium growth was even higher at 15% for the second quarter as we retain more business given our capital strain the improved underwriting environment.

And the shifting economics of retrocession purchases.

Overall, we have a larger and more profitable portfolio than we did last year.

By many measures of risk and return the expected performance of writing this year is improved versus the expected performance of the lashed underwriting year.

Our portfolios growth has been broad based with significant contributions from our Frac of global facultative operations.

What you're seeing large increases in submission activity and strong pricing trends encouragingly rates are increasingly.

Increasing strongly even in markets with sufficient capacity.

In terms of property cat market conditions overall remains strong, particularly at peak zones and recently loss affected areas.

Cat renewals in Florida, and the U.S. generally experienced double digit rate increases with higher increases on loss affected business, leading to higher expected margins and profits.

In our Florida Cat book, we wrote more premium versus last year, but with less exposed limit.

As a result of our underwriting execution and rate increases are expected dollar margin for Florida is meaningfully higher.

We also refocused our capacity on fewer core clients.

Regarding our global property portfolio, we executed our plan.

Expected profits grew considerably as we retained more economics due to a smaller outwards retro spend.

However, we maintain hedging capacity through Mt, Logan and our catastrophe bonds.

Across our peak cat exposures are net PML increased mid year relative to January snap PML, we're reflecting our plan to capture this markets improved profitability.

The net PML increases are predominantly further in a tale of the distribution.

Competition from high less capacity was less pronounced during the midyear renewals due to investor frustration from multiple bad industry cat loss years adverse development and trapped capital by several iOS managers.

The retro market is favorable for sellers and as a net seller of retro we captured strong double digit rate increases.

And demand from recurring retro buyers remains robust.

We also deployed more capacity in property pro rata business with original rate improvement and tighter occurrence caps.

Well priced cat exposure of this class contributed somewhat to the increased PML.

The casualty reinsurance markets are also improving directly from increased access rates or indirectly as original business rates benefit pro rata deals.

Excess casualty rate increases generally range from single digits, two well into double digits varying by Seaton and product.

Casualty ceding commissions improve slightly.

Well the casualty market improved we still walked away from some large renewals priced below our return requirements.

Nevertheless, we have several compelling opportunities to partner with our global client in several classes of business either through new deals brought to the market or increase shares on improve or no.

In Australia, and Asia market Firming continued through the throughout the year.

With earlier renewal rates, increasing less than later renewal rates fortys midyear renewals more business Metro return hurdles and we wrote more premium accordingly.

Our long term relationships in Asia cultivated over the last 30, plus years allowed us to capture better opportunities.

And in times like these those situations become more pronounced.

Likewise quality underwriting opportunities presented themselves in Canada as rate increases were achieved across several different lines of business in both factoring treaty.

Therefore, we have been increasing our shares on several Canadian programs.

Finally, some comments on our mortgage book, we remain comfortable with our exposure loss picks and loss reserves on our mortgage writings.

Majority of our in force mortgage business will not be impaired by the pandemic unless housing fundamentals and post economic recovery unemployment deteriorate significantly.

This is in part because of our generally high attachment points, and our conservative underwriting and pricing of mortgage.

Also unlike the primary mortgage insurers, we as a reinsure can and do book significant I'd be in our reserves.

In summary, disruptions facing our industry and our personal lives create uncertainty around the future of many businesses and economic sectors.

As a leading provider of reinsurance solutions, we maintain a strong position to absorb volatility.

And diversify that uncertainty for our clients with our robust balance sheet global presence and capital resources, while generating solid returns for our shareholders.

Thank you and now I will turn it back over to want.

Thanks, John.

I feel good about the direction of the insurance into reinsurance market and I am pleased with our execution in our momentum.

We have grown our premium by 15% than the first six months of 2020.

Our first priority is to profitably deploy our capital for organic business growth Im just hardening market environment, we continue to find ways to put our capital to work that we see strong opportunities ahead now let me turn it over to Jon Levenson to open it up for your questions.

Great. Thanks, one Cody I see we have a number of participants in Q can you. Please open the queuing it.

Absolutely if he'd like Cascade question pretty Sigma pressing star wondering your telephone keypad, if you're using a speaker phone. Please make sure that your mute function is turned out to layer signal to return equipment.

And then start one if you like to ask a question.

Well first pick a question from makes eminent ski with credit Suisse. Please go ahead.

Hey, thanks.

First question.

I appreciate all the the color regarding the the cold and losses that were booked I'm curious you know you know look a lot of questions from investors about how to think about the covenant that going forward and I know it's complex given earlier losses are on our.

Coming through the reinsurance division, but in regard to your conversations as students you know to our some of them anything that there's likely to be more losses trickling in during the back half the year as you know the it's very complex situation as is further assessed or nine out of some some insurers and think mostly primary insurers are trying to.

So to say that you know they think they kind of had most of their loss picks.

On buckets.

Things get materially worse that he called me.

Yeah, Mike. Thank you. This is a quantum dry to look I think we have a very solid estimate based on what we know today, we have a good process that is under lied. The estimates really from the beginning of this crisis and we certainly talked about it than in the last call.

All that being said you know this event is still under way right.

The crisis is still ongoing and much of this is gonna be determined by the the length of this crisis as well as by any actions that are taken by governments along the way so I think in that sense.

The race there is some uncertainty as to where we're at the losses, particularly on the reinsurance side May go as Cedents are still trying to grapple with their own numbers.

And essentially come up to two good estimate now, but again I would say from from my perspective, we do have a solid estimate based on what no and that's certainly has been de I'd be approach into perspective, but we have taken from the very beginning and as we have more updated information, we will be updating that as well.

Okay, Great My last follow up question on.

It was regarding your op outlier low leverage level and I think you know we appreciate.

You guys are playing offense clearly can see assets.

PML came up a little beds, but still kind of well below historical levels, how you're seeing you know certainly participants in the industry other raise debt equity new startups.

So as your thought process change in terms of the opportunity cost at holdings.

A lot of excess capital is it isn't changing or is it kind of plan kinase. So it's just you know, let's keep kind of trying to grow the topline in excess of are are you know hourly lots of dividends and we'll just kind of use up our success over the coming through five years that way.

Yeah. So let me start and then I would ask Craig Howie to jump in as well like what I would say, it's our capital management philosophy hasn't changed.

I started out with the fact that we have more than ample capital to deal and face off with the opportunities are in this market today and I think you see it from our numbers like that we've been very forward leaning and being able to to continue to grow in this environment.

We also had a very low debt leverage right. So as I mentioned in my remarks to the extent that we see any opportunities that that that are relevant for us it or accretive for us.

At that point in time, we have the flexibility to to increase our capital, but as I sit here today look I feel very good about our capital position. We also have over 13 billion in deplorable capacity right. When you think about policyholder surplus plus what we hold and in our bonds what we hold in May.

Out Logan et cetera, et cetera, we have plenty of capacity to worked with in this market. So from that perspective, you know our philosophy continues to deploy capital into this market, particularly given the favorable conditions that were seeing right now the crisis or anything you would add.

When I think you covered it I do think that just just to state the obvious that if we didn't want to go our balance sheet, we have sufficient low leverage in certainly one of the lowest that leverages an industry to be able to do so.

And so the would do if you had to put.

More capital work are you really more towards reinsurance in the near term or or or primary insurance to deploy that they access.

Yeah. It's a quick question that Fortunately were when a pretty good position right in the sense that that you don't have to to choose which of your children. We like most.

We see opportunities in both sides right and so you know I think its desire to collated in John to set articulated we're seeing some really good opportunities on facultative aside some very good opportunities in property as well.

All of that being said you also heard from John but we're being very disciplined so if things do not meet our economic return criteria, we will walk away from it just like what we did.

Some of the recent renewals, but we see plenty of opportunity to deploy capital there. The same thing in insurance. Bob you know you saw the growth like there, we see great opportunities and property, both wholesale and retail we see very good opportunities in excess casualty see very good opportunities and do you know so right now because of our capital base.

We are looking at where we can play offense in this market and deploying our capital that way. So we can grow and essentially take advantage of the favorable conditions.

Thank you.

Thanks, Mike.

Thank you romantic our next question from Josh Shanker with Bank of America.

Yes. Thank you for taking my question and good morning, everybody.

So I thought you took the PML of of course and falling on what Mike was saying is there any change in the cat load guidance and if we think about next year. If things go the way you want them to go all.

Where would you ideally walks resetting your PML in your cat load guidance, what with a healthy market and healthy PML in an attractive market for cat our protection.

Yes, Josh this is one so for for this year, there's no change in our cat load from that perspective, but let me ask John to set to up to speak to up to the pm outs.

Yes. Thanks, one thanks, Josh for the question.

So.

You know as I mentioned in the script, we have seen opportunities and as we are putting the investor presentation. The PML is our up now southeast wind is 7% of equity up from 5.7, and really it's going to be a function of the out of what we see a in the market. You know we expect we we'd like for.

But we were disciplined we did a shed some clients and nonperforming accounts that didn't meet our return thresholds and that that was true at July one as well and we expected to be true at one one so we do expect to see momentum continuing into one one and beyond.

We think it's a great market to be a seller retro we are top two seller retro among rated reinsurers and as want alluded to we have the capital across the Kilimanjaro bonds slogan and of course, our common equity and debt.

I have the capital and flexibility.

To write the book that we see that's in front of less than what the market gives to us, but we do expect to see robust demand in one one named going forward.

Okay, and then a little a education in casualty pro lot of risk.

If I may feed and I have a pool of risk that I'm raising prices on and I think improving margins on when I negotiate a treaty with a reinsure to protect me from some of that business. Okay, maybe I need balance sheet protection or not or is it say balance sheet I'm just not big enough.

Our doesn't give me more profitable next year, so we're going to raise the ceding commissions on him to what extent them and if they're feeling on how much profitability you can receive in a rising rate environment for risk.

It.

It's sort of tempered by the ceding commission being charged for improving profitable, but profitability on that thing right.

Yeah. Thank you that's great question and I think first principles. That's why we're agnostic to the form that we take a when taken reinsurance or ask whether that's casualty property specialty.

Mortgage we look at it across you know when we look at it as to how we want to deploy capital and that will vary by product and likewise, our clients will look to see whether they want to do things on a up a proportional basis and access basis excess of loss per risk spaces and that varies some of them all well will change that overtime, but that's why.

In my in my statement in my comments I mentioned that you know the casualty market, we're seeing improving but we're seeing a you know we're seeing a little bit of improvement in ceding commissions given that the market that we're in but we are seeing a lot more the benefits coming through the original the primary rates on the insurance operations.

So you know and it also I think it says we need the remember that there were a whole lot of clients out there.

Right right their business using different capital levels and some write some have a capital a lot of capital support that that gives them flexibility, whether they do something potentially on a pro rata basis or an excess basis, but then a lot of our clients around the world you know again, they they don't have a lot of capital and so sometimes things.

<unk> to de lever their premium and so they do need to buy proportional treaties.

And you know unmatched that's when you ask that's international that's been Lloyd.

No were a little very again by line of business and that that gives us the opportunity by having the ability to dynamically allocate capital by line by territory and byproduct excess of loss or pro rata. It gives us the best chance to capture what we see as the opportunity in front of us profitably.

Well good luck in the renewals next year.

Thank you very much Josh.

Okay, well take our next question from your own cannot always Goldman Sachs.

Thank you good morning, everybody suffer first question I do want to go back to the capital.

Raise question.

It sounds like easy environments are very constructive one and then you see it probably would like going into 21.

So there's a decision to not lose capital today.

I'm, just trying to understand how that fits and could cause us concern.

They do not see sufficient opportunities to.

Deploy capital that that you would raise it was a market not attractive enough.

I guess, a one point.

What would make you want to raise capital now that you're not seeing today.

Sure you arent that show. Thank you for for the question. This one looks at number one I would start with the fact that for US. This is a dynamic process right, we're always sort of assessing.

You know a capital our needs the environment, that's sort of thing so it's not a a fixed point in time, it's it's a very dynamic discussion that we have within the company.

We find the current opportunities to be quite attractive and hopefully you saw that from frankly, the bullish nature of my comments and dose of Johnson said on this call I think you see that from from the growth rates and how we're managing to up to execute on the opportunities that we've seen in this market.

But our position right now is look I mean, where we sit.

With the capital that we have right now we feel that we have more than enough to be on offerings in this marketplace.

On like others, who have had to raise capital for defensive purposes, we're not in that situation right. We're actually you know in a good place right now now I could say in my remarks that that this environment this very fluid.

And if we get identify opportunities that you see that are accretive.

To our bottom line that we certainly have to flexibility to be able to do that but.

Again, I wouldn't like for like to see if he's got any additional thoughts on that.

Yeah, one I agree if you're going to raise capital it should be accretive and certainly you know timing comes into play as well if you're raising equity capital certainly the earlier in the near was a good time to do it instead of waiting towards the election times, but we didn't need to raise equity capital.

We didn't need to build scale, we already have the scale, we're not trying to fund M&A at this point in time, and we're not trying to replace retro coverage at this point in time, so certainly as as the market changes are we still have flexibility, especially with respect to or that leverage.

Okay. Thank you.

And my second question with regards to reinsurance covered losses can you maybe explain what's the difference is between being fact specific to each situation in each contract as opposed to falling before chip Mike what's the distinction there that you're making.

Yeah, you aren't happy happy to talk about that look every contract is gonna be different right I think unlike that natural catastrophe, there's gonna be hours closers can be bench definitions, there's going to be different attachment points et cetera. So that's really been when we say that that's what we mean, it's that this is not a fantasy.

Yet and we're going to look at each contract by to make by its nature by its merits bites on facts and that we will make got claims adjudication decisions based on that.

And that's not the same as phones the fortune.

Well I think following the fortunes would imply that.

Essentially any lost that your Cedents report, that's being pulled that loss.

With the automatically accepted and essentially what I'm, saying, what we're saying as a company is it's very fact specific and that will be put against a contractual requirements and have already in each of our contracts.

Okay. Thank you.

Okay.

Thank you when they move onto our next question from at least Greenspan with Wells Fargo.

Hi, Thanks, Good morning, I answer the question a follow up and it's happened inside a thing no way that you can kinda like like I know you pointed to right you have your own common equity Logan Kilimanjaro that help you know some quick easy right in saying what seems like a really strong marketing.

2021, but can you give up then on your parent capital base right.

Moving on more easily.

Sounds like we're holding off on that all the time being how much well on.

UBS went on its own capital base today, and when it's going to one.

Sure I would ask Craig how we too on the answer that.

Well a reason it depends on which capital measures are working and right now we feel as though we can grow both sides of our global reinsurance and insurance with the capital base that we have today and that even goes into looking forward to one one renewals I'm on the reinsurance.

Basis. So that's why we feel as though given the market given where we are today that we have enough capital to not miss out on any opportunities in the current market conditions.

Okay. That's helpful. And then my second question I'm elaborate side.

I pointed out here I'm going to Robert I think you're hearing that turn it on you know internal mark.

Got you know him and I guess and that answer how by with the rating agencies.

ELAPRASE, who opt out provide maybe anyone from again I'm not that you guys provided earlier anything.

Right Craig.

Yeah, so at least with respect to our leverage you know certainly from a rating agency perspective, where what they're doing currently right now is allowing people to increase their current leverage as you know we're closer to 6%.

We could have easily grow that capital to 20% leverage without any question are concerned at all or most of our peers are in the 20 and upwards of 30% range. As you. All know so from that standpoint, we have plenty of room to grow and extend that leverage.

As far as the Logan and use them a question or loading and even a was we were able to grow.

The when a slightly this quarter what it is down from yearend.

$800 million.

Thank you for the time.

Yeah.

Thank you for them to take our next question from range.

On this research. Please go ahead.

Hey, Thanks, good afternoon. So.

So I'm actually interested in John do you sense perspective, because I wouldn't think look you know is going on looking at slide 15 at that site would be driving you're not just because you've been here either levers for years, and then 15 16 17 18.

The PMO is double digits and pricing was a lot worse in common sense shows that you want your pianos to be better or higher when pricing is better and now they're all in it and sentence I guess a question is like.

What's the lesson here was it too high back again or you know are are you more in the cap of I'm chomping at the debt to deploying more capital at this moment because this is when you really want to being you know quite a bit higher in terms of being off.

Yeah. Good morning, Ryan Thanks for the question so a couple of things so.

What we've been saying for awhile is that we want to you know we're not just the one trick pony within property and if you rewind. The tape you know a property our view that property was a it was more attractive on a relative basis than some other lines and you talked about being more bearish on casualty than some of our competitors. So what we've seen a couple of things. He we have seen.

Property improvement in property prices, we've all seen improvement in in casualty as you know we've been growing out our mortgage book substantially we're seeing a.

Nice increases and opportunities and specialty lines of business and so we're deploying more capacity along the way there and really I think you know what we're trying to do is is capture what we see as the opportunity in front of US. We've also talked about on prior calls kind of an elevated risk that we've seen.

In a social you know when you think about social on placement and things in Florida tied to like assignment of benefits and climate change and other risks that also have caused us to make sure that we're deploying what we view as the right amount of capacity fill accommodation answer that elevated the return requirements that we needed.

To deploy a increase capacity and again, our view as to what we head into one one we expect to see a robust January 1st, particularly in Katich, a peak selling cat and retro a and we'll deploy capacity accordingly, so what we'll do it but will also be we'll do it based on what the market terms conditions.

There are what the clients demands are but will also be looking across all lines of business in territories to really build the best book we can.

Thanks, and then just one follow for water on the insurance side.

You said in the press release that you know prices exceeding loss trend, we're seeing we see modest improvement of the underlying combined ratio in that business.

It's probably not Arithmetically, what you think it would be given the level of way, we're getting so I guess how would you describe.

I guess the cadence for the pace of margin improvement, we're seeing the insurance relatively modest rate. Thanks.

Yes, Thanks, Ryan look what I would say is you know we're definitely seeing.

Loss trend.

Yeah and essentially.

Below our written price change right you were like you're seeing a lot more rate right now in a head to head up trend and that's a good thing.

That being said, though we are also keeping our loss picks up and conservative.

Given the environment than all of it strikes or why you're seeing right ahead of loss trend and frankly, we're seeing some frequency benefits on some lines of business.

At this point in time, we think it's just prudent to up to maintain the loss picks where they are and so over time, you will see that margin improvement and so that's basically how we're looking at that.

Thank you.

Thank you don't want to my next question from their shields with KBW.

I think one set with one I get basic question no. We currently have an estimate for losses from the baby exploration, but help me think about that impacting dairies insurance and reinsurance markets.

[noise] I'm, sorry, my I couldn't hear those the first part of your question.

I was trying to get them in terms of Directionally, when you've got something like the Babe Ruth explosion, obviously far too early for any estimate of losses.

But should we think it gets as an enter into them for reinsurance today.

Got it so if we're looking at that had a root specifically I think as you pointed out looks like it's probably too early to tell you know we are at local company and I would expect that we will have some loss out of that I would expect the loss. If it comes it would be more on the reinsurance side than on the primary insurance out at least for us.

First.

Okay. Thank you very helpful.

I'm getting a couple of questions about the modest adverse reserve development in insurance segment, there was hoping that either one or Craig could kind of thing but for them.

Yeah sure, but this is one my are you happy to talk to you thought that Bob number one it's it's very small right. So it's less than 5 million Dollarss and it's really an increase on a specific large loss that came through into quarter in aren't being our international insurance operation. So.

It's not a meaningful from that perspective and that as you know our reserving philosophy has been that we react quickly the bad news and frankly, we felt the prudent to recognize stuck in this quarter and recognize that developed.

Okay.

So it is different than actual loss emergence instead of a and disciplined.

Okay, and then pharma pessimism in a quarterly numbers anymore bounce around a lot that the within insurance. The other specialty line was down year over year is that a more economically sensitive line than any other specialty line.

Yeah, Let me add that's my current two did jump tend to give you a little bit of color on that as well so Mike.

Sure.

Thanks to the question.

That actually she is definitely an economic impact that business, usually is transactional list, which is M&A, which is obviously impacted by by the code and dependent make and then another lines in the credit side. So some of those actions. We actually were delivered a in actually slowing that business down given what's going on with the pandemic antenna can add to the credit markets.

Okay, that's up I think you're going to us.

Thank you and move onto next question from Brian Meredith, Yes.

Yeah. Thanks, a couple of here wanted just to clarify I think he said in response to end question did you didnt take any frequent to benefit Macquarie either on complex retail property lines insurance segment.

Yes, sure that that side, that's correct, Brian we're not taking any frequency benefit in the quarter.

For any of the lines of business, where we have seen lower frequency so far this year.

At this point in time, we think that's pretty mature in a recent for that is pretty straightforward. While you do see planes counts down in some line should business like commercial auto and some workers comp opt in NGL exposures for all sit down which also result in premium refunds right. So the impact on severity less there yet.

So I think you really need to look at longer term averages.

Because some of these frequency decreases may be temporary and we don't know what the bounce back is gonna be once the economy's fully the open.

Got it makes sense I guess, how does that answer that it just curious one could you give me your perspective on 'cause it stays in place and kind of currently looks like is it your outlook is here as the economy reopened and with respect to that is there anything that you can do right now with contract mortgage insurance space, you know two to potentially mitigate.

You know pull that 19 related planes here going forward.

Yeah no absolutely. This is something that the frankly, we have been up all over.

From the very beginning of this crisis and give a lot of credit to our corporate underwriting teams and our chief underwriting officer, so on that.

Looking in this is consistent with what I just said about frequency I think is as the economy begins to reopen again, you know a lot of the out the trends indicators that were there prior to the pandemic. The frankly gave rise to up to some of the rate increases up we're seeing now across the board are still going to be right. So that that hasn't gone away but.

We have taken a number of actions, whether it's been pushing rate tightening terms and conditions, revealing contract Wordings. We've also been putting pandemic exclusions in place across the board. We've also got drunk capacity from certain territories certain product certain lines of business that the frankly, we were uncomfortable with as far as it was.

Hi assessment for the public stuff is being granted and you know us as you just asked on on the other question regarding other specialty insurance were also remain cautious on certain economically sensitive line. So we've taken a pretty deep and thoughtful approach to our underwriting from the very beginning of this pandemic opt in order to provide protection.

For the book going forward.

Great. Thank you.

That's right.

Thank you we'll take our next question from Stephana with Deutsche Bank. Please go ahead.

Yeah, Thanks, and good morning.

I was hoping you could talk about the reserving process for the cobot charges on the insurance business.

I think one you have mentioned in your opening remarks that there. There's some events into 2021 day or contemplated. The maybe you can just give us a flavor look one of the the timeline and how you're thinking about reserving.

Yeah, absolutely look I would tell you that the estimate that we have on the insurance side is a solid estimate as I mentioned before particularly for event cancellation type policies. We are looking into early 2021 at this point in time and this goes back to one of the questions I was asked earlier about.

You know about the the nature of this event in what I mentioned, which look this is an ongoing event than a lot of this will depend on the line in shape of it frankly, but on contingency we're definitely looking at that early 2021 at this point in time.

And so the reason I asked him to follow up then it leads to the reinsurance I don't have I'm getting the impression on these calls first quarter and probably the most of second quarter that automakers are on hobby a different feel for how far they are allowing people to look in the reserving process.

On the reinsurance book when you how conversations with TV is the horizon, they're allowed to contemplate any way complicating your ability to reserve on the reinsurance sites. How are those conversations going in is the time or you're contemplating a reinsurance really different than me.

The insurance side of your book.

Yeah. So let me give you my thoughts from Adam and I would ask John to set to jump in as well.

So look I think the process has been very similar from the perspective of of the detailed discussions that we've been having with our cedents, we've been having with brokers tried to understand the book of business. Obviously, the difference being that that want to reinsurance side. It's a much more global book you have some very large.

And since we're still trying to grapple in some ways as you would see into a lot of recalls.

With their own exposure and so from that perspective on the reinsurance side, you do get a bit of a lag as far as the information is concerned that with some of this information, but I think as far as the time horizon is concerned.

Conversations with the seasons have been you know they're looking at at similar time frames through the end of this year beginning of next year, but John I didn't know if he would like to add some color to battle. So.

Yeah, Yeah. Thanks, one and as you said there clearly is is a information a lag in terms of when the reinsurers here things plus a everybody has to go look at the contracts in terms of how well you know again going back to contract specific facts specific one of the retention clauses, what one of the retention for the Dallas clauses what are other.

Terms conditions exclusions that are in the contract and I think that just takes a while to understand and and and again and our clients again it varies by territory. What the original wording is and so there's a lot of moving parts that that really result, and this as well as as we've said this beaming with ongoing event that it makes it a lot more.

Complicated, but we feel comfortable based on all the information we have today.

With both the process that we put in place to identify as well as what Weve of what we have booked again given the information we have today.

Yeah. The last thing that I would add to that is remember the he is set to be assessments. We have out there. There are really management's best estimate and what the waters will review is really the approach on her management that essentially achieved those estimates.

Got it, but frankly, I hope everyone could lead to them.

Okay. Thank you.

Thank you and I think a follow up from Mike There Minsky with credit Suisse.

Okay. Great. Thanks, just two quick follow ups [laughter], any California wildfire subrogation benefits. This quarter are expected and also just wanted to confirm regarding the mortgage insurance book I believe you said that you know losses and boring booked.

Unless you know that situation deteriorates or start or did you say that there was some hyping are put out but you don't expect kind of losses unless things deteriorate.

Yeah. Thanks, Mike Let me start off with mortgage first and then I'll ask Craig to talk about the supplication question, we have not put up any estimates for mortgage because we don't think we need to we think our loss estimates and we think our reserves are are fine more than adequate at this point in time. So we have not put up anything for for the mortgage book.

Right.

With respect to the California wildfire subrogation, a first of all on the reinsurance on I will see a lagging reporting from our season, so not the beginning settlement.

Just happened this quarter I'm. So it will take some time before it gets reported to us.

On the insurance side, you don't expect much subjugation at all since we got very few losses related to the California wildfires in orange or insight.

Oh, Okay. So from the reinsurance we can can you kind of look at what the.

There are lot, we can see like a losses were under six back a certain percentage would that potentially come back in the coming quarters.

Well, it's just kind of someone else's huh.

Well it depends on the beach each season and it depends on each contract that we have with them and how much coverage, we had with them and then they will report back to us depending on what their settlement was.

The teachers use.

Yeah. This is John I, just wanted to add to it so it very much as a function of what was their gross wildfire loss and then where to their reinsurance you know what what is the attachment point in the limits. So you know some of it it could meaningfully impact their ceded losses in some cases, you could have no impact on mercier losses. So we're really in a wait and see as Craig said waiting for.

I see what what the settlement if any was and what they report as the benefit to the reinsurers and when and if they do that we'll we'll book that into our numbers.

Thank you.

Thank you pick our last question from my Josh Shanker again with Bank of America.

Oh I walked out. Thank you very much a this is probably easy and are probably not trying to say kinda talk anything about the insurance or reinsurance markets in Lebanon.

Given the news last week, and how we might want to thinking about that.

Hi, Good question out my last may be John to set to start off them on to reinsurance side.

Yeah. So I mean again very early days.

It's small market and we're looking at what that what they can first we're looking at what the coverages are that are offered in the region. So far a you know some of the brokers have come back with you know some of you know a modest coverages that are there.

And really where you know we're still you know it's it's too early to tell in terms of what the ripple effect is both for the building. The specific building that was at risk. But then also the broader you know the territory. They neighborhood that was impacted around that so you know frankly you go we're looking at it but are you.

You know, it's a it's a relatively small market.

And is your exposure in line with your global market share.

Where worst we're still assessing that we don't have Oh, we certainly would expect it to be but it does vary by territory, but we don't have any reason to think it wouldn't be.

At the yet I think it would be helpful to add that indigenous exposure would be de minimus right I think any exposure from the company really would be on a global treaties from tillable seasons that sort of thing.

Correct.

That makes perfect sense. Thank you for the answers.

Thanks, Jos Bank and that does conclude or question answer session I would like to turn the conference back over to management pretty addition of closing remarks.

Great. Thank you and thank you for for joining US today, and we look forward to continuing to discussions next quarter, but before I. Let you go just echo what I said earlier, we feel very good about about where ever stands right now we feel very good about our traction or momentum in our ability to execute in this market. So thank you for for your.

Sport for your questions and I Hope you stay safe.

[music].

I think that does conclude todays conference think of it participation you may now disconnect.

[music].

Oh.

HM.

[music].

[noise] among [noise].

[noise].

[music].

[music].

[music].

Welcome to <unk> second quarter 2020 earnings Conference call Today's conference is being recorded.

No.

Sure John.

Got it.

Thank you Cody and welcome to the Everest re group limited 2022nd quarter earnings Conference call.

Yeah first executives, the leading todays call or.

<unk>.

<unk> <unk>, Chief Executive Officer, Craig Howie <unk>, Chief Financial Officer.

<unk>, President and CEO the reinsurance division.

We're also enjoyed rather members of the average Badger King.

Before we begin I'll preface the comments on todays call by noting that average does he see filings include extensive disclosures with respect to forward looking statements.

Comments regarding estimates projections and similar a subject to the risks uncertainties assumptions as noted in these filings.

Management. They also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement.

I turn the call lever to want underwriting.

Thank you John.

Good morning, everyone. Good thank you for joining the call.

Well the struggle with the greatest public health right in the last century.

Which has resulted economic and great personal suffering.

At the same time individuals or why keep calling for positive social change and sticking to that breaks isn't that a quality.

Burst stand together with colleagues around the world It gets racism and discrimination.

We have an unwavering commitment to sporting diversity.

And the teams and our workplace.

And the cost except this public health economic and social environment.

Serving our customers.

Why didn't the strength and stability, but they have come to rely on for almost five decades.

Our business is running smoothly.

Well in our people continue to demonstrate the passion and resilience that differentiate shoppers.

The health and safety bar employees and customers are Paramount.

Hi, I'm very proud of art, you I'm very thankful for the hard work and perseverance.

During the solid results will be 40 today.

The quarter, that's for the first half of 2020.

Our ability to leverage our capital position.

<unk> platform and our success in executing against our objectives, even older adverse conditions sessions are very well for continued profitable growth.

We've got strong broad based forward momentum across both our reinsurance and insurance divisions.

Gross stems from a combination of new business opportunities, resulting from our strong financial ratings.

From Houston and diverse portfolio as well, it's increased rate levels and high retention rates.

Sequentially improved underwriting profitability in the second quarter.

We continue to demonstrate strong structural expense management discipline.

Oh industry, leading expense ratio continues to give us operating flexibility.

We also recorded significantly group net income compared to the first quarter. That's we benefited from the upswing in the capital markets during the second quarter.

Our shareholders' equity we'd do a record 9.3 billion that's at June 30.

Our book value per share was $232.32 up 8% for the first quarter 2020.

4% compared to yearend 2019.

Our axis capital position, where data source of strength, that's evidenced by eight plus financial strength ratings recently affirmed which stable outlooks.

Ever since the capital to play often so much market.

He worked to identify need for additional capital I loved that way should gives us high degree of flexibility.

Our capital position, our focus on execution, our people and our emphasis on solving problems for customers keep was well positioned to pursue all business opportunities that meet our underwriting appetite.

Before I, specifically address our second quarter results, let me share how we're driving to company forward.

Our focus is on sustainably growing a balanced and diversified insurance and reinsurance portfolio by line of business and geography.

Lets execution of our strategies to deliver consistent underwriting profitability.

Our nimble we report domestic we're capturing current market conditions that meet our return requirements.

On the revenue side, just about creating greater optionality and diversification across our entire business.

Bob mix of products customer segments distribution and selective local presence, we're capitalizing on growth opportunities around the world and balancing the highs and lows of our industry and economic cycles.

This is why having vibrant reinsurance and insurance businesses is a key element of our strategy.

The growth could be insurance division.

With gross written premiums now exceeding 3 billion on a trailing 12 month basis, what sustains attritional profitability is vital to greater balance in the organization.

But this growth is not at the expense of our reinsurance division.

Today, we are top 10 global reinsurer.

Growing specialty insurance and we are building on these positions in this market.

That's a good youre playing off inch to improve and further solidify our position with the best mix of Dallas products and services.

We are enhancing and sharpening the strategy and tightening the execution that operating with them.

We are deploying our flexible balance sheet, the first capital base to expand our relevance in our chosen markets.

On the margin side, the focus just on underwriting profit.

Maintaining and enhancing our underwriting results were active portfolio management strong risk governance, an excellent analytics.

We are reducing exposure in areas not meeting the right, which we talked profile.

Amicably deploying that capital to areas that.

Our strategic utilization of alternative capital well enables to further diversify the portfolio.

We are focused on claims management to deliver consistent we accurate outcomes with superior service.

We are maintaining our expense leadership through more efficient scalable operating models enabled by the latest technology.

Can be artificial intelligence and natural language processing tools.

On investments, we continue to generate strong cash flows but are invested in conservative I credit quality portfolios.

We may well diversified.

All of this will deliver growth and earnings over time, resulting in book value per share close.

Turning to the second quarter of 2020, we demonstrated continued momentum across the group will be 11% growth in growth gross written premiums excluding the impact of foreign exchange.

The growth was broad based across both our reinsurance and insurance businesses with gross written premium growth of 11% and 10% respectively also excluding the impact of foreign exchange.

We continued to benefit from the prove insurance and reinsurance market conditions during the quarter, which I will discuss in a moment.

Excluding catastrophes and the pandemic impacts.

Our I'd be in our loss provision that a small amount of associated credit impacts our attritional combined ratio for the group at 88.5 and each of our segments reinsurance at 86.7 and insurance at 93.7 are reflective of the strong underwriting performance across the group and the learnings generating power of this franchise.

Yes.

Underwriting profitability remains at the core of everything we do.

On a six month year to date basis, Everest is growing 15% and delivered and 89.1 attritional combined ratio excluding pandemic impacts.

Our reinsurance segment had strong growth for the quarter, we continued to successfully execute our strategies to underwrite a high performing book of business with higher economic returns. That's important April one June one in July one rules.

We continue to see excellent reinsurance opportunities in several areas such as facultative risk.

Operating and in certain territories, including the U.S., Canada Latin America in Asia.

If environment gives us the opportunity to better shape, our book for deals with better terms and pricing and walk away from others that did not meet our pricing hurdles.

Traditional capital from highly rated carriers like catalyst, that's become more relevant and supplies tight, particularly given the more limited availability of alternative capital.

We see this favorable pricing environment continuing for the foreseeable future you did with pandemic related economic headwinds.

Reinsurance profitability was also strong for the division with a 95.3 combined ratio, including cobot impacts at an 86.7, excluding the cold that impacts.

John Doucette will provide additional details on market conditions.

Our insurance section that segments growth remained strong for the quarter with 10% and with improvement in underlying performance.

You Attritional combined ratio excluding the endemic in pets improved to 93.7 for the quarter compared to a 96 in the second quarter of 2019.

We are strategically managing the insurance portfolio to build the more diversified business and just your mix Stuart's product lines that we expect to earn higher margins long term.

The maturation of several new product lines launched over the last several years, that's wells are wide market footprint give us access to significant opportunities.

For the quarter the main insurance growth drivers were.

Strong in white spread right momentum, excluding workers comp of plus 18% and including workers compensation over plus 12.

This is the highest overall rate change we have seen in a long time.

Insurance written rate also continues to exceed lost trend across our core PNC lines of business.

We also saw continued strength in the excess and surplus line space. We've got strong renewal retention in both our retail and you know thats businesses.

But this growth is offset by pandemic related headwinds in lines heavily impacted by lower payrolls and lower business activity.

Turning to investments that investment income decreased to 38 million for the second quarter.

The drop was after double the negative returns from our limited partnerships, which as we mentioned in our first quarter call report on a one quarter lag.

Given the lag this drop we flex the market turmoil, which occurred in March.

The second quarter recovery in the public markets provides a basis for expecting an improvement in limited partnerships, which will be reported in the fourth quarter.

The amount to the recovery, it's difficult to predict given the ongoing uncertainty caused by the fact that.

Regarding corporate 19 impacts as per our July 20, Threerd announcement, we have taken 160 million dollar loss provision in the second quarter made up substantially give IP NR.

The majority of this loss provision 130 million was for the reinsurance business.

These losses related to event cancellation or postpone that.

Business interruption in workers' compensation.

We've also increased our I'd be at our four allocated loss adjustment expenses based on anticipated cost to investigate and defend some portion of claims.

We are taking a measured approach to a loss estimation process that is based on credible and supportable information.

It's an ongoing event in very different than a natural catastrophe.

We are continuously monitoring this evolving situation and recognizing potential exposure based on the most up to date information available.

Our second quarter estimate was based on a refreshed analysis updated with the latest information from our clients.

While our analysis continues to keep all aspects of our global portfolio.

Our estimate does not take into account legal regulatory or legislative intervention that could retroactively mandates or expand coverage provisions.

Well, it's a $30 million loss provision for the second quarter in our specialty insurance business. The majority was from event cancellation that was funded policies as the nature and duration of the pandemic has increased the likelihood of cancellations into early 2021.

Smaller portion of the insurance loss provision was predominantly loss adjustment expenses for business interruption policies.

I've stated last quarter, our property policy. So other big use policy language, but requires direct physical loss for business interruption coverage to be triggered.

Additionally, the majority of the property policies in force contain a virus exclusion.

Only a very small number of policy seven door sublet mix that would offer b. I cover its four notifiable human disease. These exposures have already been recognized as part of the overall I'd be at our estimate.

Workers' compensation represents the smallest portion of the insurance provision during the quarter, we have refreshed our analysis based on the industry profile for businesses, which have now been BNP essential by many states. However, this is not a significant them out our portfolio has no known exposure at the first responders and very minimal exposure to frontline health.

Co workers.

With regard to the reinsurance loss provision we have updated our analysis based on information from Cedents and brokers.

It is important to reiterate that actual reinsurer, our analysis will be very fact specific to each situation in each contract.

We have also updated our we view our mortgage reinsurance contracts based on our current view of the macroeconomic situation.

They did flight information and our internal modeling, we remain comfortable with our exposure that with our loss reserves.

We will continue evaluating this business has economic situation unfolds.

In summary.

This continues to gain traction and forward momentum despite the macroeconomic uncertainty and the rapidly changing external environment.

Our operating smoothly with the health and safety of employees and their families top of mind.

I'm optimistic about our future you have a talented team a global platform and a strong capital position, which allows us to capture the improving opportunities in front of us.

Lastly, I want the welcome my car Malosovich to the call today.

You saw in our recent announcement I am pleased to introduce Mike That's a new CEO of our insurance Division.

Mikes promotion is an acknowledgment of the key role he played into growth of the insurance business over the past several years and provides continuity so adverse can execute our winning strategy.

It will be available to answer your questions. Today now, let me turn it over to crack to provide additional details on the financials.

Thank you on and good morning, everyone remembers delivered another solid quarter, a financial results for the second quarter of 20 point. It was reported net income of $191 million.

This compares to net income of $17 million in the first quarter of 2020 and $333 million for the second quarter of 2019.

On a year to date basis, net income was $207 million compared to $687 million for the first half of 2013.

Net income included $22 million of net after tax realized capital losses, compared to $100 million or capital gains in the first half of 2019.

These results were driven by a strong underwriting performance across the group.

Stable investment income from fixed maturities and low catastrophe losses, partially offset by a covert 19 and don't want assessment of $310 million and negative limited partnership investment returns.

The overall underwriting gain for the group was $51 million for the second quarter <unk> $80 million for the first half compared to an underwriting $393 million in the first half of last year.

The company continues to grow premium in 2020.

Year to date gross written premium was $4.9 billion of $646 million were 15% compared to the first six months appointment.

This reflects growth in both segments with insurance up 20% and reinsurance up 13% compared to last year.

In the second quarter of 20 Twond.

The company reported $50 million of catastrophe losses related to the civil unrest in U.S.

Although there were a number of loss events in the quarter nodal, we use storm events, none of these events breach or $10 million gossiping commercial and as such are included in our Attritional loss estimates.

On a year to date basis, the results reflect the catastrophe losses of $45 million compared to $55 million during the first half of 21 team.

The group combined ratio was 98.1 person through the first six months compared to 95.5 per cent for the full year of 21 team.

Excluding the catastrophe losses and went back from the covert depends on the comparable combined ratios were 89.1 person through the first six months of 20 Twond.

84% for the full year 2019, mostly attributable to business mix changes that impact the attritional loss ratio.

Excluding the pandemic loss estimate the group Attritional loss ratio was 60.7% up from 60.2 person for the full year 2019.

Primarily due to the continued changing reinsurance business mix.

For the reinsurance segment, you Attritional loss ratio, excluding the pandemic loss estimate was 59.0% up from 58.2 person for the full year 2019.

This increase was related to the continued shift towards more pro rata business, which requires a higher wants there what allows us to benefit directly from the firming primary market.

Pro rata premium is less volatile than access premium and we will see the benefit earn into our results as we like the loss picks season over time.

Well the insurance segment, the Attritional loss ratio, excluding impacts from the pandemic was 65.4 person down compared to 66.0 person for the full year 2000.

Are you West franchise, which makes up the majority of our global insurance business.

Given the runner and Attritional combined ratio in the low ninetys, excluding the pandemic loss estimate.

The good commission ratio of 22.4% was down compared to the prior year due to business mix and work Ceding Commission received insurance segment.

Group expense ratio remains low at 5.8% in second quarter and 6.1% for the first half of 20 twond money for our expectations.

During the second quarter, we saw reduced expenses for new hires travel and entertainment and conferences.

Our loss reserves, we completed several reserve studies during the quarter related to some smaller classes of business.

Overall indications were not material enough to warrant any action on studies during the second quarter.

For investments pretax investment income was $186 million year to date on a 21.6 billion dollar investment portfolio.

As one mentioned in his remarks investment income in the second quarter was impacted by $88 million alumina partnership losses.

The fixed income portfolio remained stable and produced $272 million investment income year to date.

So the $253 million, where the same period last year.

The pretax yield to maturity on investment portfolio was 3.4%.

Compared to 3.4% one year ago.

We've been able to move them consistent yield to maturity without a dramatic shift in the overall investment portfolio.

We are expecting anything or asset allocation and conservative well diversified high credit quality bond portfolio with and so the duration.

Our investment grade portfolio, the new money rate was 2.7% for the quarter.

Other income and expense included $24 million, a foreign exchange losses during the first six months of 20 Twond.

On income taxes.

Year to date tax benefit a $14 million, including a 31 million dollar tax benefit related to the carriers that we reported in the first quarter.

Excluding this benefit the effective tax rate on operating income was 11%.

And with our expected tax rate for the full year.

Positive cash flow continues.

Record operating cash flow $1.1 billion for the first half of 20, twond compared to $854 million in Swindon team.

This increase reflects our growth in premiums and a lower level catastrophe losses in 20, twond compared to 20 million team.

Shareholder dilution for the group was $9.3 billion into the second quarter, a new record forever.

Oh from $9.1 billion at year end 2019.

The increase in shareholders equity in the first there are 2020 is primarily attributable to the $207 million with net income and the significant recovery in the fair value of the investment portfolio.

The mark to market impact on the fixed income assets improved from an unrealized loss of $248 million in the first quarter, two an unrealized gain of $545 million in the second quarter 20 Twond.

Average continues and then.

Already strong capital position.

Well that leverage in high liquidity in our S investment portfolio.

Thank you know Johnson set will provide a review of the reinsurance operations.

Thank you Craig good morning.

Having now finished our June and July renewals, we are increasingly optimistic about the reinsurance market and our position as a global provider of reinsurance solutions.

The flight to quality by reinsurance buyers continues and highly rated reinsurers like Everest with solid financial strength and global underwriting capabilities will do well in this market.

The expanded opportunities that allowed us to improve our portfolio across virtually all geographies and classes of business.

As was stated earlier adverse market positioning combined with healthier market conditions led to strong growth in gross written premiums for this quarter and for the first half of this year.

For net written premium growth was even higher at 15% for the second quarter as we retain more business given our capital strain the improved underwriting environment.

And the shifting economics of retrocession purchases.

Overall, we have a larger and more profitable portfolio than we did last year.

By many measures of risk and return you expected performance of writing this year is improved versus the expected performance of the last underwriting year.

Our portfolio its growth has been broad based with significant contributions from our frac of global facultative operations.

What you're seeing large increases in submission activity and strong pricing trends encouragingly rates are increasingly.

Increasing strongly even in markets with sufficient capacity.

In terms of property cat market conditions overall remains strong, particularly at peak zones and recently loss affected areas.

Got renewals in Florida, and the U.S. generally experienced double digit rate increases with higher increases on loss affected business, leading to higher expected margins and profits.

In our Florida Cat book, we wrote more premium versus last year, but with less exposed limits.

As a result of our underwriting execution and rate increases are expected dollar margin for Florida is meaningfully higher.

We also we focused our capacity on fewer core clients.

Regarding our global property portfolio, we executed our plan.

Expected profits grew considerably as we retained more economics due to a smaller outwards retro spend.

However, we maintain catching capacity through Mt, Logan and our catastrophe bonds.

Across our peak cat exposures are net PML increased mid year relative to January snap PML.

Reflecting our plan to capture this markets improved profitability.

The net PML increases are predominantly further in a tale of the distribution.

Competition from highlights capacity was less pronounced during the midyear renewals due to investor frustration from multiple bad industry cat loss years adverse development and trapped capital by several iOS managers.

The retro market is favorable for sellers and as a net seller of retro we captured strong double digit rate increases.

And demand from recurring retro buyers remains robust.

We also deployed more capacity in property pro rata business with original rate improvement and tighter occurrence caps.

Well priced cat exposure of this class contributed somewhat to the increased PML.

The casualty reinsurance markets are also improving directly from increased access rates or indirectly as original business rates benefit pro rata deals.

Excess casualty rate increases generally range from single digits, two well into double digits varying by seating and product.

Casualty ceding commissions improve slightly.

While the casualty market improved we still walked away from some large renewals priced below our return requirements.

Nevertheless, we have several compelling opportunities to partner with our global clients in several classes of business either through new deals brought to the market or increase shares on improve or no.

In Australia, and Asia market Firming continued through the throughout the year.

With earlier renewal rates, increasing less than later renewal rates for these midyear renewals more business net or return hurdles and we wrote more premium accordingly.

Our long term relationships in Asia cultivated over the last 30, plus years allowed us to capture better opportunities.

And in times like these those situations become more pronounced.

Likewise quality underwriting opportunities presented themselves in Canada as rate increases were achieved across several different lines of business in both factoring treaty.

Therefore, we have been increasing our shares on several Canadian programs.

Finally, some comments on our mortgage book, we remain comfortable with our exposure loss picks and loss reserves on our mortgage writings.

Majority of our in force mortgage business will not be impaired by the pandemic and thus housing fundamentals and post economic recovery unemployment deteriorate significantly.

This is in part because of our generally high attachment points, and our conservative underwriting and pricing of mortgage.

Also unlike the primary mortgage insurers, we as a reinsure can and do book significant Hybean our reserves.

In summary, disruptions facing our industry at our personal lives.

Great uncertainty around the future of many businesses and economic sectors.

As a leading provider of reinsurance solutions, we maintain a strong position to absorb volatility and diversify that uncertainty for our clients without a robust balance sheet global presence and capital resources, while generating solid returns for our shareholders.

Thank you and now I will turn it back over to want.

Thanks, John.

I feel good about the direction of the insurance and reinsurance market and I am pleased with our execution in our momentum.

We have brought our premium by 15% than the first six months of 2020.

Our first priority is to profitably deploy our capital for organic business growth and disheartening market environment.

Continue to find ways to put our capital to work that we see strong opportunities ahead now let me turn it over to Jon Levenson to open it up to your questions.

Great. Thanks, one Cody I see we have a number of participants in Q can you. Please open the Canada.

Absolutely it seems like Cascade question. Please pick my pressing star one on your telephone keypad.

Using a speaker phone. Please make sure that your mute function is turned out to leaves signal to reach our equipment.

And then start one if you like to ask a question.

Well first take a question for Mike San Rescue with Credit Suisse. Please go ahead.

Hey, thanks.

First question I appreciate all the color regarding the the cold and losses have a book I'm curious you know you know look a lot of questions from investors about how to think about it called the impact going forward and I know it's complex given all your losses are are.

Coming through the reinsurance division, but in regard to your conversations with students. You know you are some of them anything that there's likely to be more losses trickling in during the back half the year. As you know that was very complex situation as is further assessed or not and I have some some insurers mostly primary insurers are trying to.

So to say that you know they think they kind of had most of their loss picks on buckets.

Last things get materially worse, but that he called me.

Yeah, Mike. Thank you. This is a quantum dry to look I think we have bought at the very solid estimate.

Still what we know today, we have a good process that has under lied the estimates really from the beginning of this crisis and we certainly talked about it than in the last call.

All that being said you know this event is still on the way right. So the crisis is still ongoing and much of this is gonna be determined by the the length of this crisis as well as by any actions that are taken by governments along the way so I think in that sense.

The race there is some uncertainty as to where was the losses, particularly on the reinsurance side May go as Cedents are still trying to grapple with their own numbers.

And essentially come up to two good estimate stop but again I would say from from my perspective, we do have a solid estimate they still what no and that certainly has been de I'd be approach into perspective, but we have taken from the very beginning and as we have more updated information, we will be updating that as well.

Okay great.

My last follow up question.

It was regarding your op outlier low leverage level and I think you know we appreciate.

You guys are paying off and clearly can see that's PML came up a little beds, but still kind of well below historical levels I you're seeing.

Certain participants in industry other raise debt equity new startups. So is your thought process change in terms of the opportunity cost of holding or a lot of excess capital. It was it isn't changing or is it kind of plan plan. A so it's just you know, let's keep kind of try.

To grow the topline in excess of our our oral we left the dividends and they'll just kind of use up our excess over the coming three five years that way.

Yes, So let me start in that I would ask Craig how to jump in as well like what I would say, it's our capital management philosophy hasn't changed you know I started out with the fact that we have more than ample capital to the deal and face off with the opportunities are in this market today and I think you see it from our numbers.

Right that we've been very forward leaning and being able to to continue to grow in this environment.

We also had a very low debt leverage right. So as I mentioned in my remarks to the extent that we see any opportunities that.

That are relevant for us that are accretive for us.

At that point in time, we have to flexibility to to increase our capital, but as I sit here today look I feel very good about our capital position. We also have over 13 billion deplorable capacity like when you think about policyholder surplus plus what we hold and in our bonds, what we hold them out.

Logan et cetera, et cetera, we have plenty of capacity to work with in this market. So from that perspective, you know our philosophy continues to deploy capital into this market, particularly given the favorable conditions that were seeing right now the cracked and strengthen you would add.

When I think you covered it I do think that just just to state the obvious that if we didn't want to go our balance sheet, we have sufficient low leverage and certainly one of the lowest up beverages in the industry to be able to do so.

And so what would do if you had to put more capital work are you really more towards reinsurance in the near term or or or primary insurance to deploy that they access.

Yeah. It's a quick question that Fortunately were when a pretty good position right in the sense that that you don't have to to choose which of your children. We like most.

We see opportunities in both sides right and so you know I think it's as I articulated in John to set articulated we're seeing some really good opportunities on facultative aside some very good opportunities in property as well all of that being said you also heard from job, we're being very disciplined so if things do not meet our economic.

Return criteria, we will walk away from it just like what we did at some of the recently rules, but we see plenty of opportunity to deploy capital. There. The same thing in insurance, Bob you saw the growth like there, we see great opportunities and property, both wholesale and retail when she very good opportunities and excess casualty she varied.

At opportunities and do you know so right now because of our capital base that we are looking at what we can play offense in this market and deploying our capital that way. So we can grow and essentially take advantage of the favorable conditions.

Thank you.

Thanks, Mike.

Thank you and I think our next question from Josh Shanker with Bank of America.

Yes. Thank you for taking my question and good morning, everybody.

So I talking took the PML them of course and falling on what Mike was saying is there any change in the cat load guidance and if we think about next year. If things go the way you want them to go all where when you ideally walks resetting your PML and your cat load guidance, what's in the healthy marketing.

Healthy PML in an attractive market for cat.

Protection.

Yes, Josh this is one so for for this year, there's no change in our cat load from that perspective, but let me ask John to set to to speak to up to the pm outs.

Yes. Thanks, one thanks, Josh for the question.

So.

You know as I mentioned in the script, we have seen opportunities and as we are putting the investor presentation. The PML is our up now southeast wind is 7% of equity up from 5.7, and really it's going to be a function of the of what we see a in the market you know we expect we like Florida.

But we were disciplined we did a shed some clients and nonperforming accounts that didn't meet our return thresholds and that that was true at July one as well and we expected to be true at one one so we do expect to see momentum continuing into one Wanna beyond a we think it's a great market to be a seller retro we are top too so.

Our retro among rated reinsurers and as want alluded to we have the capital across the Kilimanjaro bonds slogan and of course, our common equity and debt.

Have the capital and flexibility.

To write the book that we see that's in front of less than what the market gives to us, but we do expect to see robust demand a in one one named going forward.

Okay, and then a little education in cattle feed for a lot of risk.

If I mean, and I have a pool of risk that I'm raising prices on and I think improving margins on when I negotiate a treaty with a reinsure to protect me from some of that business, Okay, maybe I need balance sheet protection or they're not ours and say balance sheet stopping enough.

Our doesn't give me more profitable next year. So we're going to raise the ceding commissions on him to what extent I mean is very fueling on how much profitability you can receive any rising rate environment for risk.

It's a it's sort of tempered by the ceding commission being charged for improving profitable, but profitability I'm at thing right.

Yes. Thank you that's great question and I think first principles. That's why we're agnostic to the form that we take a when taken reinsurance or ask whether that's casualty property specialty a mortgage we look at it across you know when we look at it as to how we want to deploy capital and that will vary by product and.

Likewise, our clients will look to see whether they want to do things on a a proportional basis and excess space. This excess of loss per risk basis and that varies some of them all well will change that overtime, but that's why in my in my statement in my comments.

I I mentioned that you know the casualty market, we're seeing improving but we're seeing a you know we're seeing a little bit of improvement and fees and commissions given that the market that we're in but we are seeing a lot more of the benefits coming through the original the primary rates on the insurance operation. So you know and it also I think it's that we need.

Remember that there are a whole lot of clients out there.

Right right their business using different capital levels and some write some have a capital a lot of capital support that that gives them flexibility, whether they do something potentially on a pro rata basis or an excess basis, but then a lot of our clients around the world. You know again, they don't have a lot of capital and so sometimes.

<unk> to de lever their premium and so they do need to buy proportional treaties and and you know unmatched. That's when you ask that's international that's been Lloyd.

Where it'll vary again by line of business and that that gives us the opportunity by having the ability to dynamically allocate capital by line by territory and by product access a loss or pro rata. It gives us the best chance to capture what we see as the opportunity in front of us profitably.

Well good luck in the renewals next year.

Thank you very much Josh.

Okay, well take our next question from your own cannot always Goldman Sachs.

Thank you good morning, everybody.

So first question I do want to go back to the capital.

Raise question.

It sounds like the environmental very constructive one and then you see it probably was blogs going into 21.

So there's a decision to not lose capital today.

I'm, just trying to understand how that fits and to put this contract.

They do not see sufficient opportunities to.

Deploy capital, but that you would waves.

As the market not attractive enough I guess at what point.

Well it wouldn't make you want to raise capital now that you're not seeing today.

Sure you aren't that show. Thank you for for the question. This one looks at number one I would start with the fact that philosophy. This is a dynamic process right. We're always sort of assessing capital our needs the environment that sort of thing. So it's not a a fixed point in time, it's it's a very dynamic discussion that we have within.

Buddy.

We find the current opportunities to be quite attractive and hopefully you saw that from.

Through the bullish nature of my comments and dose of Johnson said on this call I think you see that from from the growth rates and how we're managing to up to execute on the opportunities that we've seen this market proposition right. Now is looked at me where we sit.

With the capital that we have right now we feel that we have more than it off to be on offerings in this marketplace.

On like others, who have had to raise capital for defensive purposes, we're not in that situation right. We're actually you know in a good place right now now I could say in my remarks that that this environment this very fluid.

If we get identify opportunities that you see that are accretive.

To our bottom line that we certainly have to flexibility to be able to do that but.

Again, I would like for like to see things got any additional thoughts on that.

Yeah, one I agree if you're going to raise capital it should be Accredo and certainly you know timing it comes into play as well if you're raising equity capital certainly earlier in the year was a good time to do it instead of waiting towards the election times.

But we didn't need to raise equity capital we didn't used to build scale. We already have the scale. We're not trying to fund M&A at this point in time, and we're not trying to replace retro coverage at this point in time. So certainly has as the market changes are we still have flexibility, especially with respect to.

Our debt leverage.

Okay. Thank you.

In my second question.

With regard to reinsurance covert losses can you maybe explain what's the difference is between have been fact specific to each situation in each contract as opposed to fallen before chip Mike what's the distinction there that you're making.

Yeah, Jeremy happy happy to talk about that look every contract is gonna be different right I think on like a natural catastrophe, there's going to be hours closers, there's going be bench definitions, there's gonna be different attachment points et cetera. So that's really been when we say that that's what it means that this is not a panacea.

And we're going to look at each contract fights make by its nature by its merits bites on facts and that we will make got claims adjudication decisions based on that.

And that's not the finished goods phones the fortune.

Well I think following the fortunes would imply that.

Essentially any lost at your Cedents report, that's being pulled that loss.

With the automatically accepted and essentially what I'm, saying, what we're saying as a company is it's very fact specific and that will be put against the contractual requirements and the wording in each of our contracts.

Okay. Thank you.

Okay.

Thank you when they move onto our next question from lease Greenspan with Wells Fargo.

Hi, Thanks, Good morning, I'm, sorry, I also have a question for follow up on the capital side of things No way that you can tell us and then when he came right, but you have young common equity Logan is low to come and go to help no support instant writing today, what seems like a really strong marketing.

2021, but can you give us a sense on your opponent capital base right.

I mean on more easily at the level that sounds like we're holding off on that all the time being how much well.

UBS more phone capital base today 20.1.

Sure I would ask Craig how we too on the answer that.

Well at least it depends on which capital measures are working and right now we feel as though we can grow both sides of our global reinsurance and insurance with the capital base that we have today.

And that even goes into looking forward to one one renewals I'm on a reinsurance basis. So that's why we feel as though given the market and given where we are today that we have enough capital to not miss out on any opportunities in the current market conditions.

Okay. That's helpful. And then my second question I'm elaborate side.

By the point that out here on their Robert Bellinski or hearing is that turn it on internal mark.

And then I guess and that answer how by with the rating agencies <unk> leverage and who also provide maybe anyone about when I'm not that you guys provided earlier. Thank you.

Right Craig.

Yeah, so at least with respect to our leverage you know certainly from a rating agency perspective, where what they're doing currently right now is allowing people to increase their current leverage as you know we're closer to 6%.

We could have easily grow that capital to 20% leverage without any question or concern at all or most of our peer others are in the 20 and upwards of 30% range. As you. All know so from that standpoint, we have plenty of room to grow and extend that leverage.

As far as the Logan a when a question a hard welding and you win was we were able to grow.

The when a slightly this quarter what it is down from year end I'm worried about $800 million.

Thank you for the color.

Thank you would that take our next question from land.

Autonomy. This research. Please go ahead.

Hey, guys good afternoon. So.

So I'm actually interested in John do you sense perspective, because I would think look you know again I'm looking at slide 15 at that site it'd be driving you're not just because you've been here either at every three years, having 15 16 17 18.

The PMO is double digits and pricing with a lot worse in common sense shows and she'd what you're at pinos to be better or higher when pricing is better and now they're all in it and segments I guess the question is like.

What's the lesson here was a two high back again or you know are you more mid cap of I'm chomping at the debt to deploy more capital at this moment because this is when you really want to being you know quite a bit higher in terms of being off.

Yeah, Hi, good morning, Ryan Thanks for the question and so a couple of things so.

What we've been saying for awhile is that we want to you know we're not just one trick pony within property and a few rewind. The tape you know a property our view that property was a it was more attractive on a relative basis than some other lines and you talked about being more bearish on casualty than some of our competitors. So what we've seen a couple of things. He we have seen.

Property improvement of property prices, we've all seen improvement in in casualty as you know we've been growing out our mortgage book substantially we're saying.

Nice increases and opportunities and specialty lines of business and so we're deploying more capacity along the way there and really I think you know what we're trying to do is is capture what we see is the opportunity in front of US. We've also talked about on prior calls kind of an elevated risk.

We've seen in a social when you think about social placement and and things in Florida tied to like assignment of benefits and climate change and other risks that also have caused us to make sure that we're deploying what we view as the right amount of capacity, so accommodation and so that elevated the return requirements that we need.

Good.

To deploy a increase capacity and again, our view as to what we head into one one we expect to see a robust January 1st, particularly in Katich, a peak selling cat and retro <unk> and we'll deploy capacity accordingly, so what we'll do it but will also be we'll do it based on what the market terms conditions are.

What the clients demands are but will also be looking across all lines of business and territories to really build the best book we can.

Thanks, and then just one follow up for water on the insurance side.

Oh, you said in the press release that pricing is exceeding loss trend, we actually see modest improvement of the underlying combined ratio in that business.

It's probably not Arithmetically, what you think it would be given the level of way, we're getting so I guess how would you describe.

I.

I guess, the the cadence for the pace of margin improvement, we're seeing in insurance relatively minor were apex.

Yeah. Thanks, Ryan look what I would say is you know we're definitely seeing.

Loss trend.

Yeah, and essentially a below our written price change right, where a lot you seemed a lot more rate right now in a head to head of trend and that's a good thing that being said, though we are also keeping our loss picks up and conservative.

Given the environment them all of that strikes or why you're seeing more rate ahead of loss trend and frankly, we're seeing some frequency benefits on some lines of business.

At this point in time, we think it's just prudent to up to maintain the loss picks where they are and so over time, we'll see that margin improvement and so that's basically how we're looking at that.

Thank you.

Thank you don't want to my next question from their Shields KBW.

Oh, thank once that with one I get basic question no. We clearly have an estimate for losses.

The exclusive but how should we think about that impacting dairies insurance and reinsurance markets.

[noise] I'm, sorry, my I couldn't hear the first part of your question.

I was trying to get them in terms of Directionally, when you've got something like the Babe Ruth closed and obviously far too early for any estimate of losses, but should we think of it doesn't enter into them for reinsurance and I.

Got it so if we're looking at that had a root specifically I think as you pointed out look it's probably too early to tell what we are a global company and I would expect that we will have some loss out of that I would expect the loss. If it comes it would be more on the reinsurance side than on the primary insurance out at least for.

My first.

Okay. Thanks, very helpful. I'm getting a couple of questions about the bottom adverse reserve development in the insurance segment, there was hoping that either one or Craig could comment on what their them.

Yeah sure, but this is one my are you happy to talk to pop that Bob number one it's it's very small right. So it's less than 5 million Dollarss and it's really an increase on a specific large loss that came through into quarter in an artist <unk> International insurance operations. So.

It's not a meaningful from that perspective and that as you know our reserving philosophy has been that we react quickly the bad news and frankly, we felt the prudent to recognize stuff in this quarter and we recognize the development.

Okay.

So it depends on actual loss emergence instead of a and disciplined Oh, Okay. And then follow question and then a quarterly numbers are going to bounce around a lot that the within insurance. The other specialty line was down year over year result, a more economically sensitive line than from the other specialty line.

Yeah, Let me add that's my current to jump in and give you a little bit of color on that as well so Mike.

Sure.

Thanks for the question that actually she is definitely an economic impact that business, usually as transactional list, which is M&A, which is obviously impacted by by the code and the pandemic and then another lines in the credit side. So some of those actions. We actually were delivered a in actually slowing that business down given what's going on with the endemic and again thats. It.

Markets.

Okay, I thought I think you're going to us.

Thank you and move onto next question from Brian Meredith, Yes.

Yeah. Thanks, a couple of your wanting just want to clarify I think he said the response Ryan's question that you Didnt take any frequent to benefit mcwhorter, either on complex retail property lines insurance segment.

Yes, so that that side, that's correct, Brian we're not taking any frequency benefit into quarter.

For any of the lines of business, where we have seen lower frequency so far this year.

At this point in time, we think that's pretty mature in a recent for that is pretty straightforward. While you do see claims counts down in some line she business like commercial auto and workers comp opt in NGL exposures were also down which also result in premium refunds right. So the impact on severity must there yet.

So I think you really need to look at longer term averages.

Because some of these frequency decreases maybe temporary and we don't know what the bounce back is gonna be once economies fully be open.

Got it makes sense it I guess I'd, just add ons and that it just curious one could you give your perspective on what sits in place and kind of current looks like in what's your outlook is here as the economy reopened.

And with respect to that is there anything that you can do right now with contract shortage in your insurance space, you know two to potentially.

Mitigate you know for the 19 will they be planes here going forward.

Yeah no absolutely. This is something that that frankly, we have been up all over.

From the very beginning with this crisis and like give a lot of credit to our corporate underwriting teams and our chief underwriting officer is on that.

Looking in this is consistent with what I just said about frequency I think is as the economy begins to reopen again, you know a lot of the out the trend indicators that were there prior to the pandemic. The frankly gave rise to lie to some of the rate increases of personnel across the board are still going to be either right. So that that hasn't gone away.

We have picking up a number of actions, whether it's been pushing rate tightening terms and conditions Weve healing contract Wordings. We've also been putting pandemic exclusions in place across the board. We've also withdrawn capacity from certain territories certain product certain lines of business that the frankly, we were uncomfortable with as far as it.

Risk assessment for the coverage stuff is being granted and you know us as you just asked on on the other question regarding other specialty insurance were also remain cautious on certain economically sensitive line. So we've taken a pretty deep and thoughtful approach to our underwriting from the very beginning of this pandemic opt in order to provide protect.

And for the book going forward.

Great. Thank you.

That's right.

Thank you we'll take our next question from close to partner with Deutsche Bank. Please go ahead.

Yeah, Thanks, and even when he.

I was hoping you could talk about the reserving process for the cobot charges on the insurance business.

I think one you had mentioned in her opening remarks that there there's some events into 2021 to their contemplated the maybe you can just give us a flavor look one of the timeline in how you're thinking about reserving mark.

Yeah, absolutely look what I would tell you that the estimate that we have on the insurance side as a solid estimate as I mentioned before particularly for event cancellation type policies. We are looking for at least 2021 at this point in time and this goes back to one of the questions I was asked earlier about.

You know about the the nature of this event in what I mentioned, which look this is an ongoing event than a lot of this will depend on the length in shape of that frankly, but on contingency. We're definitely looking at that early 2021 at this point.

And so the reason I asked him a follow up than it leads to the reinsurance I'll hop I'm getting the impression on these calls first quarter and probably even once of second quarter that automakers are on hobby it differently.

Feel for how far they are allowing people to look in the reserving process I get.

On the reinsurance book when you how conversations with TV.

He was the horizon, they're allowed to contemplate any way probably Katie your ability to reserve on the reinsurance side. How are those conversations going in is good time or you're contemplating a reinsurance really different than the medium shirt side of your book.

Yes, So let me give you my thoughts from Adam and I would ask John to set to jump in as well.

So look I think the process has been very similar from the perspective of all the detailed discussions that we've been having with our cedents, we've been having with brokers tried to understand the book of business. Obviously, the difference being that that one to reinsurance side, it's a much more global book.

We have some very large cedents and they're still trying to grapple in some ways as you've seen in from a lot of the calls Bob with their own exposure and so from that perspective on the reinsurance side, you do get a bit of a lag as far as the information is concerned that with some of this information, but I think as far as the time horizon is concerned.

Our conversations with the seasons have been they're looking at a similar time frames through the end of this year beginning of next year, but John I didn't know if he would like to add some color to that also.

Yes, yes, thanks, one and as you said there clearly is is a information a lag in terms of when the reinsurers here things plus everybody has to go look at the contracts in terms of how well you know again going back to contract specific facts specific one of the retention clauses, what what are the retention for the hours clauses what are up.

The terms conditions exclusions that are in the contract and I think that just takes a while to understand and and and again and our clients again it varies by territory. What the original wording is and so there's a lot of moving parts that that really result, and this as well as as we've said this beaming with ongoing event.

That it makes it a lot more complicated, but we feel comfortable based on all the information we have today.

With both the process that we put in place to identify as well as what Weve. What we have book again, given the information we have today.

Yeah. The last thing that I was out to that is remember the is the be assessments. We have out there are really management's best estimate and what the auditors will review is really the approach on how management that essentially achieved those estimates.

Got it my Franklin hope, everyone could prove to be wrong.

Thank you.

Thank you and I think from Mike Minsky with credit Suisse.

Okay. Great. Thanks, just two quick follow ups [laughter], any California wildfire subjugation benefits. This quarter are expected and also it's fun to confirm regarding the mortgage insurance book I believe you said that you know losses warrant booked.

Unless you know that situation deteriorates or start or did you say that there was some I do not put out but you don't expect kind of losses unless things deteriorate.

Yeah. Thanks, like let let me start off with mortgage first and then I'll ask Craig to talk about this obligation question, we have not put up any estimates for mortgage because we don't think we need to we think our loss estimates and we think our reserves are are fine more than adequate at this point in time, So we have.