Q2 2020 Argo Group International Holdings Ltd Earnings Call
[music].
Good morning, and welcome to Argo group, 2022nd quarter earnings call.
All participants will be in listen only mode. She need assistance. Please go outside specialist plus the starkey.
Oh.
After todays presentation the opportunity to ask questions.
Please note that this event is being recorded.
Not like the turn the conference over to Mr., Brett terrorists head of Investor Relations. Please go ahead.
Thanks, and good morning.
Welcome to Argo group's conference call for the second quarter 2020.
After market close last night, we issued a press release on our earnings which is available in the Investor section of our website at Www Dot Argo limited Dot com.
Presenting on today's call is Kevin Rehnberg, Chief Executive Officer, and Jay Bullock, Chief Financial Officer.
As the operator mentioned this call is being recorded.
As a result of this conference call Argo management may make comments that reflect their intentions beliefs and expectations for the future.
Such forward looking statements are qualified by the inherent risks and uncertainties surrounding future expectations generally and may materially differ from actual future results involving any one or more of such statements.
Our group undertakes no obligation to publicly update forward looking statements as a result of events or developments subsequent to this call.
For more detailed discussion of such risks and uncertainties. Please see our troops filings with the FCC.
I'll now turn the call over to Kevin Rehnberg, Chief Executive Officer of Argo Group.
Good morning, and thank you for the introduction Brett welcome to everyone on the call.
It's a really important strides as an organization this quarter and our results demonstrate that our initiatives are leading to stronger underlying underwriting results.
I'm very proud of how our team has performed during the global pandemic than reacted to the challenges of working remotely for an extended period of time and continued to service our customers and producers.
Well, we have all adjusting to these new working conditions, we still have managed to make good progress on our strategic objectives are benefiting from very strong underwriting environment.
Our financial results were impacted by coded 19 again in the quarter.
Well the catastrophe losses, we recorded relating to covert 19 were down from the first quarter and a manageable level for us it did push us to a slight underwriting loss for the quarter they shouldn't take away from the strong underwriting.
Loss ratio improvement.
Across the group and the best quarter, our U.S. operations has reported in history.
These improvements are better indication of where we are taking the company strategically and the results we are capable of achieving.
Additionally, our net investment income reflected the lag in reporting of the financial market volatility in the March 2020 corridor or private equity in hedge fund holdings.
This caused us to report only modest investment income during the quarter, but our overall portfolio has more than recovered from losses in the first quarter and is now at a positive total return for the year.
Looking through the volatility related to covert 19 related catastrophe losses in reported alternative investment performance I think there were a lot of positive signs that were evident in our results.
We were able to achieve positive growth in the quarter, including almost 6% growth in the U.S. and a flat top line on international.
This demonstrates not only the strong rate increases we achieved but also our strong customer relationships and product innovation in fact, some of our most economically sensitive businesses such as construction and surety continued to lead the way.
For us in the U.S. and were able to absorb the impact of the pandemic to report next quarter.
It also shows the we're not overly dependent on any single business Warner product our strategy to operate discrete business units catering to a specific industry specialty or niche provides balance during periods of disruption with today.
Second quarter submissions were up in our BNS lines and some of our focus growth areas such as Argo Pro other business units were down slightly but we continue to report positive submission growth in the quarter have started to see the slight uptick across the board in July.
In international the topline premium has been and we'll continue to be constrained by profitability improvement actions.
The market continues to present opportunities for although they are well positioned to take advantage.
Market conditions has continued to improve during the second quarter than we experienced high single digit.
Rate increases on average in the U.S. and mid teens rate increases on average and international we've seen the strongest pricing improvements and property professional liability and excess casualty across the group.
Property was up 13%, but in several places such as their views. It was up in the mid Twentys and across the board, it's been coupled with reductions in exposures.
A question liability rates in the U.S. and Bermuda increased more than 20% and excess casualty pricing was generally about 40% with per year, the excess over 60%.
The economic backdrop and the change in risk appetite across the markets suggests that these attractive underwriting conditions should continue well into next year.
Go as well as much as the industry has started to feel the earnings impact.
Of the continued drop in interest rates. This impact will continue its portfolios or reinvested in lower new money yields.
The incremental benefit of adding risk to our investment portfolio nominal. So we will continue our focus on improving operating margins and drive underwriting income to the bottom line.
Turning back to our results our combined ratio was 100.3 for the quarter.
This reflects the balance of our strongest quarter ever in the U.S. offset by underwriting losses in international that were driven by additional losses related to covert 19 and other catastrophes.
In the U.S., our combined ratio was 88.5%. This was really an exceptional result during a period of significant economic pressure in elevated catastrophe losses.
The loss and expense ratio showed improvement from the prior year quarter, which at 89.7 was a tough comparison.
I'm, particularly excited that we are able to achieve strong rate increases on top of already attracted margin and returns in our us business.
This is an area, where we will look to deploy more resources and capital due to the strong environment.
International reported a combined ratio of 120.4, the result, including more than 17 points faster be losses, and an elevated expense ratio that Jay will walk through in more detail. However, recent rate increases and re underwriting actions led to a solid improvement in the underlying loss ratio.
As we anticipated on the last earnings call.
Our koby 19 related cat losses were less than we experienced in the first quarter.
The majority of our exposure to the events in the second quarter continues to be focused on and then cancellation coverage in our international business.
Health precautions that business impact around the globe remain fluid situation, but we are currently expecting the trend of smaller losses related to the pandemic to continue for the balance of the year.
Overall I think there are some very positive signs coming from our underwriting results in the quarter. Our combined ratio in the second quarter included 17 million or 4.3 loss ratio points as catastrophes related to coded 19 adjusting for these losses.
Our year to date combined ratio remains at the low end of around 2020 combined ratio guidance of 96% to 98%.
No we provided in February.
We have initiatives in place that are designed to continue to improve our group wide margins. Many of these actions are already underway, but will take time to fully execute.
Process, which has been slowed a bit by the pin debit.
Businesses, representing more than $500 million a gross premium currently under review for actions that include additional re underwriting to improve margins, perhaps finding a partner to acquire certain business units were in the absence of that alternative simply shutting a business down in some cases.
This review is concentrated in areas, where we do not view there to be attractive long term growth or return opportunities for us.
We also have a sharp focus on reducing costs through these initiatives. Our objective is to drive the kind of efficiency, we achieved in our us business, where we sub premium per employee increased approximately 65% from 1.6 million to more than 2.6 million over seven year period. During this time, we've invested in technology initiatives.
To help us produce business more efficiently. These investments are paying off demonstrated by roughly 200 basis point improvement in our expense ratio double digit premium growth in the U.S. since 2013 as we speak today.
Business units and functional areas are doing extensive line by line review of cost.
Much of the easy work has been done such as reducing marketing expenses are exiting certain high cost businesses, including our operations in Asia and Latin America that said much of the cost that needs to be dealt with is related to unproductive or less productive parts of the platform I refer back to my comment from a moment ago about our intent to address those business.
Yes.
We expect this work will be complete in the next 90 days at which time, we'll have more confidence in communicating the progress, we're making on expenses and expecting 2021 and beyond.
Okay.
These are similar to actions that were taken in U.S. segment. After I joined our goal in 2013 to lead the us business.
Certain businesses, we had any less needed to be restructured or sold costs were rationalized to a more sustainable level.
Resources were deployed businesses with the best long term return opportunities and our investments in technology and underwriting tools improves our service and success. If you look back at our financials for the rest operations for the last seven years, you'll see that the strategy has led to strong and attractive margins. That's why we plan to execute for the entire organization going.
Forward with spectra of additional details to share with you.
As we make progress on this strategy.
I'd like to take a moment to discuss them of the recent announcements related to leadership changes.
Over the past several months, we've worked to design the refresh the organizational structure, that's more appropriately focused on our those go forward strategy being a us focused specialty company. These changes.
Covered underwriting claims operations and legal Argo as an excellent talent pool of individuals that have joined the company in recent years and in many cases, we've been able to promote from within.
Last month.
We also announced that we have started to search for Jay Bullock successors CFO at Arbor, Jerry has been a great asset to our of over the last 12 years and we'll continue to lead our finance department until his successor has joined ensuring a smooth transition.
Overall, we are encouraged by we're encouraged by what we are seeing in the market and progress we're making at Argo our underlying performance in the quarter was solid.
Particularly any less and in line with the expectations, we set out early in the year.
As a specialty carrier focused on US risks, we are well positioned to take advantage of increasingly attractive underwriting opportunities. We have freed up additional capital to deployed to those businesses business units generating the strongest returns.
Through de risking our investment portfolio over the last nine months and our recent issuance of preferred stock.
Both of these actions have provided additional rating agency and regulatory capital to write more selective business volume as long as the pricing environment routine remains attractive.
Our long term strategy and focus on delivering value for all stakeholders is unchanged. While we continue to focus on applying a theme of simplify reducing eliminate across all operations. We're really excited about the opportunities in the marketplace today with our current platform technology and capital resources, we see significant growth opportunities ahead.
For Argo ill now turn the call over to Jay to go through our results in more detail.
Thanks, Kevin I'll spend the next few minutes sharing some more detail on our results and then we'll take your questions for the second quarter 2020, Argo reported a small net loss of 6.4 million or 18 cents per share and a smaller operating loss of 4.7 14 cents per share primary drivers of the results in the period were elevated.
Patrick your losses, including losses stemming from Cobot 19.
The negative marks on our private equity hedge portfolio that are reported on a larger arm.
Right.
Despite the impact of the unusual losses and economic challenges in the quarter there were some real positives.
With some real positive underlying fundamentals within our results first on the topline growth results were in line with what we discussed on our call last quarter or some balancing forces a very strong rate increases across the organization three partially offset by lower insured exposures to the issues facing the areas many areas of the global economy, certain underwriting and price.
Quick refinements in our international segment.
In the second quarter us gross premiums were up almost 6%.
Growth was driven by a continuation of prop positive rate trends and strategic growth initiatives certain business lines strongest growth was in professional liability surety and are running business unit.
Net written and earned premium growth during the quarter in the U.S. came in at 2.86, 0.2% respectively.
On the international side, our gross premiums year over year were approximately flat in the second quarter of 20 Twond. This reflects balanced rate increases, but continue to accelerate offset by certain profitability initiatives, including action business lines and terminating binding authority relationships.
Overall, we feel really good very good top line in the quarter, given the macro backdrop and it aligns closely with our strategic objective to core capital to our best performing units.
Kevin mentioned, we saw strong rate increases in both our you often international businesses during the second quarter.
Average rate increase was above 10% or across the company.
This is an acceleration of the rate trend weve experienced over the past few quarters and the market clearly how's the tailwinds for this momentum to continue.
The rate environment will certainly help is improving underwriting margins remain our number one focus.
Our combined ratio in the second quarter.
It was 100.3 per cent compared to one when I was 3.4 in the prior year quarter.
2020 result exceeded 6.7 points catastrophe losses, which was primarily due to 4.3 points related to covert 19.
The remainder was due to regional storms in the U.S.K. and to a small provision for losses coming from civil unrest in the U.S.
Similar to last quarter, most of our catastrophe losses related to cope with 19 for the results cancellation exposures within our contingency business.
The U.S. combined ratio was an exceptional 88.5% in the second quarter strong level of profitability combined with growth in our premium base as to our strongest U.S. underwriting income number this quarter.
International combined ratio was 120.4 includes the majority of our catastrophe losses in the quarter.
Reserves were again stable.
Just 1.8 billion 4.4 points of unfavorable development in small positives and negatives across our business netted out.
Our little impact on our underwriting results, we're very pleased with the second quarter.
Deserved movement has been modest as we noted on our last fall we worked with a third party actuarial firms you get an independent review our reserve adequacy, we receive that report.
First quarter.
We've also this end up through and what we've seen over the past few quarters gives us comfort around our current reserves.
The current accident year loss ratio, excluding catastrophes improved 3.4 points from 59.3 50 about 5.9 in the 2022nd quarter.
This was a very nice improvement and brought U.S. and international segments relative to the prior year quarter as well as full year 2019 results. This demonstrates our strong focus on profitability.
And the benefit of rate increases we've achieved over the last few quarters beginning to pursue our results.
Also as many of the industry had noted.
The locked down and related slowdown in economic activity has resulted in lower claim frequencies. We have also experienced that in our property and liability.
Our claim counts, particularly in the U.S. were down significantly.
A portion of this apparent benefit as reflected in the results and can be seen most pronounced in the U.S. current accident year loss ratio non cat loss ratio.
Offsetting that someone in the current accident year results was large loss experience in our international units for marine liability and our power outage business during the quarter.
All in our loss ratio was 62% of a second quarter down three points from 66% in the prior year quarter.
What is much better underlying profitability story, we're frankly very exciting.
Our expense ratio in the quarter, while still some distance from large objectives showed modest improvement at 37.2%.
This was down slightly from the prior year quarter, but down from 38.6 in the first quarter of year.
Expense ratio in the U.S. as shown nice progress.
31.7.
And your day period.
This is a pretty competitive expense base, but we will continue to push on costs, where we can.
Contrast, the international expense ratio was 43.7 in the quarter compared to just under 39 last year.
As I explained on our last fall.
Strengths ratio reflects Argo supporting more of the capital at all at once business in 2020.
And with this we assume a higher share up expense base.
Pressure, it's come down debt as the international expense ratio was down about 200 basis points sequentially on the first quarter two points one.
In addition, as mentioned previously.
We are seeing acquisition costs dropped materially in business Spearing currently written the benefit of this large component of the international expense ratio will be everyday in subsequent quarters as that business is earned.
All said, we're highly focused on expense pressures in international. So this is not sustainable level.
Turning to investments, we had a nice recovery our investment portfolio during the quarter and we have returned to a materially positive return for the year.
This drove most of our increase in book value in the quarter.
Included in this were negative marks our private equity and hedge fund investments are private equity holdings are reported on one quarter and our hedge fund investments are reported on a one month like.
These assets in the quarter reflected the peak volatility that we're seeing the financial markets earlier this year.
As a result, our net investment income was 1.5 million for the quarter.
Including a loss of 23.4 million alternatives.
As markets have recovered significantly generally now positive over the year to date basis, we would expect anymore, but one will result from our private equity hedge fund portfolio next quarter.
On the core portfolio, we like much of the industry are feeling the pressure of significantly lower interest rates investment.
Alternatives was down approximately 25% from the prior year quarter to 24.9 million.
Late last year, we made the decision to de risk the portfolio.
This sort of accelerate at some of the income pressure, but is also freed up some additional capital to deploy into our underwriting operations at this point in time, given the current market dynamics it doesn't feel like adding risk to the portfolio, which would only marginally that's expected returns it's approved Mary.
Following the close to the quarter, we successfully executed our first preferred stock offering this additional capital will primarily be used to refinance our.
Our existing term RMR and 25 million.
But there are additional capital benefits of this transaction as our term loan we see no regulatory and rating agency capital treatment.
Replacing the term with security that received favorable treatment from regulators and rating agencies will allow us to support additional growth.
Operator that concludes our prepared remarks, and we're not ready to take questions.
Well now begin to question answer session.
Asking Washington with Press Star then one of your Touchtone phone.
For use of Speakerphone, please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then too.
At this time, we'll pause momentarily to assemble our roster.
First question comes from Greg Predictors of Raymond James. Please go ahead.
Hi, good morning.
Have a couple of questions for you guys first would be.
Around the reserves specifically in the International I. You said you know you did exhaustive review had an independent person company come in.
Is are you going to go through that same process say in the third quarter. This year. So there will be another review and you know I guess ultimately one of the reasons why your stock's trading it where it is just this lingering concerns that you're going to have another reserve charge from international come through.
In the third or fourth quarter. So any color you have around.
You know how the claims are settling out you know what the be case, how the case reserves are holding up et cetera would be helpful.
I'm sure I'll I'll take that.
I wouldn't anticipate that leaves it do external review.
More than once in a year, we have mentioned that we will be.
Probably with the services and saying from.
In subsequent years.
I would say that.
The activity that we saw and the first quarter and the second quarter. When we took a lot of action last year right.
Each quarter I don't know, that's what you're referring to it I appreciate that.
Blocks the activity that we saw in that first quarter in the second quarter of this year was in line with expectations. So books incurred.
Settlement or.
Where this case reserves.
I've been posted evolve.
With that within expectations. So.
I I guess I referred back to the China.
And my my remarks, you know, we've got two quarters, where basically we didn't have any material movement.
In either.
For the U.S.
Got a third party from a very reputable from study that gives us some comfort as to where we are.
You know one of the things that most everyone's reported is that there's been a reduction.
And noted for Sosa loss, new claims et cetera.
Do you think you think.
Through as a result of coal, but in the economic shut down do you believe that that's.
Also affected some of the issues that were in your international business. The reserves. So that may be what you've reported seen in the first two quarters. Each year may have mass maybe some underlying challenges that still may be there.
Well I certainly wouldn't sometime.
First quarter Oh, Okay. Thanks, really really got started better really.
The.
Planes level.
Liberty level, but we've seen a reduction in claims was most pronounced in Iraq, we didnt see at nearly as much.
International So I don't think.
Is that.
Influence I don't think that the results are influenced by that and I think that what we're saying from there tends to be up.
Allied and many of our international businesses, especially the Lloyds business reporting lines. Its just.
The nature of getting information through that system.
So we haven't seen anything we haven't seen a drop off.
But neither have we seen anything that was outside of expectations.
I would add Greg, it's Kevin I would add to that that.
Some of the prior year development work that you saw in last year was around areas that we were significantly re underwriting as well and some of those actions have been going on in some instances back to the first quarter of last year and subsequently over the last.
46 quarter so.
You know the.
If you you're talking about is more related to prior year than it is to current year since the underwriting Act bid.
Aided by the market changes.
Okay.
I'd like to pivot and I know, there's been some plus the ports regardless.
Presale I think it was rumored that or I saw report that area, we was up neighborhoods.
Potentially up for sale and then in your comments you've talked about you know businesses under strategic review, obviously, you're probably not going to give as much detail on what's going on but certainly you can give us an idea about the amount of capital that is backing these businesses that are.
Quote unquote sluggish generate acceptable return so we can size up from both the premium in a capital perspective, what Chuck could the business is you know in question here.
Yeah I think.
First of all we don't comment on room, or so I'm not going to do that like you anticipated. The second thing I would say is that and pill anything done we don't know where things are going so you know there's there have been.
I mean do you view us as an example, where we have.
Over the course of glass.
Seven to 10 years, just continue to look at what's in there and get out of businesses that or new capital away from them. If they haven't been performing don't have longer term prospects and in it could be that there is a situation or the business is better with another partner than it is with us and Trident was the most recent example of that.
So.
And we continue to have U.S. businesses that were looking young can you have international business, we're looking at but until the action is taken and.
We don't know what that actually is if it's if it's a renewal rights the capital still going to be there for a while we're running off the business like it happened to be lies with the Allied network right.
In places like Asia Pacific or Latin America. The books were relatively small and you know that didn't have much associated with it so.
Any cases, we can give you would that would be and we'll give you know probably do a better job of.
Trying to identify what has moved around a bit where things have freed up would come back next quarter, but at this point it'd be premature to say, we've got X amount of capital in this business and they are under review because.
The marketplace turns right when you get the rate and we can get the book Vic we'll keep <unk> trading.
Well, that's a good not point to make Kevin because it would seem that except for workers comp and maybe a couple other lines, you're probably in the best pricing environment. We've had their last 15 plus years, so exiting businesses right now may not be.
You know a good long term strategic decision, but again you're on the ground were just sitting here in the cheap seats.
Yeah, I mean that do you want to keep you up more question are you willing to respond to the Gulf <unk> you can respond to it but it's yeah. Okay. Yet don't forget we we're a specialty company me right sub segments of businesses. So you know the fact that rates are up in a particular area maybe.
Maybe break that's not the only thing that drive the environment. There is the external exposures. There is the core precedents that or is that there's the capital requirements than needed for the businesses and the relative returns that are available in other businesses that we may have so.
When you've got the number of discrete business units, we have the value of it is that you're not dependent on any one of them right. So someone might table rates are going up like this and you know in our view that may not be not break or.
There may be other circumstances embedded change too because the playing field significantly so that rates just not the only thing when you're looking at so I understand that Theres a view that you know it may not be the best time to get out when the rates are going up but there's also more interest in people who may be willing to partner.
Her with you and timing of that.
Got it.
I'm sure. There's other watch so I'm going to conclude with one last question.
Jay and your comment you said.
Obviously, the investment income was affected by alternatives in the second quarter, yet reflected the March 31st marks.
And you said I don't know if its direct quota, but it's almost direct.
No more normalized resulting pipes activity going forward.
Can you please help define what that means.
Sure I mean.
You go back to over the last couple of years, when we tried to several years ago and one was probably the start of the six years ago. When we like many in industries like alternatives are generating income.
You bet, we tried to provide some sort of backing out the mass that that kinda loved ones to their conclusion that.
Three to 6 million per quarter.
Portfolio, which was not unreasonable and that's kind of what I consider to be more global results coming out of that so I don't think Jeff. If you think about the two components. One is a hedge fund component, which has a much like ER and the other is private equity I think you'll see a rebound.
Finally, I'd be private equity will be fine I don't expect that managers of private equity would necessarily mark up their portfolios of all product almost all private physicians, but I do think that you'll get back to a more normal Oh results, which often includes and the private equity arena.
Positions that happen Barker.
Got some diversification over that portfolio. So mid mid multiple manager. So it's not uncommon to have a disposition that generates a positive result, so that's what I made by more normal result.
That's exactly what I was looking for thank you. Thank you for the answers.
Thanks, Greg.
I got the other question. Please press Star then one.
Our next question comes from Jeff Schmidt of William Blair. Please go ahead.
Hi, Doug good morning.
Looking at the do you asked the accident year loss ratio ex cats, obviously was really good under 55% sounds like that was a record.
And I get surprised to see that much of a drop for 90 basis points just given.
The uncertainty that still out there social inflation is still out there.
How much that was driven by I guess, just kind of favorable frequency trend.
Pandemic, which maybe we can.
Kind of thinking that it's more nonrecurring.
Or what was what was the drivers there.
Yeah, I think thanks for the question meat and good morning, the [laughter].
It was a combination of the lower frequency and mostly driven by that but don't forget we're getting rate and re underwriting as we go alone. So I would say, it's a combination of all of those things but the.
The largest of the three drivers is there in that would be.
The drop in frequency.
Okay, if you want to expand on that.
No one.
I think it's it's religious reflection of what happened Jordyn pure.
And we've not made it.
And the.
You know.
[noise], which we tried to take a.
Somewhat conservative approach to what the data was telling us and we didn't extrapolate on what that data could be.
Future such that yes.
It was a onetime.
Right.
You know, you'll see an uptick in the third quarter.
But.
Yeah, Ryan say I don't think I'm.
In a position to.
You don't make make predictions about what what that frequency.
[laughter].
I believe you've mentioned the average rate increases in the U.S. were 10% [laughter].
Other didn't mention you now they're seeing loss costs increasing.
4%, meaning that.
In line with kind of what you're seeing.
Just I'll, let answers cannot let me jump in but I made the comment that the 10% was across the entire group. So it's every business across the group, 10%, So U.S. and international but Kevin if you want to comment on loss costs.
Well yeah. The U.S. is just slightly under 10% is one where we are in and they get it really varies by class and again the loss costs vary by class II. So if you averaged it out our average may not be like somebody else's, but we're not seeing an acceleration other than the areas that we've talked about previously social inflation.
But those are do you know moderated through reduction in exposures largely so limit you know maintenance, if you will as well as rate and some terms in attachment points. So.
But the underlying loss cost because of the drop in the claim activity.
You know consistent with what the rest of the worlds.
Okay, and I would I'd also add to that the rates were seeing on line are right in the bands and ranges that you that you're hearing about so when we talk about professional liability will when you go to do you know specifically, it's you know twice what we're getting across the board in professional liability because that's what's happening which will drive.
In that segment of the market.
Okay and.
And then just one last quarter investment income the non alternative.
Oh, we're down quite a bit 20 to 25 million you talk about sort of the portfolio de risking could you maybe explain that I'm just trying to understand how much that drop was from that versus the yield pressures well. So there is so there's two there's really.
There was a couple of things that happen right and in the fourth quarter of last year.
Coincident with land.
You know stepped in into the role you know we were looking at the environment.
Pre everything that's going on right now right and thinking well this is a great underwriting.
I want to put our efforts towards the U.S. specialty business and one way one way to have more capital you that which is to take some of the risk out of the investment portfolio, which is well constraints capital. So we.
We are we sold almost 300 money Oh the equity portfolio.
Hello got in cash.
Through the beginning of year.
And then.
Or perhaps even a bit more cautious as most people were in the March and April time frame trying to understand.
How the economy was going to read out feel pretty reasonably comfortable about how the economy was going to react and what impact that might have on.
James.
Cost and so on and so forth.
After the same time as we all know, especially on.
Cash or really short term investments anything inside of the year rates plummeted jobs and effectively nothing if you go back a few years ago.
Three years ago when.
It was a period of time with the short end of this.
Her came up with that but before that you know any kashi hell be basically we're getting that you want it. So common unintended consequence of having that greater amounts of liquidity at the same time, that's a really short end of the curve goes flat, that's kind of big Big impact I think will.
I think as we're understanding how.
You know the economic environment is affecting our platform starcher reinvest some of that but even the reinvestment is gonna be kind of a modest benefit given.
The fact that always our or Marshall.
That's kind of the exploration.
One of things happen.
Okay got it up I think for the answers.
This concludes our question answer session.
I'd like to turn the conference back over to Mr., Kevin Rehnberg. Please go ahead.
Please.
We just have a question now coming in from Greg Peters. Please go ahead.
Hey, I just wanted to get a couple more questions and.
First.
There's a lot of there's a lot of reports around the current CA case in the UK around business interruption that and.
And so you could just take a moment if that case goes against the industry is that going to be something that's gonna be come back in.
Still.
It for you guys or if you don't want to answer that question, maybe you could just talk to us a little bit about your or remind us about your business interruption type of exposures.
Okay.
Thanks, Greg So yes, the AK is UK Pacific and it is about particular wording types and there're a number of different wording legs.
We write less than $10 million of that business.
So while there will be potential exposure there.
It is not a significant book.
That will have an impact.
Going forward and something that is no.
Contemplated in our universe, and we look at everything across the board.
Where that goes from there I don't know I don't think anybody knows but I'd now turn.
Sure the impact of will have on us its.
Pretty small now the business we right.
You said, it's 10 million of subject premium or 10 million of limited exposure.
No it was premium.
Oh, okay.
You know you know.
Here in Florida.
We had our first hurricane already [laughter] or semi hurricane.
Can you.
Give us an idea you because we are in cat season.
You know if theres a if there was a major cat events you know what how's your reinsurance structure addition, near steered you know hold off if there's a you know there's a it's a major back to you that U.S., how should we thinking about that the company.
Yeah, Greg.
Not dissimilar from what it was last year.
Our.
Reinsurance retention of designs and manage quarterly volatility and.
Meaning you know.
The Retentions that we had in 2019 and then there's a lot of questions around this and 18.
And <unk>, but we haven't changed we haven't made any material changes. So we had the same.
Appetite any exposure that we had a wash.
Got it.
The last questions Ron Capital Management, obviously, you talked about the capital raise.
It's you know the stock is trading at a the substantial discount I know some of the larger companies of.
Pause, there or share repurchase programs and I know you have a dividend.
But I'm just curious what your positioning is on capital management.
Yeah.
For the for the near term.
Sure and where the stock prices because it certainly seems to be a could use of cash or extra capital by stock here.
Yeah.
This is a this is an obvious one you know when you looked at it economically but.
The unknowns in coated arena and liability side have more than just a regulatory and rating agencies scrutiny. So the.
Potential buyback shares is a lot more limited right now than it was in prior years.
Okay.
Thanks for answering my follow up questions.
Thank you.
Yes, I'll conclude your question answer session.
I went to turn the conference back over to Mr., Kevin Rehnberg for closing remarks. Please go ahead.
Thank you I would like to thank our employees for their continued efforts and trading through these difficult times or producers for continuing to work with us finding risks in helping solve our.
Customers problems and to our shareholders in all interested parties who are.
Continuing to support us and joining us today. So thank you everybody then you have good day.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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