Q3 2020 Argo Group International Holdings Ltd Earnings Call
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Welcome to the Argo Group Conference call.
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Thank you and good morning welcome.
Welcome to Argo group's conference call for the third quarter of 2020.
The market close last night, we issued a press release on earnings which is available on the Investor section of our website at <unk>.
W. W Dot Argo group Dotcom.
Presenting on today's call is Kevin Rehnberg, Chief Executive Officer, and Jay Bullock, Chief Financial Officer.
The operator mentioned this call is being recorded.
As a result 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 involved in any one or more of such statements.
The group undertakes no obligation to publicly update forward looking statements as a result of events or developments subsequent to this call.
For a more detailed discussion of such risks and uncertainties. Please see our groups filings with the FCC.
Now I'll turn the call over to Kevin Rehnberg, Chief Executive Officer of Arbor Group.
Good morning, Thank you for the interruption Brett welcome to everyone on the call. We filed a short slide deck. This morning that is also posted on our website <unk> refer to certain slides at various points in my prepared remarks.
Today I will speak to you about some of the strategic progress we have made over recent months and our plans for the future I will also discuss some of the positive signs we are seeing in the market environment and comment on our results for the quarter.
Since our last reported to you and throughout the year, we have made significant progress as a company.
Slide three provides a summary of some of our key achievements. There are five key projects, where I'm pleased to report additional detail.
As we announced yesterday, we have entered into an agreement to sell our reinsurance business area. We expect the transaction to close later this year subject to certain regulatory approvals.
We have also made progress on a plan to exit our underwriting operations in continental Europe outside of Lloyds that's.
This includes our platforms and Italy Malta.
In Italy, we are closing close to finalizing an agreement to transfer employees and solar operations to a third party.
Also we have stopped writing new business altogether, we will continue to evaluate options for the business going forward.
In the U.S., we have decided to put our grocery and retail business unit in Toronto, we have not been able to achieve either the scale or returns to continue to invest in the business.
And finally, three weeks ago, we announced entering into a reinsurance to close transaction for syndicate 12, hundreds reserves for the.
2017 than prior years.
In total the business I, just outlined represents over $400 million of annual gross premiums <unk>.
All but approximately 30 million of those comes from our international operations I would note on a net basis the impact on premiums and underwriting results is less meaningful these businesses in total represent approximately 175 million of net premium, including approximately 75 million from hurdle rate.
As we've discussed previously we are constantly reviewing the best uses for our capital.
To produce the best possible returns.
A series of announcements does not mean, we're done we continually review businesses that are underperforming or not aligned to our strategy and will pursue options to maximize value for our go redeploy our capital elsewhere.
These actions reflect a lot of hard work from many of my colleagues since the start of the year. This represents an important step in our journey to becoming a high performing U.S. focused specialty insurer.
We know we are not there yet.
And there's plenty of work ahead of us, but I'm excited about the progress we have made.
Exiting these businesses will free up capital resources and management time to focus on our strategic growth areas.
As we and many in the industry have reported underwriting conditions remain attractive across many lines we operate it.
Our strategy is to focus resources on the highest return areas and these strategic actions help support that goal.
I would also note that the reinsurance to close transaction provides us with protection against any further resolved reserve volatility from the years of account to some thousand 17 prior for syndicate 1200 bits.
The transaction was priced approximately at our booked reserves, which is another sign of comfort with our current reserve position. We are happy to put this behind us and focus on better underwriting opportunities. We have ahead.
As we have said before our goal is to become a more focused and efficient organization.
Today, we are sharing our plans to take expense actions of $100 million against total expenses incurred in 2019 of $724 million.
We will be reinvesting some of these savings into our ongoing businesses, where we are generating better returns. We expect the savings to result in an expense ratio of 36% by year end 2022, which is a 250 basis point reduction from 2019.
We provide additional detail on pages five and six of our slides. We believe this is an achievable near term target that we will hit by focusing on a few key areas.
First we've announced several new executive hires and departures in recent months the reorganize leadership team will reduce the size and cost associated with senior management.
Second we are reviewing our real estate footprint and have reduced our marketing budget since sheltering in place began about seven and a half months ago, almost all of our employees have been working remotely. This.
This has allowed us to reevaluate travel entertainment and real estate needs for the future.
Most of our leases are long term, but we expect to produce savings in this area.
Third we have and will continue to exit businesses that are not able to control costs or meet our return hurdles.
Several of these actions and transactions I mentioned, a moment ago fit into this category.
Lastly, being a more focused organization will reduce.
Needs for some external resources, and we expect to reduce certain holding company and investment expenses.
There's also been a drag on our results from other corporate expenses in 2019 other corporate expenses totaled $38 million. These costs are not included in our expense ratio, but have a meaningful drag on our results.
Im pleased we incurred only $400000 of other corporate expenses during the third quarter of 2020, we do not expect these costs to impact our results in the future.
We believe these actions are a positive initial step to bring our expense base more in line with our peers.
While we are highly focused on reducing expenses, we will continue to invest in our platform. Today, we are seeing opportunities to benefit from investments to improve our processes and increase automation.
We provide several examples of this on page seven of the presentation. We're confident these investments will continue to support long term sustainable benefits to underwriting results by being able to handle more business with the same amount of resources.
This year, we expect to spend about $10 million on our digital investments. We believe we are getting good returns on those investments as they support some of our most profitable and fastest growing business units a good measure of this is our us operation in our US operations is premium per employee in the last 10 years, we have been able to double the amount of pressure.
We write with roughly the same head count as seen on page eight of our presentation.
Turning to market conditions, we continue to see strong rate increases during the third quarter on average pricing was up more than 10% across the group.
The U.S. was up over 9% on average while international was in the mid teens. We are encouraged by our ability to get rate and do not foresee slow down in the momentum. Additionally, we are seeing favorable changes in terms and conditions.
Well the pandemic is certainly having an impact on the economy and growth in certain lines of business for us we remain very optimistic about the underwriting opportunities ahead of us.
Our financial results for the quarter were impacted by several natural catastrophe events, mainly U.S. windstorms and wildfires as well as additional catastrophe losses from COVID-19.
Combination of these pushed us to an underwriting loss for the quarter. However on an underlying basis. There were some very positive signs in our results. Our current accident year ex cat loss ratio improved 4.6 points from the prior year quarter.
Better result was primarily related to stronger rates and re underwriting actions, we have taken across our book of business.
Similar to the first half of the year Reserve development was modest in the quarter.
Both our us and international operations experienced favorable development in the third quarter and on a year to date basis. This was offset by strengthening in our runoff segment, primarily related to the legacy, especially those exposures.
We are very pleased with the stability of our reserves have shown this year as we mentioned last quarter. We had a third party review done at year end 2019 study showed a central estimate that was in line with our booked reserves. We now three quarters in a row during 2020 with very modest net development overall, we remain comfortable with our current reserve position.
The expense ratio was up 60 basis points from the prior year quarter to 36.9. However, it was down nicely from both the first two quarters this year.
Although it will continue in a straight line, we expect our expense ratio will move in the right direction to 36% by year end 2022.
As you recall at the beginning of the year, we set our combined ratio target of 96% to 98% on a year to date basis, our combined ratio was 104.8% above our original target.
However, if we apply a more normalized cat load to our results we would be within our guidance range for the first nine months of the year page.
Page four of our presentation shows our year to date performance relative to our guidance range and 2019.
Looking through the impact of catastrophes and coated.
Our underlying performance for the first nine months of 2020 has been strong.
In terms of growth our topline was up about 1% in the quarter us growth.
It was 2.4% while international declined 1.4% in the US I would note all lines of business experienced growth with the exception of liability. The primary driver of the decline in liability was our workers compensation business that has been impacted by payrolls. This.
This included our fronting business, where we don't retain any of the risk and to a lesser extent at rockwood. Despite.
Despite this impact the U.S. still reported its strongest premium quarter in history I.
I would also note that liability submissions were up more than 5% in the quarter.
We are making good progress on the underwriting side and anticipate continued benefits from the strong market conditions across many areas of our business and the expense initiatives. We now have in place, we're extremely well positioned to our size with our capabilities and talent to continue to build a leading specialty insurance business I will now turn the call over to Jay to.
To discuss 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 third quarter of 2020, Argo reported a net operating loss to common shareholders of $11.9 million or 34 cents per share an improvement from last year's result of up to 44 cents per share loss.
And while still a loss in the current period was it was impacted by fundamentally different factor than last year's results, namely elevated catastrophe losses included losses, including Austin stemming from cold at night too.
The underlying current accident year margins represented a significant improvement and for the third quarter running prior year loss activity was not material.
A further positive note, we experienced a nice rebound than the marks on our private equity and hedge fund portfolio that are reported.
Through our net investment income.
First of all the topline gross premiums written of $890 million up approximately 1% from the prior year quarter similar to last quarter growth was impacted by continued strong rate improvement being partially offset by lower insured exposures.
As a result of economic headwinds and the exit of business, It's Kevin alluded to in his comments.
In the third quarter U.S. gross premiums were up 2.4% our growth was driven by a continuation of positive rate trends and strategic growth initiatives in certain business lunch.
The strongest growth was in professional liability and inland marine.
Net written premiums declined 3% in the quarter, primarily due to the impact of additional regions reinsurance purchases relative to last year's quarter.
On the international side, our gross premiums year over year were down 1.4% in the third quarter of 2020. This.
This reflects a balance of rate increases that continued in the mid teens during the quarter offset by certain profitability initiatives, including exiting business lines and terminating binding authority relationships.
Overall, we feel really good about the topline in the quarter as Kevin noted was the largest this was the largest gross premium total in the history of our U.S. business.
In international was down only modestly and in line with our strategy to focus on profitability over growth.
Given the macro backdrop, we think this is a pretty good result.
Our combined ratio in the quarter was 110.7 compared to 111.4.
In the prior year period.
The 2020 result included 16.5 points of catastrophe losses, which were primarily due to us for a change in the wildfires.
The remainder was due to the continued impact of trial did not change.
Similar to last quarter, most of our catastrophe losses related to totaled 19 were the result of event cancellation exposures within our contingency business.
We believe we have manageable exposure and expect future losses related to cold at night, Jim will be meaningfully lower.
And we have reported on a quarterly basis during 2020.
As to the contingency business virtually all exposed events will have been determined by the middle of 2021 and the impact from those events is modest in comparison to recent quarters.
The U.S. combined ratio was 102% in the quarter and included 26 million or 9.4 points of catastrophe losses.
The international ratio was 116% and included approximately 45 million or 30.9 of catastrophes and co that 19 related losses in the quarter.
[noise] reserve development in the quarter was unfavorable by $1.6 million. This.
This reflects favorable development in both our U.S. and international operations offset by specialists related strengthening in our run off segment.
Overall were very pleased that for the third quarter in a row No reserve movement has been modest and on a year to date basis, but to your question international or reporting favorable development.
On an underlying basis, excluding catastrophes and prior year development.
Our loss ratio and combined ratio showed very fast very positive year over year improvement.
Our ex cat accident year loss ratio improved 4.6 points from the 2019 third quarter.
On a year to this but on on on a year to date basis. It has improved by 2.3 points.
This demonstrates to us that our underwriting actions over the last 18 months are beginning to bear fruit.
And get picked up in the numbers.
In the U.S., we reported a one point increase in the current accident year loss ratio excluding catastrophes.
Increase includes approximately 1.7 points from two large claims while the prior year did not have any similar experience.
Overall, we're excited.
About what we're seeing in terms of underlying margin trends, particularly with the pricing environment that appears to have strong momentum for sometime to come.
Our expense ratio in the quarter was 36.9% compared to 36.3 in the prior year quarter.
The current period was impacted by reinstatement premiums.
Which increased the ratio by <unk>, 0.3%.
While we are still above our ultimate expense ratio goals as Kevin shared earlier.
We have a strategy to address our expense ratio and I've established targets as you outlined.
In the U.S. the expense ratio is up a little over a point year over year. This primary primarily reflected change in business mix and the impact of reinstatement premiums.
On a year to date basis, our U.S. expense ratio hasn't proved compared to 2019 and stands at 32.2%.
The international expense ratios showed some good progress in the quarter.
We reported an expense ratio of 38.9%, which was flat with the prior year quarter. However, the expense ratio was down nicely from the first two quarters of the year, where it was over 40%.
Turning to investments our investment portfolio.
Performed well in the quarter and included a nice rebound in our alternative investments.
Alternatives contributed $19.3 million to our investment income during the quarter, that's private equity and hedge fund March rebounded.
This also included the receipt of a performance based contingent payment related to the 2017 sale.
An investment that had been accounted for on an equity basis and therefore included in investment income historically that gain was just over $6 million.
Our core portfolio continues to face pressure from lower yields and tight credit spreads investment income excluding alternatives was down approximately 30% from the prior year quarter to 22.7 million.
Part of this decline reflects de risking decisions, we made late last year, but the general yield pressure in the market is unavoidable and we are not currently looking to expand our risk appetite.
I would note that the foreign exchange loss.
It was greater than we have experienced in prior quarters and the result of an increased level of volatility in currency markets related to the dollar pound Sterling Euro and Canadian dollar of.
A portion of this losses offset by gains in our investment portfolio from asset sales and non U.S. dollar currencies.
Turning to capital during the quarter as expected we use part of the proceeds from the preferred stock offering to repay the outstanding term loan of 125 million.
Then I would note that preferred provides capital credit while the term loan did not.
Our book value per common share was down slightly in the quarter was flat relative to June 30, this when adjusting for dividends.
I'd like to provide some thoughts around our announced transaction to sell our reinsurance business burial rate as we have discussed previously aerial was largely supported by third party capital.
In 2020, Argos capital commitment to support aerial was approximately 26% from the capital.
Supporting the business against which we had approximately $100 million deployed.
Under the agreed transaction, we will keep the historical reserves and then remaining exposure exposure is related to the 2020 year of account and.
And the buyer will provide the capital for the business going forward.
We expect that this will free up.
Oh about half of the time of our capital commitment at closing with the remaining half to be released over the next two years I would note that there are only about $80 million of reserves associated with this business.
And that they relate mostly to short tail launch.
Operator that concludes our prepared remark remarks and were now ready to take questions.
At this time, we will begin the question and answer session. So asking the question in your press Star then one on your consent them.
Using a speakerphone please pick up your handset before pressing the keys.
The charter your question. Please press Star then too.
At this time, we will pause momentarily to assemble our Austin.
Our first question comes from Greg Peters Raymond James Greg. Please proceed.
Hi, Good morning, everyone, let's just a first step back and talk about the business that youre. The I think you called out $400 million of total gross written premium.
And $175 million net written premium that's going to be coming off the books.
Can you talk about you.
What did the combined ratio was on that business relative to the group average I'm just trying to understand from a modeling perspective.
Is this going to be a lift or a drag on the loss and expense ratios.
Yes, Greg good morning.
The let's ICSC, let's exclude a three.
The reinsurance business from that because that was a pretty.
Performing.
Okay for US and then line the reason that we sold the reinsurance business was that the returns and the ship, we're shifting capital to lower volatility as Jay talked about that that with our strategy today, we're not set up for the volatility of the upside to the downside that comes with that business. So it wasn't Mr.
Our performance in that business itself. So the other ones that you're talking about a would be Europe. The two European operations at Argo insurance and suffice it to say those had been drivers of a poor results we have not.
Talked about in the past, but I.
Splitting it out like that I don't have the number of top of the head, but I can get it for you.
Well I'm just directionally, they certainly underperformed and that's why we've been taking underwriting actions in those businesses.
Over the last several years right so that to come under review.
The businesses are either not making the appropriate returns or they don't fit the strategy or were not the right company for the strategy that you could get with an organization such as Ariel.
Got it okay.
I understand directionally, what you're trying to head with us and.
I know you in your slide deck, you focused on you know that slide eight which is the employee count for a gross written premium <unk>.
I I you know I look at that in the context of your dropping you know next year $400 million of gross written premium is that what we see that will we see that that chart on slide eight go down now because of the reduction in gross written premium that's a really good question, Greg I want to point out this slide.
As for the U.S. operations only okay. So.
What's the point was really to highlight what the investments in digital and systems have done over the past.
10 years since the initiative started they weren't all digital until 2012 and 11 in some of the work started on the workflows side and it's important to note that through that period. There was also about $600 million of business that was pushed out. So this is us exclusive and the whole.
The whole point is to show that we have put tools in place and we're moving to businesses that are efficient and profitable, but we can continue to grow as we do that and we're setting ourselves up for really good growth going forward.
Impact of the largest premium you're talking about is going to be felt in the <unk>.
The international business and because of that we're going to have.
Not a linear drive towards the 36% group expense ratio, there's going to be costs associated with the exit.
Exited some of those businesses or re underwriting that goes on so thats why we said it's over a.
You know two year period that we're looking at.
Got it.
Well each quarter.
Track and let you know where where some of those moves come from but there will be some times where.
There's costs associated with exiting at that will appear in the business.
Got it and then I guess.
Other areas just to talk about and I know you provided color around the expense ratio and reinstatement premiums, causing in some headwinds to improvements there, but as an offset to that you know most of the companies that we're dealing with are reporting.
Upper Bowl.
Thing favorable expense variances like on travel and entertainment et cetera, and I guess, you know to some degree we didn't see as much of that come through and they're consolidated numbers. This this quarter.
When you when you go forward I mean do you do you are you is it your intent tensioned not to incur travel entertainment.
And to keep it at these current levels you know as we think 21 and 22 in the <unk> and I'm thinking about this in the context of your goal to get down to the 36, <unk> expense ratio, where where's that kind of come from essentially.
No that is a great question, Greg If you go to page six and look at the four segments right, we actually talked about TV in there.
The best way to think about this is that the bottom one other general expenses is going to be about a third of the total.
The one above it business rationalization is going to be a little bit less but roughly a third and then the other two are going to be split with the remainder with more weighting towards marketing and TNT and real estate. So there has been some.
Savings this year from from where we were at 19 and those total around 55 million.
Across the four buckets.
So.
Costs associated with that so you're not going to.
Like getting bucket three there is a lot of costs associated in there some in bucket one so you're not going to see that necessarily in the expense ratio itself.
Similarly, where we've had reductions in real estate travel and entertainment and marketing.
Those will continue longer than we thought but they're going to go back up at some point in time, what t. and they will go back up when the world eventually starts trading face to face again, but I.
Because we are reducing our footprint in terms of where we have people in the business we're focused on.
We expect there to be a reduction there and we're not going to go in and we're not going to operate the same way we did with.
The types of meetings that were conducted in the amount of business travel a lot of people have been able to figure out how to use the.
The technology to to work well.
And get the business for us it doesn't work in every line of business, but it works and most of those quite well so.
But we'll address those each quarter and we can highlight but we're starting to travel again and I think what we want to be able to do is give you insight into what's in the buckets and you know scorecard update each each quarter. So.
Well, what's left on said Theres $45 million and that roughly equates to 250.
A basis points that we talked about that would get to the 36 by year end 2022, and I keep emphasizing that because.
There may be times, when it ticks up and it doesn't look linear naked frustrating.
That makes sense I guess the final question yeah.
Let others ask call would be strong capital management.
You know your your your stocks trading below book value you have a track record of dividends and at times share repurchase Where's The board stand with you know capital and capital management, and specifically share repurchase.
Yes. So I think you know every meeting we look at the alternatives, we have and one of them is share repurchase another would be dividends, obviously and then the third one which has been really what we've been pushing the money towards his business opportunity and as we continue to see.
Good business opportunities any excess capital we have we'll go we'll go there first.
Thank you for your answers.
Thanks.
Our next question comes from Jeff Schmidt of William Blair. Please proceed.
Good morning.
On your expense ratio target of 36% could you give us a sense on on what your targets are for each book I mean, there is a lot of that coming from the international I just wanted to get a sense on what you think what the U.S. targeted.
That's a good question.
The majority of it would have to come up in terms of a percentage basis on the expense ratio in each segment from the from.
From the international.
Book, because it's starting so high.
But the growth that we're going to have in the U.S. business is outpacing the business in the international area, so that that means that.
They'll be more costs borne by the U.S. business.
So even though theyre all us focused businesses right. It's just that's just math, so we will be.
Be working on both sides, but I think you'll see more investment in the U.S. and probably over time, a more on a percentage drop from the international side.
Okay.
And then when we look at.
Sort of corporate expenses, which you can kind of just back into if you take that total underwriting expense line subtract out the segments.
Historically that had been you know price.
Average 12 million a quarter 13, 14, even Dan.
And that's been running at eight now I know there's.
In this competition, there which can vary.
But it's been 8 million this quarter last quarter.
Is that the right run rate or is there some incentive comp.
No.
Lower there were maybe that's going to be 10, or 12 million going forward yes.
So it's it's a.
It's not it's not an easy question to answer for you I am sorry, because when.
With some of the departures that we're going to have some of that may impact what was in the incentive comp and.
That will move.
As we go forward as well, but what I would say is that the our expectation over time is that as the business gets more.
Focus there will be a reduction there Jay do you want to add anything here yeah.
Yeah, no. It's a I think you.
Got to the point I was going to get to covenant and I would say that.
Currently kind of trying to 10 million a quarter remember this is the cost that we retain at the corporate level think of it as you know the cost of running.
A public company and a public company that trades in several international markets as the platform simplifies theres opportunity to reduce cost. So right now that's what I would think of it as Bob but that's also something where I think we plan to make progress.
Okay.
And then in <unk>.
One more on the expense ratio of 36% target does that assume.
That Ariel re deal gets completed I mean, I presume you self regulatory approvals and all that I don't know was Ariel re running at a much higher or lower expense ratio than that.
No. It does a very good question. The it does it does contemplate the sales of area right, we're waiting regulatory approval, but the our intent and the buyers and tends to move forward.
And the reinsurance business had has some on a direct basis was not as expensive as the rest of the organization. However, they there was a lot of resource consumption. So some of that corporate expense would would show up in that area. So.
But it's all contemplated.
Okay.
Okay. Thanks for the answers.
As a reminder, if you have a question. Please press Star then one.
Our next question comes from to see Alexander from Compass point. Please.
Please proceed.
Yes. Good morning, you called out the fact that you had added reinsurance purchases to that net written the U.S. operations is it is it the companys feeling that that looking at the prevalence of cat events and and the change.
There's some weather patterns that you may actually further increased reinsurance purchases.
In the U.S. operations to again dampened the volatility of earnings related to cat events.
Good morning, Casey we.
We.
Protect the exposure to cat events across the group. So that's done you know with what what is looked at as the property exposure. We have in the U.S. book through the Bermuda operations and through.
The international operations. So I don't think there'll be a change in how we look at that but on a on the.
Casualty side, we've had some significant reductions in our limits exposed in not only the Bermuda casualty market, but.
20.
27%, but also.
Also in the U.S. casualty market, our excess limits are down 15% year over year in Argo pro over a two year period, they're down 25% with an increase of.
Cumulative over that two year time period, 60% in rate so.
We'll be reevaluating, what our reinsurance purchasing needs are and whether the programs fit the current limit profiles, because they've changed and that could lead to some savings for us in the U.S.
Okay.
All right. Thank you secondly, I understand if I got this right you have about $100 million of capital deployed to reinsurance and the transaction would free up about 50 million immediately and the rest over a couple of years, but is there also a purchase price related to the transaction.
Yes, we haven't disclosed that well wait to close.
So okay, but when when its appropriate we'll come forward with the appropriate cost it cost me nothing to ask the questions of course it doesn't [laughter].
All right. Thank you for taking my question. Thank you.
And our next question comes from Bob Farnam of Boenning and Scattergood Bob. Please proceed.
Morning, So youve, obviously made all the changes in the international business with the selling aerial reach and green.
Reinsurance to close transaction syndicate 1200 into teasing note the exiting the continental Europe operations.
The question is probably for Kevin what what do you actually in vision for international going forward. It's just you know it relative to the overall pie here how much of it is going to be international and what types of.
What types of B will be in med a unit.
Yes.
That's a that's a good question I'm glad you asked that because it's it highlights what we've talked about in this you know supplemental deck today, when we talked about being a us focused specialty insurer and we there's we are focused on specialty insurance. It we write a lot of it in the United States. It does make its way.
Specialty insurance's us based makes its way into the Bermuda market, where we have a platform and then to.
Lloyds, where we have a platform that the re underwriting that's going on in Lloyds and you know we didn't talk about it but there has been a number of stories throughout the quarter about some areas we've gotten out of in the intend to get 1200 like the cyber area, where we've gotten out of professional liability that wasn't related to the U.S. So.
I think those type of things.
Will help identify that we're going to use those platforms and as long as the business is.
Can perform at the hurdles that were setting and then they'll remain if not we'll have to put them on to review.
So as of right now since there is still around or have they been performing.
To your your hurdles.
Well I think when you talk about.
Certainly recently Bermuda, Yes, I think last year. It was obviously challenged right when we had some reserve increases.
So you know I'm not.
On an expense side to Bermuda operations very very good.
The challenge in.
The 1200 operation is the expense side, but their loss ratios are good. So we've got to look at the total business what kind of return we're getting and the fact that there is a predominantly UES business that were writing there and going forward.
We'll just continue to watch it and if it if it works out thats great. If it doesn't we'll look at alternatives.
Okay. Thank you.
Thanks Bye.
This concludes our question and answer session I would now let's turn the call back to Kevin Rehnberg for any closing remarks.
Thank you I'd like to thank all of our shareholders.
Shareholders policyholders other stakeholders employees and everyone interested in supporting the group producers and shirts.
For your continued support of the organization and interest this morning.
Good day thanks.
Conference is now concluded. Thank you for attending today's presentation you may now disconnect.