Q1 2021 Argo Group International Holdings Ltd Earnings Call
Good morning, and welcome to the Argo Group first quarter 2021 earnings conference call.
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I would now like to turn the conference over to Brett Sheriffs head of Investor Relations.
Please go ahead.
Yeah.
Thanks, and good morning, welcome to Argo Group's conference call for the first quarter of 2020 one.
After the market closed last night, we issued a press release on our earnings which is available I mean that and the investors section of our website at Www Dot Argo group Dotcom and was filed with the SEC.
Presenting on today's call is Kevin <unk>, Chief Executive Officer, and Scott Kirk Chief Financial Officer.
And 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.
Argo 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 argo groups filings with the SEC.
Also note that we will be referring to certain non-GAAP financial information more information regarding the non-GAAP financial measures are provided in our earnings release.
I will now turn the call over to Kevin Redbird, Chief Executive Officer of Argo Group.
Good morning, and thank you for the introduction and Brett.
Welcome to everyone on the call I'm happy to be speaking with you again today, just about seven weeks since our investor update in March.
A lot has happened since then including a change and our outlook from a M. Best we are pleased that a M. Best revised our outlook to stable and we certainly believe that the actions we have taken demonstrate our commitment to producing better returns and becoming more efficient and maintaining a strong balance sheet.
We have the benefit of a few more data points since we last spoke and our experience continues to suggest that the market remains strong and is likely to provide lots of opportunities for specialty carriers like Argo going forward.
As you will see from the numbers, our strategic actions and expense focus are beginning to become evident and our underlying combined ratio results.
Pricing terms and conditions all have maintained momentum and there are signs that parts of the economy are turning this environment should allow us to grow and a disciplined manner, while improving our margins.
While our topline was impacted by business exits and re underwriting actions our strategic growth areas continued to produce strong growth and margin results.
Excluding the impact of Ariel re our planned exits and Italy, and Malta, and our U S grocery business gross premiums were up approximately $6 five per cent.
This is within the growth range that we outlined for the full year when we provided guidance in March.
Both the U S and international segments contributed to this underlying growth picture, although it was impacted by our actions to reduce property exposure I'll.
And I'll spend some more time on this and a few minutes.
During our Investor update I highlighted six business units and the U S. Argo pro casualty construction environmental inland Marine and surety.
These businesses represented 60% of our U S premium base during the first quarter and grew by more than 15% versus the prior year.
Each of these six businesses and its.
Experienced positive rate increases.
During the first quarter, which is a great sign as we already have a track record of underwriting profitability for this group and the first quarter. The combined ratio of these businesses was comfortably below 90% with minimal catastrophe losses.
And international our underlying growth was primarily related to strong rate increases and the mid teens on average.
I'm also very pleased that our current accident year ex cat combined ratio of 93, 4% improved by 250 basis points from the prior year quarter.
This improvement was a result of both a better current accident year ex cat loss ratio and a lower expense ratio, which demonstrates solid execution against our priorities.
I would note that the result was the lowest current accident year ex cat combined ratio, we have reported and more than four years.
This success is a function of our focus on deploying resources.
And capital to our highest returning businesses a strategy that we have been very clear about over the last 18 months.
We will continue to focus on improving this ratio.
Through disciplined underwriting and appropriate expense management.
One area of focus that we have discussed over the last couple of quarters is reducing volatility and our business, particularly.
Particularly property exposure.
And most visible example of this was the sale of Ariel re and November 2020.
Ultimately the sell of Ariel will remove quite a bit of volatility as our remaining exposure runs off.
We have also managed to reduce the net exposure of our specialty property insurance business during.
During the first quarter, we aggressively reduced the size of our U S property and contract binding books and recent quarters. These two business units have contributed a significant portion of our catastrophe losses in the quarter premium for the specialty property business unit and our U S segment was down more than 50% and are you on.
Contract binding business was down more than 25 per cent.
Yeah.
We were disappointed with the level of catastrophe losses, we experienced in the quarter, but we believe we're taking the right.
Steps to produce better results with less volatility going forward as.
As we have noted previously the actions we have taken over the last couple of quarters will take time to play out.
However, we expect to be and a better position before Atlantic Hurricane season. This year as most of the U S property renewals happen prior to June or July.
This includes a meaningful reduction and all.
Our remaining exposure to Ariel re.
Based on the actions, we have already executed and our plans for the rest of the year.
We expect that if the same winter storm event were to happen again next year, our losses would be reduced by approximately 50 per cent.
As of April 1st our modeled one and 250 year, Florida P. M. L was down 12% from year end 2020, and by July 2nd and I expect it to be down 40% to approximately 4% of shareholders' equity as we outlined during our investor update.
While these actions will continue to impact our top line for the remainder of the year. We believe they are prudent decisions that will lead to better results and returns for our shareholders.
Turning to the environment rates were broadly consistent with last quarter. We saw a few businesses continued to experience accelerating rate increases well. If you pulled back slightly but remain positive overall rates were up more than 10% on average across the group. This is the fourth consecutive quarter of rates being up 10% or more.
And the U S. We saw rate increases of just below 10% while international was comfortably in the mid teens. Additionally, we have continued to be successful and reducing limits and raising attachment points.
Submission growth was another positive trend, we saw in the quarter, excluding property and contract binding where.
And where we are actively pulling back submissions were up modestly across our U S operations looking closer at some of our focus growth areas, such as Argo Pro casualty inland Marine and surety all of these units experienced strong submission growth and the first quarter that was well above the segment average.
Looking at data from April submission trends have improved with overall submission growth and double digits, excluding property and contract binding.
These trends give us confidence that we are offering products and services, our insurers and brokers value and will provide us with the opportunity for growth going forward regardless of market conditions.
Another strategic focus I have spoken about in the past.
Our efforts to simplify and modernize argo's platform.
With this initiative.
Aimed to enhance our efficiency and ability to scale the business going forward.
Central to this is having fully integrated systems.
What we call the Argo one platform. The goal is to be able to harness better data more quickly. So our leadership can make dynamic and real time informed decisions to manage their businesses.
Spec this will result, and improve customer service.
And lead to better growth and profitability over time.
As we are able to retire legacy systems and processes.
We have partnered with industry standard companies like Duck Creek, and Appian to create this integrated ecosystem.
Argo one platform will provide benefits across our business, including policy billing and claims administration work flow management distribution submission intake and marketing.
We are initially rolling out these enhancements and the U S with inland Marine is the first business unit to operate on the Argo on platform we.
We expect this deployment will be complete by the year by the end of this year 2021 with other business units coming onto the platform over time.
This is a multiyear program that we are deploying across most of our U S business and the coming years.
As this project moves forward, we will continue to provide progress reports and share some of the benefits that we're realizing.
So while we are focused on reducing our expense ratio. It's also worth noting we are making meaningful investments into our operations. We are very excited about the strategic investment and expect it will allow us to continue to grow our business and improve efficiency.
I'll now turn the call over to Scott to discuss our results in more detail.
Yeah. Thank you, Kevin and good morning, everybody.
And the first quarter, we made good progress towards our strategic initiatives and financial targets, yes.
And the ex cat accident year combined ratio quarter on $93 four per cent is like 250 basis point improvement on the Q1 2020.
Importantly, this being driven by improvements in both the ex cat accident year loss ratio and the expense ratio.
Operating EPS was <unk> 44 cents for the first quarter and annualized operating return on common equity was just up a full percent.
Even improvements and achieved spot tests and events during the quarter.
Turning to operating results gross written premiums declined eight 4% and the first quarter 2021, largely due to the impact of the Siloed area, where <unk> and the business exits we have announced on the last few quarters.
And as Kevin mentioned earlier, excluding these net premiums were up 6% and the quarter.
As we said at the Investor update in March so low gross written premiums and sometimes a decrease as a result, and the exit businesses, we expected net.
And net earned premiums to increase.
And this is what has occurred during the first quarter with net written premiums and net and premiums up 11% and 7% respectively compared to the PA and core.
While a significant component and the change results from the exited sequences and the remaining increase is driven by business mix and.
She and some fronted business U S. In addition to reduced third party capital and our international operations.
We reported a loss ratio and 66% from the first quarter of 2021 up from 64, 6% from the prior year period and.
And this increase was driven by higher catastrophe losses, which totaled 10 percentage points or just on this compared with just on the seven percentage points from the prior year quarter.
The current accident year ex cat loss ratio was 55, 6% from the first quarter of 2021, which represents a one seven points and prudent in the prior year quarter.
And prudent reflects the impact right increases and targeted on boarding actions.
And I've cat losses totaled $47 million of which $43 million related to natural catastrophes and full moving dollars related to COVID-19 losses.
Included in on natural catastrophe losses, and the quarter was $7 million is related to our mining exposure from aerial wage open and use of Macau.
We expect the majority of our exposure to aerial range U S puppy business run off around midyear.
Reserve development was negligible and the first for 2020, one and marks the fifth quarter and a large net prior year reserve movements have been small.
It's far and move on to talk about expenses I would like and we might have from Chinese dwell on reporting and score.
First we are committed to being transparent and this quarter, we have provided and split of acquisition and general and administrative expense detail for the group and the price segment.
Second we have created a new line on them from now on operating expenses.
And this will include costs that are not associated with our ongoing insurance operations, such as various transaction costs and severance and other strategic personnel related expenses and certain legal costs.
We believe these changes and we'll provide you with a better view of underlying trends and performance.
Turning now to them and expense in the first quarter. Our expense ratio was 37, 8% and was down 80 basis points from the prior year quarter.
And you would expect from a reduced levels of ceded premiums and the quarter acquisition ratio has increased marginally by 60 basis points to 17%.
Conversely, the general and administrative ratio Assurant is significant.
And as they on 140 basis points to 28% and the quarter.
We said at the Investor update, but the improvement and the expense ratio will be driven by a combination of increased net and premium and reduced expenses.
And this quarter you were seeing the impact of increased earnings coming toward and reducing the expense ratio.
And while expense those are largely flat.
Flat compared to Q1 and 2020, we have made good progress against reducing G. T J and I expenses that we should stop and coming charge in the coming quarters.
We said this improvement was knocked on linear and we remain committed to the 36 months on expense ratio target in 2022.
Turning to the segment results and the U S. Gross written premiums are up two 7% payment and first quarter of 2020 guidance was primarily driven by professional and specialty lines.
And to the impact of its exit from grocery business, and a targeted reductions and pumping and contract body wash and premium dropped 10%.
Net written premiums in the quarter were also up 9%, Chile increases and gross premiums and some Chinese and business mix.
The U S segment reported underwriting income of 11 million balance on a combined ratio of 96, 4% and the first quarter of 2020 low <unk>.
Included in the combined ratio was just under seven points or 21 billion balance of catastrophe losses, primarily from we just don't and Eric.
Current accident year ex cat loss ratio was 55, 7%, which is an improvement of two seven points from the prior year quarter.
The improvement and the loss ratio, primarily reflects the impact of rate increases, earning through the results.
The expense ratio of 34, 2% was up two full points from the par call.
On the general and administrative expense ratio was stable at I day same day.
The acquisition ratio was up two two points to 16%.
Now the increase and the acquisition ratio was due to a combination of current unit increases from Boston changes and business mix and reduce fronting phase and addition to the PA you're benefiting from some additional ceding commissions that were recorded in the first quarter of 2020.
Turning now to our international segment.
Written premiums were down 24% JV impact and the South Bay area, where he and our planned exits and middleweight multiple operations.
Excluding these businesses of course, your premiums and international increased 12% from the first quarter 2021.
Net written premiums of $128 million increased 16% gross it's a pulse and the quarter.
Quarter.
As we noted during our best dropped I'd historically retained on the a small portion of the area of premium net.
With that premium running off in 2021, and you can see that our premium retention ratio increased from 32% and the prior year quarter to 48% and the common core and.
We expect this ratio to trend higher over the course of the year.
International segment reported an underwriting loss of 22 of Athene balance on a combined ratio of $114 four per cent and the first quarter of 2020 one.
Included in the combined ratio was just not the 18 percentage points or 27 million downloads of catastrophe losses.
Net losses included $4 million related to contingency business exposed to COVID-19.
COVID-19 related cat losses have been trends low off or the philosophy quarters inline with our expectations and we expect this trend will continue.
And so on accident year ex cat loss ratio was 55, 4%, which increased 80 basis points from the prior year quarter.
Hi, Walter I share some increased lots and lots of activity, partially offset by the impact of writing corrections and through the results.
The expense ratio of 41, 4% was down four 2% from the par call.
With improvements and by the acquisition ratio and the G&A expense ratio.
The acquisition ratio was 19, 1% and was down three two points compared with the first quarter 2020.
And the premium spoken about exiting business with higher acquisition costs and the benefit of these actions start on tour.
Moving on to investments, we reported investment income of $44 $4 million and the quarter.
The result included just under $21 million of income from alternative investments principally mark to market guidance on our private equity and hedge fund investments.
Although we are certainly pleased with this result, I would caution on the last three quarters had included elevated per tonnes from these investments.
Net investment income excluding alternatives was just on the $24 million on the quarter, which was down 28% from the prior year quarter.
Mr Claude and flex the Derisking actions on lost 12 variety bumps as well as lower overall yields available on the market.
Given what we've seen in the underlying environment, we do not expect to be adding risk to the investment portfolio in the near term.
And finally, let me comment on book value per share and.
Value per share of 40, adult and 23 cents increased from $47 37, compared to Q1 and 2020.
When compared to Q4 last year, our book value per share, including dividends declined one 7% due to the unrealized mark to market losses on our fixed income securities.
Operator that concludes our prepared remarks, and we are now ready to take questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
And if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Greg Peters with Raymond James. Please go ahead.
Yes.
Good morning.
Ill focus my first question around retention.
There, obviously theres a lot of moving parts and your top line with the sale of Ariel re and the other.
Actions that you're taking.
But there has been some noise in the marketplace about and some other departures that net.
It's not necessarily plan for within.
Within the company. So I was wondering Kevin without specifically, calling out things like that if you could just give us an idea of how retention is evolving at the company with key producers and key underwriters.
And if you think that everythings intact or you know where your challenges are.
Yeah, Good morning, Greg Thanks.
The the movement of people happens from time to time and the business and we do have some calling in and some coming out and I think.
It's important to remember that all of our businesses have different stages and in each stage as they grow and develop there's different skill sets that are are brought to the party by certain leaders and some of them are needed by us or desired by those folks. So as an example.
And the folks who really enjoyed building businesses, there's a lot of opportunities and the marketplace at the moment with a lot of the capital that's moved in and some of the new entrants and folks find that attractive.
The good news is we have institutionalized our businesses and we don't have anything thats dependent upon any one individual we've got strong leadership teams and very good producer relationships.
<unk>.
So just briefly move to the retention piece with the producers are retentions of.
Renewal retention has actually moved up this year and and most businesses are the ones that we're trying to grow and.
As opposed to what we've seen in previous years, but the opportunities that exist there and for individuals as some of these leaders move on is.
Also helpful.
All the way down the line and.
It's really not that unusual on the timing of this is unusual and that there were several at one time and we got a couple of headlines.
But when you look at the six businesses, we identified two of those we've had leadership changes and but we had two leadership changes last year and those businesses too.
And so again, it's not something that's unusual for our specialty business are the timing and the headlines are as I mentioned, but I think we're in great shape for growth going forward and these businesses are performing well with good teams.
Great. Thanks for the answer.
Makes sense can you I'd like to pivot.
To the expense ratio and the U S operations, Yeah, and I'm just looking on that table that you provided and I do appreciate.
The breakout of acquisition and general and administrative and provide some additional clarity to the moving pieces and I guess when I look at that I'm I'm trying to reconcile what you're saying about these improvements and investments with the numbers I'm seeing on the page as it relate.
And just to the U S operations. So maybe you can help bridge. The gap you know why the acquisition ratio was up why the general and administrative expense ratio was up and the quarter I'm sure. It's there's a reasonable explanation to it yeah. No. This is the one that really jumps out at everybody because it seems to be counter to what where we've been.
Saying only if you look at the first quarter of this year in isolation versus the first quarter last year. So.
What I mean by that is our expense ratio.
It generally flows through the year the three previous years all ended up in the mid 32 range and in the first quarters of those years, we had $34 $3 34 for it and then it's 31 eight last year. So this is back to more of a normalized first quarter for us.
And.
Is it balanced itself out last year, I mean through the through the balance of the year. The two things that drove the overall expense ratio. The most were a reinsurance transaction.
Transaction and timing for one and how it affected the earned premium and in that quarter and the other was related to some expenses there is more detail to it than that but that's in general the first part of your question answered.
The second piece on the.
The acquisition.
Acquisition cost that is completely driven by business mix, although it was impacted a little bit by the Tri net transaction, we did so that transaction.
Drove up the expense ratio a little bit.
But the tradeoff, we thought was a good one for the overall business, but the.
And this mix and some of the things, we're driving out or have pulled out of actually had lower expense ratios and then on the G&A side.
There I'll, let Scott follow up on this but in general it's some of it has to do with.
The size of the taxpayer and that there are I don't think we've got and issue from that standpoint in terms of the investments, we're making and the rate of growth. There. So overall you.
As we mentioned its not going to be linear, but some of the actions. We're taking some of the expenses that come through this year just are.
And I don't want to use the word alarming, but they're they stand out in a way that I expected. This question. So Scott would you like to add anything.
Hi, Kevin and I think that's the.
That's a pretty comprehensive and stuff.
And and Greg I guess I'd, just take us back to the Investor update and say that low power Alley expense store.
He was going to be group by two two component and seen.
The first one day.
<unk> earnings coming through and you're seeing that importantly, <unk> quarter, and then the second piece would be about reducing our expense dollars and and I'm certainly getting my feet on to the table here.
And we had actually take and we'll be able to take some actions and <unk>.
Q2 here to reduce the.
And the level of expenses going forward.
And we remain confident that we kind of hit our expense targets that we have all day.
Yes.
Understood. Thank you. Thank you for the answer.
You know the other the other question that I have a lot of them, but I'll just pivot to the last question for net investment income you called out the alternatives you called out.
The lower run rate of investment income ex alternatives, so and look at the 23 seven that you did and the first quarter of net investment income excluding alternatives just sort of like a good quarterly run rate give or take.
Yes, I think that's what the message we were trying to get across on the investor update and and and.
On previous calls is that it's closer to that number and that.
Yeah, because I think folks had been thinking about reaching for something a bit higher recognizing we still have an element of the other portfolio. So yeah. That's Scott you on them.
Yeah, No I think that's absolutely right.
Kevin.
I would say, though with rights moving a little bit Greg.
You know, we hope to see that number might be come up towards the end of the year, a little bit, but it's not gonna be all that sensitive to cash flow and the sidewalk.
Look it's not a bad on white from now and hopefully we can tell me and a little bit on wise on that towards the end of the debt, but no not that meaningful I don't want to come across as and it's gonna be a major shift, but hopefully on plumbing.
Okay. Thank you for the answer and say just one final recommendation and I don't want and and I don't want this to be misconstrued because you do provide a lot of information.
With all the moving pieces, you know understanding how your reinsurance works and how storms may affect.
Your are your underwriting income would be helpful and I know you called out the.
And you all have reduced your debt to Florida storms.
40% and and 4% P M L or 4% of shareholders' equity.
Beginning in the Florida storm season, but understanding how your reinsurance works for other events, because Florida Hurricanes arent the only if that's out there and again I'm not suggesting.
Suggesting you provide the secret sauce and it but.
Some better clarity at some point.
And might be helpful, and and and I just thought I'd throw that out there. That's that's all I have to say, Greg It's a thank you.
And it is.
Very valid point that a number of folks have been asking about and it's because of the way the business is running off.
One one timeframe for one renewals anything that was five one and some that are seven ones and then.
How were moving out of certain businesses.
It does move it's literally been moving on like a monthly basis, but it's all been down and I think what we were trying to do with the Florida piece would be instructive to say this is in general how things are moving forward, but the reduction will.
And we'll come back with a specific number.
At the next call in terms of what percentage it is down because by that point it won't be final.
But the actions that are being taken are moving us you know.
Closer to that number which is over 25 per cent at the moment so.
Got it.
For your answers.
Thanks.
The next question comes from Bob Farnam of bending and Scattergood. Please go ahead.
Yeah, Hi, there just just to continue on that theme, so and I'm, assuming your cat load that Youre looking for you know you had been and kind of the 3% to four per cent range every year as as the business flow is off as area of re flows off.
Do you expect that cat load like the cat load for 2022 per example would that theoretically would be lower than than it has been.
Yes, good morning, Bob.
That's a great question and I think.
In theory, yes, but in practice, probably not given the fact that the catastrophes that we're facing and everyone's facing are up and I think when you. When you just look at.
The cost of rebuilding and things like that that are coming into the overall exposures.
While we are reducing exposure.
At the peak.
Cat profile and what we're facing.
Doesn't seem to be abating at the moment, so in order to counter that and accept the fact that we are getting rate, but we do need some other things.
And we will.
Probably keep it in the range. It's been this year, it's actually because of exposure.
Down its actually up and.
Over and over what it was so I think.
And we'll continue to assess that and again, how much we positioned the book will drive what that number ultimately is and will continue to talk about it but.
Understood. Okay. Thank you for that.
I'm assuming so.
The COVID-19 losses.
And I'm, assuming events are still being cancelled as we speak I mean, not everything is back up to running speed yet so should we expect.
Further losses here and and the second quarter and perhaps the third quarter is everything and kind of get back up to speed.
Yes. So the approach we took just for everyone's benefit was that we were going to address them each quarter rather than just.
Make an assessment and pick a number and try to figure out when it ended.
And we did say it would decline every quarter and that's exactly what has happened and it's gotten down to a point now where it's.
Low single digit figure this quarter.
And would expect that the.
The numbers will continue depending on how long the pandemic continues.
To.
They have some things come in but bear in mind that there may be some expenses at different times as we go into the future that show up just based on.
All the litigation that's out there and the fact that some of this stuff may take three to four years to settle.
Given what estimates are coming from people, but I think the majority of our exposure was seen last year.
And I think the numbers play that out when you look at where we ended up with.
Last year versus what you are seeing here.
Yes.
I guess, we're getting to the point now where it's been.
Pardon me long enough and since the beginning of COVID-19 debt did you start changing the policy language and some of these and some of your policies that perhaps would reduce the exposure as well.
Yes.
And we really had.
That was not something that we had a big problem with across the board right. I mean, we had a few circumstances, where we had specific coverage grants.
But those have finite limits on them and so I think there is.
Isn't like we that situation and the U K right, we had a small exposure to that but it's very small and it was adult within a quarter that.
You've seen the numbers for previously it wasn't like we had products that were out there that has a lot of exposure that way.
So we just continue to move along and and we haven't seen a new areas of development there may be some but our main.
And exposure really was on the contingency side, and then that specific property side and as I had mentioned a year ago, we had a very specific environmental product that covered virus.
Cleanup.
That we had and that that first quarter there.
And then some other property exposures that were across the board.
And we're expecting it to be modest as we go forward.
Got it.
Okay and last question from me.
So in the past we've been kind of guy.
Guided to use maybe a 15% effective tax rate going forward is that still the case that you know with all the moving parts and we're getting rid of Ariel re and just kind of curious if that effective tax rate has changed or our expectations free the effective tax rate.
It will change going forward.
Yeah, I'm going to pass this one right Scott.
Because he and the middle East.
[laughter], although you might do that limit.
And.
It's a good question and there are a lot of moving parts and because as you value. Your effective tax rate is always going to be driven by the emergence of profits and weighted emergence of byproducts comfortable alright.
But right now I think the way.
We're sticking with that but 15% is our estimate.
Look if things change.
And our profit.
Paul for ships around and the group and <unk>.
We will definitely come back and watch it on.
Okay very good thanks.
Yes.
The next question comes from Casey Alexander with Compass point. Please go ahead.
Hi, Good morning, Kevin Good morning, Scott Hey, Good morning case.
And <unk>.
I guess I only get one chance to ask this question because the.
And the shift in business mix here has been you know pretty extraordinarily complex.
Some lines completely stopped some lines, where you stopped the clock, but theres still things, earning in the growth on one side.
So how do you see premiums, earning and relative to what you earned in the first quarter over the over the rest of the year.
Because it is a pretty complex mix of how your earned premiums are coming into the income statement.
Yeah. So.
And there's a couple of things at play here that that factor and as well some of the things. We we are out of no longer require reinsurance and we have programs that may have reached across the group that were reassessing and as we've so theres a reinsurance element of this as well but.
Remember the largest group that was oh.
And if it was the largest but we went through all the premium last year on a gross basis, but on a net basis.
It was a lot lower right and.
As we go through the year the growth, we're seeing and the larger areas absent.
And the U S will take care of whatever whatever issues, we are dealing with and moving out of it and the U S debt. So firstly on the international side on the top line because of the impact.
Impact of Ariel.
There is and some re underwriting it is more of an issue there with Italy and Malta.
And on the earned premium side.
Don't remember the exact number Scott do you it's true what that may be.
Not off the top of my head Kevin.
So we're gonna have to come back to you on that in terms of what the expectation is but.
You know, it's all factored into the guidance we gave so it's it's Scott.
And it's just tough to figure out because it.
It will sort itself out sort of halfway through the year right, because that's where things stop so yeah, well. If you think it's tough for you you ought to try and from the outside [laughter].
It's Scott here.
B I can help a little bit with that at the Investor Day, We did go back and and try to give you a bit of a low both on a on how premium flow through on an annual base as well as the earnings split by the U S and international.
And that might be a helpful place for you to go and have a look to see if.
And that plays and a little in terms of what you're looking for.
Okay.
Secondly on on the net investment income I know you're.
This is is 23 and change.
But I mean.
Or are you, suggesting that we just model no earnings for the alternative side I mean, it would seem to me that there would be some expectation that over time that would add to that $23 million base.
Yeah that that is absolutely correct, but I think the I think I answered. The question is asked relative to what he was asking on that that part of the portfolio and I did mentioned that we would see continue to see some.
Income from the alternative side.
Okay, Great Alright, that's it thank you for taking my questions I appreciate it thanks.
Again, if you have a question. Please press Star then one on a touchtone phone.
The next question comes from Ron and Bob men with capital returns. Please go ahead.
Hi, Thanks again.
For the call.
Hey, good morning, everybody.
I had a a sort of a core business question and sort of.
And I guess, a sort of counts.
I think it's <unk>.
Going back.
I don't know, it's probably easily a year, maybe as much as three years sort of the E&S market broadly and I'm talking about your core E&S business has enjoyed a real pick up.
And sort.
Shots at the basket sort of submission.
Submissions were up across the board for everyone and that in that segment.
And I imagine and the earliest days that was really a function of sort of competitive behavior, whether it was lloyd's or other E&S companies sort of taking a different view towards underwriting and presenting an opportunity but of late from what I understand the E&S stamping office measures are also showing a continued pickup in and and <unk>.
Submissions and and I guess writings I guess.
Is it now really much more a function of the economy.
Driving those volumes up further and less so about sort of.
<unk> underwriters.
Retrenching or taking action thats.
Something a pickup and and and opportunities yeah, right and that is a great question and.
I think.
And.
I'm just looking at our submissions here for.
Those areas are.
And we were excluding.
On contract and property because of our actions and see two things happen one as things flow into the E&S market or they flow into the regular market and then.
Producers respond to our appetite so we've got to look at each instance, like Wow. We've got one that's up 70%, okay, but we really weren't doing much of that last year right. So and theres, others that are down 60%, but what we're trying to get out of that business. So when you when you look across the board in the quarter.
We were up and.
And the low single digits across the board, but in March it was a little bit higher than that but in April.
It's 16%.
Across the board.
Alright.
Excluding the two areas that we're really trying to get out of and it's so so the double digit growth.
And the submission change is so high it has to be the economy right because it can't just be the.
I can't just P&C insurance market a lot of these businesses we were in we were open.
So I would say based on that that the economy is helping there as well right right and presumably your CFO and allowing isn't allowing you to pay the intermediaries anymore, so that isn't driving.
[laughter] yeah.
Interesting.
The market sort of dictates what that amount is but and it does vary by line.
And then from multiple sources, so we're cognizant of all that but.
Business flow in April as you.
You know it really encouraging yeah for sure great to hear thanks for the help thanks.
This concludes our question and answer session I would like to turn the conference back over to Kevin Jay run Berg for any closing remarks.
Thank you I appreciate everyone's interest.
Involvement that your and support you have given the company so thanks to our shareholders.
Two our wall Street community following us to our employees and producers and anyone else supporting us. So I hope everyone has a good day reported catching up soon and thanks.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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