Q3 2023 Arch Capital Group Ltd Earnings Call

Good day, ladies and gentlemen, and welcome to the Q3 2023 arch capital earnings Conference call. At this time, all participants are in a listen only mode.

Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, this conference call is being recorded before.

Before the company gets started with its update management management wants to first remind everyone that certain statements in today's press release and discussed on this call may constitute forward looking statements under the federal Securities laws.

These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently actual results may differ materially from those expressed or implied for more information on the risks and other factors that may affect future performance investors should.

Review periodic reports that are filled by the company with the S. E C from time to time.

Additionally, certain statements contained in the call that are not based on historical facts are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

The company intends before looking statements in the call to be subject to the safe Harbor created thereby.

Management also will make reference to certain non-GAAP measures of financial performance.

The reconciliations to GAAP for each non-GAAP financial measure can be found in the company's current report on form 8-K furnished to the S. E. C yesterday, which contains the company's earnings press release and is available on the company's website and on the Sec's website I would now like to introduce your host for today's.

Conference, Mr. Mark grandson, and Mr. Francois Morin Sirs, you may begin.

Thank you Gigi good morning, and thank you for joining our third quarter earnings call.

Body.

Well.

Yesterday, we reported another excellent quarter highlighted by strong performances from each.

Operating segments resulted in an annualized operating return of 25%.

4% increase in book value per share.

Overall, our team capitalized on good underwriting conditions.

Like catastrophe losses.

To produce an outstanding 721 million of underwriting income in the quarter.

Our property casualty teams continue to manage a favorable market conditions.

Net premium.

26% from one year ago.

And Sharon once again delivered impressive.

High quality underwriting earnings that we redeployed into our P&C segment or opportunities abound.

Broadly we continue to achieve rate increases above loss trend in most sectors of the market.

Although rate increases are slowing us online.

Accelerating and others.

Under that there is not a single insurance cycle.

As always <unk> is well positioned to navigate across these many cycles by reallocating capital to this segment with the best risk adjusted returns.

One of our core differentiating principles is that our underwriters are aligned with our shareholders through our unique compensation structure. Our underwriting teams are always seeking to maximize opportunity as long as they need our shareholders targets.

As we near the end of 2023 and look ahead to 2024, I believe that although the dynamics shift this hard market will continue to support profitable growth.

Let's take a moment to recap the current state of the market and where we are likely headed.

I see it as a play in three acts.

The first at the current hard market started in primary liability insurance in 2019, and then it has a unique circumstance of a two year pause in claims activity.

Operator: Good day, ladies and gentlemen, and welcome to the Q3 2023 Arch Capital earnings conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. Before the company gets started with this update, management wants to first remind everyone that certain statements in today's press release and discussed on this call may constitute forward looking statements under their federal securities laws.

As a global pandemic.

Second Act introduced Hurricane Ian as a main character where property reinsurance has to adjust both the pricing and risk appetite. In addition capital get more expensive and the industry has to respond to meet new expectations from investors.

Operator: These statements are based upon management current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filled by the company with the SEC from time to time. Additionally, certain statements contained in the call that are not based on historical facts are forward looking statements within the meaning of the private securities litigation reform act of 1995. The company intends the forward looking statements in the call to be subject to the safe harbor created thereby. Management also will make reference to certain non-gap measures of financial performance.

While property has been the most recent driver of this market as we move into at three.

We are faced with increasing evidence of casualty rates widening underpriced and oversold doing a laptop market needs to increase.

We expect this third act of the extended our market already one of the longest in memory to persist until the industry's reserving issues are resolved the wholesale casualty rates generate positive results.

<unk> is well positioned to capitalize on this operating environment.

As new hard market underwriting opportunities arise are incredibly nimble reinsurance group allows us to grow more quickly and significantly in our insurance group and is therefore, where we are most likely to deploy capital.

Today market trends point to a reinsurance driven GL hard market and we stand ready to act.

The third factor is very started but things look very promising for March.

Now some color on our operating segments.

Our reinsurance group has once again driven by growth with third quarter net premium written of $1 6 billion up 45% from the same quarter in 2022 and 60% over the last 12 months underwriting.

Operator: The reconciliations to gap for each non-gap financial measure can be found in the company's current report on form 8k furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website and on the SEC's website.

Underwriting performance in the reinsurance group was excellent.

Bond ratio of 80% for the quarter.

Operator: I would now like to introduce your hosts for today's conference.

Our expectation is that we'll continue to see hot property market conditions through next year's renewal cycle as uncertainty in loss activity remains elevated.

Marc Grandisson: Mr. Mark Grandison and Mr. François Morin serves you may begin. Thank you, Gigi. Good morning and thank you for joining our third quarter running call. I hope everybody is safe and well. Yesterday we reported another excellent quarter highlighted by strong performances from each of our three operating segments that resulted in an annualized operating return of 25% and a 4% increase in book value for share. Overall our teams capitalized on good underwriting conditions and relatively light capacity losses to produce an outstanding 721 million underwriting income in the quarter.

As noted above we expect increased opportunity and liability as well.

Our insurance group also remains in growth mode in both our North American and international units.

While net premiums written in the insurance segment up 16% over the last over the past.

12 months are more modest than in reinsurance there are more broad base because of our focus on small and medium sized specialty accounts underwriting income continues to build with increased earned premium and a strong combined ratio of 99%.

Today, there are still plenty of opportunities to grow profitably and insurance prop.

Marc Grandisson: Our property casualty teams continue to lean into favorable markets and additions to like 3 billion of net premium up 26% from one year ago. More great insurance once again delivered impressive high quality underwriting earnings that we redeployed into our PNC segments for opportunities available. Broadly we continue to achieve rate increases above loss trend in most sectors of the PNC market. Other rate increases are slowing in some line. They are re-accelerating in others which is a good reminder that there is not a single insurance cycle but main.

Property and short tail lines pricing and terms and conditions remained very strong with rate increases in excess of 15%.

Casualty pricing is increasing in response to the overall casualty trends in the market and our programs unit continues to achieve rate increases of upfront.

Professional liability rates softened in the quarter with net premiums written down 9% in the third quarter 'twenty two we shared the marketplace sentiments about the segment with both IPO and M&A activity decrease at the same time as rate pressures from competition in <unk>.

Marc Grandisson: As always art is well-positioned to navigate across these many cycles by reallocating capital to the segment with the best risk adjust of the week, in terms. One of our core differentiating principles is that our underwriters are aligned with our shareholders through our unique compensation structure. Our underwriting teams are always seeking to maximize opportunity as long as they meet our shareholders target. As we need the end of 2023 and look ahead to 2024, I believe that although the dynamics we shift, this hard market will continue to support profitable growth.

<unk> class action activity increase however returns in that segment are still strong in the same vein, we maintain a positive outlook on fiber pricing on an absolute basis despite rate decreases in the 50% range.

Our outstanding mortgage group continues to deliver quality earnings for our shareholders at higher persistency of our in force portfolio.

To offset the slight decrease in <unk>, which had been affected by lower mortgage origination.

Although we tend to focus our comments on the U S primary market is worth noting that nearly 40% of our mortgage segment underwriting profit. This quarter came from non U S operations compared to just over 10% in 2017.

Marc Grandisson: Let's take a moment to recap the current state of the market and where we are likely headed. I see it as a play in three acts. The first act, the current hard market started in primary liability insurance in 2019 and then has a unique circumstance of a two-year pause and claims activity due to a global pandemic. The second act introduced Hurricane Ian as a main character, where property re-insurers had to adjust both their pricing and the risk appetite.

Marc Grandisson: In addition, capital got more expenses and the industry had to respond to meet new expectations from investors. While property has been the most recent driver of this market as we move into act three, where our faith would increase evidence that capital to rates widely underpriced and oversold during the last half-market need to increase. We expect this third act of the extended hard market already one of the longest in memory to persist until the industry's reserving issues are resolved and until capital to rate generate positive results.

International business represents a significant growth opportunity for the mortgage group at arch and our strategic decision to diversify our mortgage operations is yielding positive results that further differentiate arch from our competitors.

We are currently in a positive cycle on the investment side of our business or.

We're increasing cash flow some growth are being invested into today's higher yield environment Newmar.

New money rates are well in excess of our book yield, which should continue to boost our investment income over time and provide us with an additional ongoing tailwind.

It's late October which for baseball fans I mean, it's time for the World series.

Ball is somewhat unique in that it's one of the few team sports that isn't limited to a specific length of time.

Score as many runs as possible until the other team gets three out.

To me the current hard market feels like a baseball game, we know theres only nine innings to replace but we have no idea how long ago was earnings will take.

Marc Grandisson: Art is well positioned to capitalize on this operating environment. As new hard market, underwriting opportunities arise, our incredibly nimble re-insurance group allows us to grow more quickly and significantly than in our re-insurance group and is therefore where we are most likely to deploy capital first. Today market trends point to a re-insurance driven GL hard market and we stand ready to act. The third act has very started but things are very promising for March.

Got a great lineup, we're happy to keep hitting our singles doubles and occasional homerun until that unit is over.

At <unk>, we remain committed to being good stewards of the capital entrusted to US we do that by following a tried and true data driven approach that maximizes the capability.

Our diversified platform.

Diligently at the years towards cycle management philosophy, and is centered around superior risk selection and prudent reserving.

Marc Grandisson: Now some color on our operating segments. Our re-insurance group has, once again, driven our growth with third quarter net premium revenue of 1.6 billion, up 45% for the same quarter in 2022 and 60% for the last 12 months. Underwriting performance and the re-insurance group was excellent with a combined ratio of 80% for the quarter. Our expectation is that we will continue to see hard property market conditions to next year's renewal cycle as uncertainty and loss activity remains elevated.

All the while our underwriters are fully aligned with our shareholders.

These principles are foundational to our playbook and underscore our long term commitment to superior value creation.

As we close out 2023, we had significant momentum in all three of our businesses in a reliable and high quality earnings engine.

Mortgage group that are helping fuel our growing investment base. All the pieces are fitting together nicely and we are well positioned for the future.

Marc Grandisson: As noted above, we expect increased opportunities in liability as well. Our insurance group also remains in growth mode in both our North American and international units. While net premium revenue in the interim segment, up 16% over the last of the past 12 months are more modest than in re-insurance, there are more broad bays because of our focus on small and medium-sized specialty accounts. Underwriting income continues to build with increased earn premium and a strong combined ratio of 90 more than 9%. Today there are still plenty of opportunities to grow profitably in interest.

Now look I'll follow up on the on deck circle and will return to answer your questions. Shortly thank you Mark and good morning to all thanks for joining us today to add to the baseball team I would also emphasize that while this long winning streak has certainly been fueled by it finally in dynamic offense.

We're also very much aware that team defense has played an important role in our success.

<unk> been working hard not to waste any offensive production with careless errors and by executing well accurately and on the field.

We produced exceptional third quarter results from high quality earnings across all of our plans.

Marc Grandisson: Robert E, and short data lines pricing in terms of conditions remain very strong with rate increases in excess of 15%. The NS casualty pricing is increasing in response to overall casualty trends in the market and how programs unit continues to achieve rate increases above trends. Professional liability rate softens in a quarter when net freedom is written down 9% in a third quarter of 22%. We share the marketplace sentiment above the deal segment where both agio and NNA activity decrease at the same time as rate pressures from competition and security satisfaction activity increase.

The highlights of the <unk> team effort are numerous and include after tax operating income of $2 31 per share for an annualized operating return on average common equity of 24, 8% and a book value per share of $338 62 as of September 30 up.

Four 3% in the quarter and 18, 4% on a year to date basis.

Similar to last quarter's results. Our reinsurance segment grew net written premium by 45% over the same quarter last year led by the property other than catastrophe line, which was 73% higher than the same quarter one year.

Marc Grandisson: However, returns in that segment are still strong. In the same vein, we maintain a positive outlook on cyber pricing on an absolute basis despite rate decreases in a 15% rate. Our outstanding mortgage group continues to deliver quality earnings for our shareholders at higher persistency of our enforce portfolio, helped offset the site decrease in NIV, which has been affected by lower mortgage origination. Although we tend to focus our comments on the US primary MI market, there's work noting that nearly 40% of our mortgage segments underwriting profits this quarter came from non-US operation, compared to just over 10% in 2017. International business represents a significant growth opportunity for the mortgage group at Arch and our strategic decisions diversify our mortgage operation, is dealing positive results that further differentiate Arch from our competitors.

As for our property catastrophe business, it's worth mentioning that the net written premium in the third quarter one year ago.

Alluded approximately $34 million of reinstatement premiums, mostly as a result of hurricane here.

If we adjust for the impact of reinstatement premiums our growth in net written premium for this line would have been approximately 64% year over year.

The quarterly bottom line for the segment was excellent with a combined ratio of 80% 73, 5% on an accident year ex cat basis, producing an underwriting profit of $310 billion.

The insurance segment had another very strong quarter with third quarter net premium written growth of 11% over the same quarter one year ago.

Similar to last quarter's results, we experienced good growth in most lines of business with the main exception being professional lines or the market remains competitive, particularly public directors and officers liability.

Marc Grandisson: We are currently in a positive cycle on the investment side of our business, where increasing cash flows from growth are being invested into today's higher yield environment, new money rates are well in excess of our book yield, which should continue to boost our investment income over time and provide us with an additional ongoing payment.

If we exclude professional lines net written premium would have been 20% higher this quarter compared to the same quarter one year.

Overall market conditions for our insurance and reinsurance segment remain attractive and we expect the returns on the business underwritten this year to exceed our long term targets by a solid margin for some business units.

Marc Grandisson: It's late October, which for baseball fans mean it's time for the World Series. Baseball is somewhat unique in that it's one of the few team sports that isn't limited to a specific length of time. You can score as many runs as possible until the other team gets three out. To me, the current hard market feels like a baseball game. We know there's only nine innings to be played, but we have no idea how long those innings will take.

Profitable growth during periods of favorable market conditions as one of the hallmarks of our cycle management strategy and the current hard market is definitely giving us the opportunity to deploy meaningful capital in many areas.

Our mortgage segment batting average has consistently been a leader in this quarter was no different with a four 7% combined ratio.

Marc Grandisson: We've got a great lineup. We're happy to keep hitting our singles, doubles, and occasional home runs until the ending is over. At Arch, we're really committed to being good stewards of the capital and trusted to us. We do that by following a trident through data driven approach that maximizes the capability of our diversified platform, diligently adheres to a cycle management philosophy, and is centered around superior in selection and prudent preserving. All the while, our underwriters are fully aligned with our shareholders.

Net premiums earned were in line with the past few quarters across each of our lines of business.

Included in our results was approximately 98 million of favorable prior year Reserve development.

Quarter, Nevertheless of acquisition expenses with over 75% of that amount coming from U S allies.

And the rest of the other underwriting units our delinquency rate at U S. Army remains low based on historical averages and close to 85% of our net reserves at U S. Semi are firmed post COVID-19 accident periods at the end of the quarter.

Marc Grandisson: The principles are foundational to our table and underscore our long-term commitment to superior value creation. As we close out 2023, we have significant momentum in our three of our businesses and our reliable and high quality earnings engine. And our mortgage group that are helping fuel our growing investment base.

Across our three segments are underwriting income reflected $152 million of favorable prior year development on a pretax basis or four seven points on the combined ratio.

Marc Grandisson: All the pieces are spinning together tonight, and we're well positioned for the future.

It was observed across all three segments driven by short tailed lines.

Marc Grandisson: Now I'll call Francois up for that on-deck circle, and we'll return to answer your questions shortly as well.

Current accident year catastrophe losses across our group were 180 million approximately half of which are related to U S. Severe convective storms with the rest coming from the line of wildfire hurricane that dollar yen and other global events.

Francois Morin: Thank you, Marc, and good morning to all. Thanks for joining us today. To add to the baseball theme, I would also emphasize that while this long wind streak has certainly been fueled by a timely and dynamic offense, we're also very much aware that team defense has played an important role in our success. We've been working hard not to waste any offensive production with careless errors and by executing well actively and on the field. We've produced exceptional third quarter results from high quality earnings or loss all our landfills.

Pretax net investment income was <unk> 71 per share up 11% from last quarter as our pre tax investment income yield was up by approximately 18 basis points last quarter.

Total return for our investment portfolio was a negative 40 bps.

In the U S dollar basis this quarter as our fixed income portfolio was impacted by the increase in interest rates during the quarter and most other asset classes had negative returns in line with broader financial market indices, such as the S&P 500, which was down approximately three 7% in the quarter.

Francois Morin: Highlights of the team up are numerous and include after that operating income of $2.31 for share for an annualized operating return on average common equity of 24.8% and a book value for share of $38.62 as a September 30 of 4.3% in a quarter in 18.4% on the year-to-date basis. Similar to last quarter's results, our re-insurance segments were net written premium by 45% over the same quarter last year led by the property other than catastrophe line, which was 73% higher than the same quarter one year ago.

Net cash flow from operating activities has been very strong so far this year in <unk>.

A $4 billion, which has helped grow our invested asset base by approximately 20% in the last 12 months.

With new money rates on our fixed income portfolio comfortably above 5%.

Sure.

Continued meaningful tailwind in our net investment income.

Turning to risk management as of October one on a net basis, our peak zone natural look at P&L for a single event one in 250 year return level.

Francois Morin: As for our property catastrophe business, it's worth mentioning that the net written premium in the third quarter of one year ago included approximately 34 million of re-instatement premiums mostly as a result of Hurricane Ian. If we adjust for the impact of re-instatement premiums or rate and net written premium for this line would have been approximately 64% year-over-year. The quarterly bottom line for the segment was excellent with a combined ratio of 80% to 73.5% on the next year XCAP basis producing another rate of profit of $310 billion.

Basically unchanged on a dollar basis from July one and now stands at 10, 1% of tangible shareholders' equity well below our internal limits.

Our capital base group and got stronger during the quarter and now stands at $18 billion.

Our leverage ratio represented as debt plus preferred shares to total capital is currently under 20%, which provides us with significant flexibility as we look to deploy capital as opportunities arise.

Francois Morin: The insurance segment had another very strong quarter with third quarter net premium revenue of 11% over the same quarter one year ago. Similar to last quarter's results, we experienced good growth in most lines of business with the main exception due professional lines or the market remains competitive, particularly in public directors and officers liability. If we exclude professional lines, net written premium would have been 20% higher this quarter compared to the same quarter one year ago.

With these introductory comments, we are now prepared to take your questions.

Thank you if you have a question at this time. Please press star one one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press star one one again and if you.

Francois Morin: Overall market conditions for our insurance and re-instatement remain attractive and we expect the returns on the business under written this year to exceed our long-term targets by a solid margin for some business units. Profitable growth during the period of favorable market conditions is one of the hallmarks of our cycle management strategy and the current hard market is definitely giving us the opportunity to deploy meaningful capital and many areas. Our mortgage segments batting averages consistently been a lead leader and this quarter was no different with a 4.7% combined ratio.

You are using a speaker phone please lift the handset.

Our first question comes from the line of Elyse Greenspan from Wells Fargo.

Thanks. Good morning, My first question was.

I was hoping to get.

Some thoughts on the January one property cat.

Our new wells on the reinsurance side so.

Francois Morin: Net premiums earned were in line with the basket quarters across each of our lines of business, of the United States. Included in our results was approximately 98 million of favorable priori or reserve development in the quarter, net of acquisition expenses, with over 75% of that amount coming from U.S, behind and the rest from other underwriting units. Our delinquency rate at U.S. Amai remains low based on historical averages in close to 85% of our net reserves at U.S. Amai are from post-COVID action.

Where do you think.

Where do you think rates end up next year.

Risk adjusted basis.

Hi, Elyse I think it's still early we have a lot of movement in the marketplace in capital and people are as you can appreciate positioning at all the conferences, but.

Our general consensus and the team when we book the underwriters is that we'll still have.

Improvement in 124, not as big as 143 over flipping to get.

Slight improvement on the reinsurance side of things. What is also I have mentioned before this is not really fully reflecting what we believe has been the.

Francois Morin: The cost of acquisition period at the end of the quarter. Our costs are three segments, our underwriting income reflected 152 million of favorable priori or development on a pre-tax basis, or 4.7 points on the combined ratio was observed across all three segments during and by short damn arms. Current action of U.S. Amai losses across the group were 180 million, approximately half of which are related to U.S, severe conducted sores, with the rest coming from the line of our higher hurricane to Dalian and other global events.

We underwriting at a recent mellberg.

Allocating of capacity by our clients and it remains to be seen how it kind of be reflected and will depend on our clients frankly, but overall, we can expect a very healthy very robust 124 million on property.

And then on your casualty comments, Mark you alluded to that being the.

The third act and really leaning in there on the reinsurance side I was hoping you could just give us a sense of timing on how that will play out.

Francois Morin: Pre-tax net investment income was 71 cents per share of 11% from last quarter as our pre-tax investment income year was up by approximately 18 basis points since last quarter. So our return for our investment portfolio was a negative 40 dips on the U.S, dollar basis for 4 as our fixed income portfolio was impacted by the increase in interest rates during the quarter. And most other asset classes and negative returns in line with broader financial market indices such as the S&P 500 which was down approximately 3.7% in the quarter.

That's a 24 event do you see the reinsurance book shifting more to casualty or do you think it's an environment, where they bolt on property and casualty offer good growth opportunities for the company. It's a great question I think.

We have a big play in property as you saw between the property cat on the reinsurance side that is.

The property other than cap the quota shares.

In between so I think we're still very very much keen on that line of business liability is a bit harder to evaluate right now because I think the first order is going to have to be looking at our plan for 2024 looking at the reserve or development that <unk> talking about our clients towards I think a little bit more complicated for people.

Francois Morin: Net cash will from operating activities has been very strong so far this year in excess of 4 billion which has helped grow our invested asset base by approximately 20% in the last 12 months. With new money rates and our fixed income portfolio comfortably above about 5%, we should continue meaningful tailwinds in our net investment income. Turning to risk management as of October 1 on the net basis are peace zone natural can't PML for a single event 1 and 250 year return level.

Figure out what is it that you have and what they want to do with it going forward in 'twenty four.

So we will have probably some of us things that we may have a renewal they feel a bit more.

Not as stable as it once was.

So I think we'll probably see the early innings to go back to my baseball analogy of that liability and a possibly at one one the one beautiful thing about GL or the ones that and depending on the charter market.

Francois Morin: We're basically unchanged on the dollar basis from July 1 and now stand at 10.1% of tangible shareholders equity. Well below on to our earnings. Our capital based group and got stronger than the quarter and now stands at 18 billion. Our leverage ratio represented as depth plus prefer shares to total capital is currently under 20% which provides us with significant flexibility as we look to deploy capital as opportunities are.

A longer term development on a softening and hardening the GL can it will take a little bit longer to get to where it needs to get to because it takes takes time for you to get the losses reflected in our reserving and we have a good sense of where the ultimate results off from your prior year to adjust and help inform that.

Pricing you're going to have over there. So this is going to be a lot of much more protracted third active second networks.

Francois Morin: With these introductory comments, we are now prepared to take your questions.

That's helpful. Thanks for the color.

Thanks.

Thank you.

One moment for next question.

Our next question comes from the line of Jimmy <unk> from JP Morgan.

Hey, good morning, So first just staying on casualty.

There's been a lot of concern about reserves and obviously if scheduled its a fairly broad market category, but.

Operator: If you have a question at this time, please press star 11 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star 11 again. And if you are using a speakerphone, please lift the handset.

What are your thoughts on overall industry reserves in casualty reserves and then.

Maybe any color on the lines within casualty, where you think there might be an adequate season sort of the drivers of that.

What's driven the reserve issues.

That's a great question, Jimmy I think there is.

Elyse Greenspan: Our first question comes from the line of Elyse Greenspan from Wells Fargo. Thanks, good morning. My first question was hoping to get some thoughts on the January 1 property cat renewals on the re-enter inside. So, where do you think rates end up next year? Well, how do you lead? I think the still early we have a lot of movement the marketplace and capital and people are as you can appreciate positioning after all the conferences, but our general consensus in the team when we talk to underwriters is that we'll still have improvements in 1-1-24, not as big as 1-1-23, but we're going to get a slight improvement on the reinsurance side of things.

Yes, as you said, it's a broad market certainly we've seen some pressure on our results I think we see so you see both an insurance and reinsurance on the reinsurance side, we see some of our clients.

Recognizing adverse in the wait and see up someplace being reported to us I think.

Is coming through we like to think we've been proactive in addressing those issues, but you never quite know for sure Bill Although everything comes through but some of the subsets definitely umbrella is an area that.

That is something that we're watching carefully.

Good thing I think with our book is again, we reward be players in that space in the soft market year. So we're seeing some pain, but not to the same level, we think that maybe others, well and but it's a hot topic in Oregon.

Looking at it.

One thing I would add Jimmy do it through what profit has mentioned is that where you're hearing from the call that it's going to be more acute more of a pressure point on the larger accounts and the smaller accounts I think that the limits deployed there and the uncertainty and the.

Elyse Greenspan: What is also, I mentioned before, this is not really fully reflecting, but we believe has been the re-enterwriting and the re-allocating of capacity by our clients. And that remains to be seen how it's going to be reflected and will depend on the clients, frankly. But overall, we're expected very healthy, very robust, 1-1-24 when we want property. And then on your, you know, casualty comments mark, right, you alluded to that being on, you know, the third act and really leaning in there on the re-enter inside.

The combination of all these years developing is a little bit more.

More than a bit more of a bit more of an urgency in that sector. So we expect a larger accounts, which we don't do a lot of on the insurance side to be the first one to really feel the pressure.

Okay.

And then on mortgage insurance I would have thought and I think most investors thought that thats something that at some point.

Elyse Greenspan: It was hoping you could just give us a sense of, you know, timing on how that will play out. And if that's a 24 event, do you see the re-enterrence bookshifting more to casualty, or do you think it's an environment where they both on property and casualty offer, you know, good growth opportunities for the company.

Would see sort of a step down in your results still strong earnings, but maybe not as strong as they had been the years following COVID-19 because of the release of Covid related reserves.

Wondering how we can sort of get an idea on how much of the COVID-19 related reserves are still on your books and could be released.

Marc Grandisson: The great question. I think the, you know, we have a big plane property, as you saw, between the property cat on the reinsurance side that is in the property other than cats and the poor shares and things between. So I think we're still very, very much keen on that one business. My built is a bit harder to evaluate right now because I think the first order is going to have to be, you know, looking at their plans for 2024, looking at the reserve or development that they are in need to talk about our clients.

<unk>.

It may be.

An ongoing benefit from that in the near term.

The next few quarters.

Well I made that comment.

Close to 85% of our reserves and as U S. R. Meyer from post Covid years.

So so that would mean <unk>, but lets remember that when we were coming out of Covid. We saw just a lot of changes in home prices and home price appreciation.

Marc Grandisson: So it's going to take a little bit more time for this for people to figure out what it is that they have and what they want to do with it coming forward 24. So we'll have probably some of us think that we may have a renewal a little bit more, you know, but not as stable as it once was. So I think we'll probably see the early innings to go back to my baseball analogy of that liability and possibly at one one.

And potential overvaluation right. So when we were setting reserves and in the last few years 'twenty one 'twenty two even.

Until early <unk> 43 that was a concern of ours. So we were somewhat as you would expect us to do somewhat more prudent I'd say in setting our reserves.

Marc Grandisson: The one beautiful thing about GL or the one bad thing depending on the side of the market, you know, it's a longer term development, you know, on the softening and on the hardening. The GL can, you know, it will take a little bit longer to get to where it needs to get to because it takes time for you to get the losses, protecting them and reserving. And we'd have a good sense of where the ultimate results are from your prior year to adjust and help inform the pricing you're going to have over there. So this is going to be a lot of much more protracted third act than second act was. That's helpful.

How that how that plays out.

The delinquencies cure, we don't know could there be further.

Favorable development, maybe but.

I'd say for the most part what's really been happening. The last couple of years is just eight I'd say very much again, a portion of the housing market, which has been just exploded and then created a different a different set of Canada data points that we're trying to analyze them. That's how we based our will be based on reserves on so.

So hopefully that answered it gives you a bit of color on the on the question here I'll just add one thing Jamie on the industry. The industry is extremely disciplined.

Elyse Greenspan: Thanks for the color. Thanks.

Operator: Thank you.

Operator: One moment for our next question.

Again, very nice thing to see around us so from an ongoing perspective, putting the reserve for a second if I can talk to the our expectations and we think that.

Jimmy Bueller: Our next question comes from the line of Jimmy Bueller from JP Morgan. Hey, good morning. So first, just staying on casualty.

There is still risk on your item, but the credit quality of our portfolio. The housing supply imbalance that you hear from Crossrail and the fact that we have a lot of LTE equity into our policy in policing policies enforces is.

Marc Grandisson: There's been a lot of concern about reserves and obviously, casualties are fairly broad market category, but what are your thoughts on overall industry reserves and casualty, your reserves, and then maybe any color on the lines within casualty where you think there might be inadequacies and sort of the drivers of that, or what's driven those nerve issues. As a great question, Jimmy, I think there's, yeah, as you said, it's a flaw in market.

This is Greg.

Really really good and when we say that our mortgage growth is also doing very well and that's what we're getting ready to place.

Thank you.

Okay.

Thank you one moment for our next question.

Marc Grandisson: Certainly, we've seen some pressure in our own results. I think we see, so you see both an insurance and insurance on the research side, you see some of our clients, recognizing adverts and the latency of some clients being reported to us. I think it is coming through. We like to think we've been proactive in addressing those issues, but you never quite know for sure if Dell or everything comes through. But some of the stuff that's definitely umbrella is an area that is something that we're washing carefully.

Our next question comes from the line of Tracy <unk> from Barclays.

Hey, Mark.

Posted double digit insurance premium growth this quarter, the pace has decelerated a bit over the last year.

Looks like peak insurance premium growth was in mid 'twenty, one and that might be a tough benchmark given you've grown a ton in professional liability and you are shrinking their as you pointed out.

We expect insurance premium growth at double digits to be sustainable going forward or should we see it followed the high single digits because of the professional lines headwind.

Marc Grandisson: The good thing I think with our book is, again, we wanted big players in that space in the soft market here. So we're seeing some things, but not the same other we think that maybe others well, but you know, it's a high topic and we're going to keep looking at it.

Just wondering if it's fair to assume that you prefer deploying capital into reinsurance now all else being equal.

In terms of return expectations I think your instinct is right on I think reinsurance is providing right now very very healthy returns and we expect this to continue into 2004 and 25 to be honest, but the insurance group I think it's one quarter a couple of moving parts due to some accounting thing timing and stuff here and there sometimes but that's why as I mentioned.

Marc Grandisson: The one thing I would add, Jimmy, to what Father just mentioned, is that you're hearing from the call that it's going to be more acute, more of a pressure point on the larger accounts and the smaller accounts. I think that the limits deployed there and the uncertainty and the combination of all these years developing is a little bit more, a little bit more of an urgency in that sector. So we expect a larger account, which we don't do a lot of on the insurance side to be the first one to really feel a pressure.

The growth in our lineup, we like to see growth into.

I'm very pleased to see because this is where I would expect the team to grow with the market conditions are great there and I would expect.

<unk>.

Some of those non professional lines to actually maybe carried a david more going forward I won't be surprised that we could go back above 10% next quarter and into 'twenty and into 'twenty four so I'm not I don't I don't see one quarter the trend to be honest.

Jimmy Bueller: And then on mortgage insurance, I would have thought, and I think most investors thought that at some point, you would see sort of a step down in your results still strong earnings, but maybe not as strong as they'd been the years following COVID because of the release of COVID-related reserves. Just wondering how we can sort of get an idea on how much of the COVID-related reserves are still on your books and could be released versus maybe an ongoing benefit from that in the next few years.

All right very helpful.

You slightly shortened the duration of your asset portfolio in September to 2.97 years from 3.03 years in June it feels like Youre, taking duration asset mismatch because my liabilities are much longer dated.

Given the shape of the yield curve is beginning to show signs of Steepening.

Tad bit less inverted going forwards would you consider lengthening your asset duration or you feel comfortable with the sub three year duration level.

Jimmy Bueller: Well, I made the comment close to 85% of our reserves in the US or from post-COVID years. So that would mean 20 and after, but let's remember that when we were coming out of COVID, we saw just a lot of changes in home prices, home price appreciation, and potential overvaluation. So when we were sending reserves in the last few years, 21, 22, even up until early 23, that was a concern of ours.

Yes, good point I think the duration is probably the lowest it's been in a long long time and that's just.

Our investment professionals here again and make the decisions and there is obviously a little bit of tactics that's involved in Uganda.

They want to play at certain one time, but.

Right for sure absolutely.

First rates, we think.

Andre the curve ended up being a bit more attractive I mean, we'd certainly consider extending duration, a little bit and we got a bit of room. There anyway, just to match with our liabilities to make sure that we're not mismatch. There. So that's certainly something that we'll look at in the coming months and quarters, yes.

Jimmy Bueller: So we were somewhat, as you would expect us to do, someone more proven by saying, sending our reserves, how that plays out when the link with these cure. We don't know because there'd be further favorable development maybe, but I say for the most part, what's really been happening in the last couple of years is just, I'd say very much again, a function of the housing market, which has been just exploded and then created a different set of data points that we're trying to analyze, and that's how we based our resources on. So hopefully that gives you a bit of color on the question.

Thank you.

Thank you one moment for our next question.

Our next question comes from the line of Yao Rone Kinner from Jefferies.

Thank you good morning.

I guess first question. It sounds like you are pretty constructive looking into one 124 could you maybe talk about your prioritization of capital and maybe give us a way to think about maybe potential.

Marc Grandisson: I'll just add one day to me on the industry, the industry is extremely disciplined. Again, very nice thing to see around us. So from an ongoing perspective, putting the reserve for one second, if I can talk to our expectations, and we think that they're filled with on your items, but the credit quality of our portfolio, the housing supply and balance that you hear from Francois, and the fact that we have a lot of LT equity into a policy and policies and forces is, it looks really, really good. So when we think that our mortgage growth is also doing very well, that's what we mean. It's a very good place. Thank you.

<unk> capital you have to.

Deploy into the insurance and reinsurance markets.

Well, yes, we are constructive on one one I think we would Morgan I'd also add I think it's a really good market.

In totality, there's some pockets that are certainly better than others.

We think that the internal capital generation, we've been able to get the.

January.

In the last few quarters is gives us the ability to really grow and take advantage of the opportunities that we think have a good chance of being there.

Tracy Bengui: One moment for our next question. Our next question comes from the line of Tracy Bengui from Barclays. Hey, while you posted double digit insurance premium growth this quarter, the pace has decelerated a bit over the last years. It looks like peak insurance premium growth was in mid-21 and that might be a tough benchmark given you grown a ton in professional ability and you are shrinking there as you pointed out. Could we expect insurance premium growth at double digits to be sustainable going forward or should we see it fall to high single digits because of the professional line's headwind?

Again, we don't we don't make the market we participate in the market. So if the market is as positive as we think it can be then we'll be happy to step in and take a bigger share of it but I.

I think the fact that we've got capital flexibility has always been one of the only business.

Maybe the one of the most important things in our strategy. All along is we want to make sure that we have plenty of capital to deploy when the market's right and.

So far we've been able to do that so yeah, Ron if I look at a high level the way we think about it.

We think about it is different perhaps than even our underwriting units, meaning that they'd already.

The recovery how much capital is allocated than at the beginning of the period I want to remind everyone that people who are writing the business underwriting the rights of the business.

Francois Morin: And I'm just wondering if it's fair to assume that you prefer deploying capital into re-insurance now all else being equal. In terms of return expectations, I think your instinct is right on. I think re-insurance is providing right not very, very healthy returns and we expect it to continue into 24 and 25 to be on it. But the insurance group, I think it's one quarter, the couple moving parts through there, some accounting, thing timing and stuff here and there, some times.

And then after that.

Then when the calendar to be using and based on the planning and all the expectations that we have.

Our message this robust Ben there is no capital constraint or issue concerns that that pertains to you guys. If you see the market being at better and even better than we saw feel free to deploy more capital. If you. If you wish to do so so there's definitely this all in all hands on deck go forward. If we can write the business.

Francois Morin: But that's not what I mentioned. The growth in the line that we like to see growth into, I'm very pleased to see because this is where I would expect a team to grow into that the market conditions are great there. And I would expect even some of those non-professional lines to actually maybe carry the day bit more going forward. I wouldn't be surprised that we could go back about 10% next quarter into 20 and 24. So I don't see one quarter of the trend to be on.

That's one thing that's really nice and we will then.

Attribute of capital up at the written business. That's what we do every year on the property cat side, which is probably the more interesting one for what it's worth to you. We're about 85% of allocated to the reinsurance group in terms of our P&L at that <unk> mentioned and I think it's because the returns are there.

Francois Morin: I'm very helpful. You slightly shortened the duration of your asset portfolio on September to 2.97 years from 3.03 years in June. It feels like you're taking durational asset mismatch because the MI liabilities are much longer durated. Given the shape of the yield curve is beginning to show signs of steepening, I mean to tad bit less inverted. Going forward, would you consider lengthening your asset duration or you feel comfortable with this sub-three-year duration level?

A little bit more.

Favorable on the reinsurance side and that we have that discussion at the group level. That's one exception. So what do we have an acute or a specific area of the capital will sit down with the insurance group and reinsurance group with Nicholas Nicholas facilitating the whole discussion I will sort of decided roughly broadly where we want to allocate capital.

Yes.

I appreciate that and then certainly I think the capital availability and the kind of the appetite to deploy as a very important part of the story.

Francois Morin: Good point. I think durations probably the lowest it's been in a long, long time and that's just our investment professionals here again that make the decisions and there's obviously a little bit of tactics that's involved in Canada. Where do they want to play at a certain one in time, but for sure, if interest rates we think the longer the curve ends up being a bit more attractive, I mean we certainly consider extending the durations a little bit and we've got a bit of room there anyway to match with the liabilities and make sure that we're not mismatched there. So that's certainly something that we'll look at in the coming months and quarters yet.

I guess from that perspective is there anything you can offer us in terms of an attempt to quantify the available capacity or is that something that we will just have to watch and see.

Operator: Thank you.

Yes, I mean, we certainly we have some capital.

Operator: One moment for our next question.

There were plenty below weighted capital available.

We just don't know what the market will look like at one one so that's where I would say.

No.

Youre right probably.

Have to wait and see a little bit and see how <unk> play out and then well.

We'll have the ability to.

To do something with the excess capital.

Okay and then my other question.

On public D&O and fiber, where we're clearly seeing a little bit of.

Pressure and competitive pressure there.

You still view rates as adequate there and are they clearing the loss cost trends yes.

Yaron Kinar: Our next question comes from the line of your own, Kinner from Jeffries. Thank you. Good morning. First question, it sounds like you are pretty constructive looking into 1-24. Can you maybe talk about your prioritization of capital and maybe give us a way to think about maybe potential available capital you have to deploy into the insurance and insurance market? Well, yes, we are constructive on one one. I think we, we, we, we, we, we, Marc and I both said it.

Yes, our returns expectation on both these lines fiber and <unk> is still very very healthy.

Thank you.

Yes.

Thank you one moment for our next question.

Our next question comes from the line of Joshua Shanker from Bank of America.

Yes. Thank you for taking my question.

With the higher Retentions.

This quarter in terms of.

Yaron Kinar: I think it's a, it's a really good market. In totality, there's, there's some pockets that are certainly better than others. You know, we think that, you know, the internal capital generation, we've been able to, to, to, to generate in the, in the last few quarters is, gives us the ability to really grow and take advantage of the opportunities that we think have a good chance of being there. You know, again, we don't, we don't, we don't make the market. We participate in the market. So if the market is as positive as we think it can be, then we'll, we'll be happy to step in and, and pick a bigger share of it.

Premiums ceded a.

Can you.

Maybe line by line or dig in a little bit about which lines of business. You are retaining more and is that a signal that you've gotten to the point, where you have enough information that you love the profitability more and want to keep it yourself or if you're looking at your capital and saying you know we have the cap.

Deploy select either bigger slice the pie how did that all come together.

You answered the question beautifully I mean by hand by asking a question you gave the answer I think all of those things you said are true.

Marc Grandisson: But I think, you know, the fact that we've got capital flexibility is, has always been one of the, and, and, you know, one of the biggest opportunities, one of the most important things in our strategy all along is, we want to make sure that we have, you know, plenty capital to deploy when the market's right and, and so far, we've been able to do that. So you know, if I look at the high level, the way we think about, we, we think about it is different, perhaps, and even our underwriting unit, meaning that they don't really, you know, they would, nobody know how much capital delegates to them at the beginning of the field.

I guess it aligned in a second but to your point is exactly right.

We are growing through this hard market.

<unk>.

There is still value reinsurance you cannot go without reinsurance you'd still need it.

For various reasons limits management risk management and also information like reinsurers are providing us on the Asia side with valuable information about what the market is in the state of the markets and we don't want to be an outlier out there. So it's always good to have this as a as additional value proposition from the reinsurance companies in terms of.

Marc Grandisson: I want to remind everyone that people who write the business are underwriting the rights to business. And then we after that, you know, charge in with the capital to be using. And based on the planning and all the expectations that they have, our message that for us then, there is no capital constrained or issue of concerns that that pertains to you guys. If you see the market being better and even better than we thought, feel free to deploy more capital, if you, if you wish to do so.

What we decided to do it after three years Youre quite right that we had been building as Matt also mentioned a significant amount of capital through our mortgage earnings. So thats certainly something that was helpful and available to deploy.

In other areas and that also helps being able to maintain and retain more net I think if you at a high level I think that the patterns of buying we're buying.

A fair amount of less on the liability lines, specifically those that went through the first act and what do you have a lot of good uplift.

Marc Grandisson: So there's definitely this all, you know, all hands on deck, go forward. If we can't invite the business. That's one thing that's really nice. And we'll then, uh, contribute the capital up to the original business. That's what we do every year on the property cap side, which is probably more interesting. One for four years work to you, and we're about 85% allocated to the insurance group in terms of our PML that's, that's the promised mention.

So we definitely saw that happening on a property.

Even though the property is very hard as we all know.

Since last year.

Is a much more volatile line of business that we still maintain our excess of loss on the cat side until volume quota share a significant portion of that business as well so.

Marc Grandisson: And I think it's because, you know, the returns are there, you know, are a little bit more, you know, favorable on the insurance line. And then we have that discussion of the group level. That's one exception. So why don't we have an acute or specific area of the capital. We'll sit down with the insurance group and insurance group with Nicholas, negotiating the whole discussion and we'll sort of decide which roughly, you know, broadly what we want to allocate capital.

Paul.

It's meant to be a balancing act between providing relief or.

Volatility protection to some extent and information, but you're quite right, having more capital definitely helped us take more net on our balance sheet.

And switching gears, a little bit when you have a 25% are we quarter youre, making a lot of money and you have.

Marc Grandisson: I appreciate that. And, and certainly I think the capital availability and the, because the appetite to deploy is a very important part of the arch story. And I guess from that perspective, is there anything you can offer us in terms of an attempt to quantify the available capacity or is that something that we'll just have to watch and see. Yeah, I mean, we certainly, we, we have some capital, you know, have plenty, plenty of capital available.

Large team that as contributors to that result.

I assume they would like to be paid for their good work how should we think we've not seen a quarter like this a long time in a year like this how should we think about.

The pattern in the cost of discretionary comp, where it hits, the P&L and how it compared with prior years.

Great question.

Sorry.

We.

Marc Grandisson: We just don't know what the market will look like at one and one. So that's where I say, you know, you're right. Probably have to wait to see a little bit see how one one's layout. And then we'll have the ability to, you know, to do something with the extra capital. Okay. Okay, and then my other question, just on public D&O and fiber, where we're clearly seeing a little bit of pressure and competitive pressure there, do you still view rates as adequate there, and are they clearing the lost cost trends?

Just again in terms of timing right there are incentive compensation decisions are.

<unk> made in the first quarter of.

Will be made in February of next year.

But no question that throughout the year, we accrue.

<unk> bonuses.

Based on what we think that peripheral mark performance might look like and there is effectively a true up that takes place in the first quarter when the final amounts.

Marc Grandisson: Yes, I return the petition from both these long fiber and D&O, or it feels very, very healthy. Thank you.

Are determined.

Something we're keeping an eye on so I don't know if there'll be a.

Early adjustment in the fourth quarter or not something will be looking at.

Carefully so that we don't get it.

The store too much the first quarter next year, obviously the board has final.

And how much.

Operator: One moment for our next question. Our next question comes from the line of Joshua Shanker from Bank of America. Yeah, thank you for taking my question. You know, with the higher retention, this quarter in terms of premium seeded, can you go maybe line by line or dig in a little bit about which lines of business you're retaining more? And is that a signal that you've gotten to the point where you have enough information that you love the profitability more and want to keep it yourself, or is you're looking at your capital and thing?

<unk> will be available to pay our troops. So that's.

A little bit.

Don't want to front run it we want to be reasonable and not introduce too much volatility in the numbers on the opex side, but that's certainly something that will take a look at in the fourth quarter to make sure we're not missing anything here.

Thank you very much and congratulations again.

Thank you.

One moment for our next question.

Our next question comes from the line of Alex Scott from Goldman Sachs.

Hi, good morning.

First one I had is on the Attritional loss ratio in the reinsurance segment I was just interested if you could give us.

Operator: You know, we have the capital deployed, so let's eat a bigger slice of the pie. How did that all come together? I think you answered the question beautifully. I mean, by asking a question, you get the answer. I think it's all those things you said are true. You know, I'll get to the line in a second, but to your point is exactly right, you know, we're going through this hard market, and we still value our insurance.

A little more color.

What's driving this year.

Favorable performance year over year, and if there's anything nuanced, we should be thinking about or if it's just.

The pricing environment being as strong as it is.

Yes, yes.

Two quick things there one is and we said it before that and it goes both ways, we think of reinsurance as a line of business or a segment that we.

Operator: You cannot go without our interest. You still need it for various reasons, you know, limits, management, risk management, and also information like reinsurers are providing us on the insurance side with valuable information about what the market is and say is the market, and we don't want to be an outlier out there. So it's always good to have this as the additional value proposition from the reinsurance company. In terms of what we decided to do it after we used your part like, you know, we have been building, as Fruss mentioned, the significant amount of capital through our mortgage earnings.

We think it's better analyzed on a trailing 12 months basis, we think looking at it quarterly.

There'll be some good there'll be some bad and we've said in the past orders, where we have elevated attritional claim activity we said.

Don't panic.

Don't over think it in the same way here I think so we would certainly encourage everybody to look at it on a trailing 12 month basis.

Operator: So that's certainly something that was helpful and available to deploy. You know, there are areas and that also helps being able to maintain and retain more than that. I think if you at a high level, I think that the patterns of buying, we're buying a fair amount left on the liability line, specifically those that went through their first act and really had a lot of good uplift. So we've definitely saw that happening on the property, even though the property is very hard, as we all know, since last year, this is a much more volatile line of business than we still maintain our access of wealth in the cast line, and still buy a quarter share or a significant quarter share on that business as well.

To have a better view of the long term prospects of this segment.

The other thing I'd say is also obviously, we've grown a bit more in properties there relative to the other lines. So bye.

By nature right, our ex cat combined ratio should probably come down and it has as a result of again the growth the significant growth we've got both in property cat and property other than gas.

Got it very helpful.

I wanted to ask a follow up on the comments you made on casualty reinsurance.

Yes.

Interested in.

What is changing that's causing more of this commentary to sort of bubble to the surface.

Operator: So people who are involved, it's meant to be the balancing act between providing relief or volatility protection to some extent and information, but you're quite right, having more capital definitely helped us take more than that on our balance sheet. And switching gears a little bit, when you have a 25% RWe quarter, you're making a lot of money, and you have a large team that has contributed to that result, I assume they'd like to be paid for their good work.

We've heard it from some of the European reinsurers as well.

Is it.

Is it truly just there.

Starting to see reserves develop in a poor way for some companies there.

Is there something that's changed about the social inflation environment I mean, what what.

Do you think is the underlying driver or drivers.

Yes, I think the industry is.

How does a couple of things come along at the same time and they Unfortunately don't go in the right direction for both for all our industry. If you have different casualty first we had as I mentioned in my comments, we had a bit of a slowdown in activity, including core activities settlement activity.

Operator: How should we think, we've not seen a quarter like this in a long time in a year like this? How should we think about the pattern and the cost of discretionary comp where it hits the P&L and how it should compare with prior years? Great question, I'm sorry. You know, we just again in terms of timing, right, or in terms of compensation decisions are made in the first quarter. We'll be made in February of next year.

And we also have as you as we all know there's a lot of litigation funding is a bit more aggressiveness coming from Atlanta, Florida, certainly something that you could described to be social inflation, but that's not really something new but there was sort of a lull in this market. It was sort of the various spike if you will.

Operator: But no question that throughout the year we accrue expected bonuses based on what we think the first former performance might look like and there's effectively a true rough that takes place in the first quarter when the final amounts are determined. You know, something we're keeping an eye on, so I don't know if there'll be an early adjustment in the fourth quarter or not. Something we'll be looking at carefully so that we don't get to, you know, distort too much the first quarter next year.

Between 2000 2021 to really middle of this year already of this year. So I think right now you have sort of a refresh and re updating all the information about the laws are and where we are and what could happen with demand being updated.

And mid more current at the same time, we have reprised.

Price that business as an industry in 2019 with inflation in the 2% now inflation is north of 567, depending on where you look at so at the same time course reopened claims are being adjudicated, we annualize youll have to account for a higher inflation number and that is that is a classic.

Operator: Obviously the board has final, you know, say in how much money will be available to pay or prove so that's, you know, a little bit of, you know, we don't want to front-run it. We want to be reasonable and not, you know, introduce too much volatility and the numbers on the opposite side. But that's certainly something that we'll take a look at in the fourth quarter to make sure we're happy this year.

Case of having a couple of things going against you.

Nothing nothing in the industry did on its own is just the economy and the environment and the riskiness of the environment. So I think that we're facing all collectively as an industry.

That phenomenon and what I like about the industry's capability is its reacting and Thats, what you hear and Thats something that we should be very very happy for collectively as an industry.

Alex Scott: Thank you very much and congratulations. Thank you.

Alex Scott: One moment for our next question. Our next question comes from the line of Alex Scott from Goldman Sachs. Hi, good morning. The first one I have is on the traditional law ratio in the reinsurance segment. I was just interested if you could give it a little more color around, you know, just what's driving this year, you know, favorable performance year over year. And if there's anything you want, we should be thinking about, or if it's just, you know, the pricing environment being as strong as it is. Yeah, yeah. Two quick things there are one is, and we said it before, and it goes both ways.

The other the other call that you've heard that this quarter recognize it and once we recognized an issue and a problem people are very good and very adept at addressing it and I think thats whats going on but I think there are couple of combination coming in very very short order.

Because of the <unk> surrounding environment I think is what largely drives what's going on right now.

Thanks for all the detail sure.

Thank you one moment for our next question.

Our next question comes from the line of Michael Zaremski from BMO capital markets.

Hey, good morning.

Switching gears to the.

Marc Grandisson: We think of reinsurance as a line of business or a segment that we, you know, we think it's better analyzed on the traveling 12 months basis. We think looking at it quarterly, you know, there'll be some good, there'll be some bad. And we've settled in past orders where we have elevated the traditional claim activity. We said, you know, don't panic, don't, you know, don't overthink it in the same way here, I think.

And good morning to the investment portfolio.

The net realized.

Losses were are somewhat outsized again this quarter I know they run below the line, but any color on those actually crystallizing to take advantage of.

That higher rates are is there is there noise in there from unrealized staff or maybe the LPT transactions in the past.

Marc Grandisson: So we would certainly encourage everybody here to look at a three and 12 month basis to have a better view of the long term kind of prospects of the segment. The other thing I say is also, obviously, we've grown a bit more in properties than relative to the other line. So by nature or ex-cath to my ratio should probably come down than it had as a result of, again, the growth, the significant growth, we've had both in property gas and property other than gas. Got it, very helpful.

Yes, I mean, it's mostly around kind of crystallizing some losses I think.

It's a process we go through.

For each of security on the fixed income side, where we make the determination.

Is it appropriate to the <unk>.

Well some of those and redeploy the proceeds of that at higher yields in our investment team does that so yes, there are always going to be some some realized losses coming through the fixed income obviously, the equity portfolio, which is not huge but still there is.

Fbl's security like fair value option securities, including equities that are effectively marked to market and that comes through the realized gains and losses line in the income and the bond income statements. So those are the two big items. There is a little bit of other stuff going on that is all.

Marc Grandisson: I wanted to ask a follow-up on the comments you made on casualty reinsurance. And yeah, I'm just interested in, you know, what is changing it's causing more of this commentary to sort of bubble to the surface? I mean, you know, we've heard from some of the European reinsurance as well. Is it, I mean, is it truly just that they're, you know, starting to see reserves develop in a poor way for some companies?

But in the week, so more to go there, but thats directionally hopefully that.

That's just normal course of action.

Okay.

And lastly.

Marc Grandisson: Or, you know, is there something that's changed about the social inflation environment? I mean, what do you think is the unknowing driver or driver? Yeah, I think the industry is, there's a couple of things going on at the same time and they unfortunately don't go in the right direction for both of our industry, if you have, it can casualty. First, we have, and I mentioned in my comment, we have a bit of a slow down in activity, including core activities, Salmon activity, and we also have, as we all know, there's a lot of litigation funding, there's a bit more aggressiveness coming from the native bar, that certainly something that you could strive to be social inflation, but that's not really something new, but there was sort of a law in this market, it was sort of a sort of a respect, if you will, between 2020-2021 to really middle of this year, early of this year, so I think right now we have sort of a refresh, re-updating all the information about the law, to the where we are and what could happen, with the demand being updated and made more current.

<unk>.

On.

My understanding for me to put out there.

Second comment letter, maybe different they call it something else, but on the <unk>.

National tax changes that will take place.

Any way you could offer us some color on.

What's how how things are going to play out base case over the coming year or two or.

The step up.

And it goes as plan does the step up in tax rate happen in 'twenty four 'twenty five event or both.

Yes.

It's again very early so it's too early unfortunately to give a clearer kind of views on what we think.

Could happen or because they are still developing the.

Laws and we expect more progress on that before the end of the year, but at a high level. It doesn't start with one start if it goes through until 2025. So there is not no it back for 2024.

And we will be evaluating.

<unk>.

Marc Grandisson: At the same time, we have, we have, we've tried that business of an industry in 1519 with inflation and that's 2%. Now inflation is north of 5, 6, 7, depending on where you look at. So at the same time, of course, we open things of being a dedicated, reanalyed, you have to account for a higher inflation number. And that is, that is a classic case of having a couple things going against you.

Canada made public some some target tax rate that.

They will try to get to.

But again more to come I think what we will do our best to keep you apprised of how we think about it probably on the next call, but until we have more finality more clarity on where it's going to land I think it's a bit premature to give you too much too many details here.

Okay. Thank you.

Marc Grandisson: Nothing, nothing an industry did on its own, it showed the economy and the environment and the riskiness of the environment. So I think that we're facing all collectively as an industry, that phenomenon. And what I like about the industry's capability is it's reacting. And that's what you hear. And that's something that we should be very, very happy for, collectively as an industry.

Yes.

Thank you.

One moment for our next question.

Okay.

Our next question comes from the line of Meyer Shields from Keefe Bruyette <unk> Woods.

Alright, great. Thanks, a lot.

First question on I guess.

Marc Grandisson: The other, the other call that you heard, that this quarter, recognize it. And once you recognize an issue and a problem, people are very good and very adapt that addressing it. And I think that's what's going on. So I think there's a couple of combinations coming in very, very short order. Because of the surrounding environment, I think it's what largely drives what's going on right now. Thanks for all the detail.

The reinsurance.

This year like January 2023, we saw not only significant increases in property cat, but we saw changes in program structure with higher attachment point is there anything analogous to that that we should see on the casualty re side in 2024 or is it just going to be a great story.

Marc Grandisson: Thank you.

Probably more of a rate story the buying pattern on GL is mostly in our core share, but there's a lot of quota share repurchase in that segment. That's also certainly something.

Michael Zuremsky: One moment for our next question. Our next question comes from the line of Michael Zuremsky from BMO Capital Markets. Hey, morning.

We prefer to focus our capacity on those of you who followed US for years now this is where we prefer to focus on capacity on the excess of loss monitoring people's already by a whole lot of people don't put out.

Francois Morin: Here's to the morning to the investment portfolio. So the net realized losses were somewhat outsized. Again, this quarter, I know they run below the line, but any color of those are you actually crystallizing to take advantage of, you know, the higher rates or is there noise in there from unrealized stuff or maybe the LPT transactions in the past. Yeah, I mean, it's mostly around kind of crystallizing some losses. I think, you know, it's a process we go through for each security on the fixed income side where, you know, we make the determination.

60, <unk> hundred million dollars limit. So we don't have a similar kind of risk ecmo. The risks vertical is not as big and in terms of event.

Like a cat portfolio, you could see where things are accumulating can generate unwritten arguments about that exposure in the liability side. It's not it's not the same as already have a necessarily a one or two event that could really impact.

Why what area of your GL. So I think we'll see a lot more silver and short answer more on a proportionate basis and some of the excess of loss here and there.

It's not very similar it's not at all similar to the property market.

Francois Morin: Is it appropriate to sell some of those and read the proceeds at high or yield and our investment team does that. So yes, there are going to be some some realized losses coming through the fixed income. Obviously, the equity portfolio, which is not huge, but still there's, you know, FBO security like their value option securities, including equities that are effectively marked a market and that comes through the realized game, the losses line in the bond income statement.

Okay, that's very helpful.

And second question and hopefully I can ask.

In a way that makes sense when we talk about.

Reserve problems from older accident years.

Driving casualty rate increases to accelerate it.

That's what the industry can over earned in 2024 and backfill or is it because the recalculated older years losses means that current rates are actually not as adequate as we thought.

Francois Morin: So those are the two big items. There's a little bit of other stuff going on that is a little bit in the week. So I wouldn't want to go there, but that's directionally, hopefully that's just normal, of Action with me.

I think it's a louder and Maya I mean, it is a bit of the FERC formula to be honest with you when people will have to.

Recognize those losses, if they have them.

I do believe as we've talked about modules as well as we do you an accurate yourself the reserving process feeds into the pricing process.

Francois Morin: Okay, and lastly, my understanding from you to put out, there's a second comment letter, maybe it's different, they call it something else, but on the potential tax changes that will take place are, you know, any way you could offer us some color on, you know, what's how things are going to play out base case over the coming year or two or, you know, it's the step up, if everything goes as planned, does the step up in tax rate happen in 24 or 25 event or both? Yeah, but it's, again, very early, so it's too early, unfortunately, to give a clear kind of views on what, you know, we think could happen, or because there's still developing the laws, and we expect more progress on that before the end of the year, but at a high level, it doesn't start, it wouldn't start if it goes through until 2025, so there's no impact for 2024, and we will be evaluating, you know, they, they, you know, can they, they publish some, some target tax rate that they, they will, you know, try to get to, but again, more to come, I think we'll do our best to keep you surprised of how we think about it, probably on the next call, but until we have more of finality, more clarity on the where it's going to land, I think it's a pretty mature thing to give you too much, too many details here. Okay, thank you.

And clearly if we have a reserving that's a bit higher than you would expect that it will help inform your loss ratio historically.

<unk> them to the level of analysis that helps get you to that price increase that you're looking at so the past as it's developing will happen.

Inevitably lead you to having to charge more.

The reason, we don't do a whole lot of large GL for that matter is precisely because of your second point, which was it has been historically a little bit one thing and on the right level in the renewable side.

Okay.

Some about recent years for the industry, but that's very helpful. Thank you. Thank you.

Operator: Thank you.

Thank you.

One moment for our next question.

Our next question comes from the line of Bob Huang from Morgan Stanley.

Hi, Thank you congratulations on the quarter just a quick question on your insurance segment loss ratio.

Year loss ratio improved for about 30 bps.

Just given just the strong pricing.

Environment.

Suddenly expect a little bit better improvement in loss ratio is there any.

In the loss trends that probably differed from how you thought about your loss picks in the past.

Just any comments around that.

Hi, David.

I mean, I think the answer is really around like us being approved and say there's any initial loss picks we don't want to get into the.

Meyer Shields: One moment for our next question. Our next question comes in the line of Myr Shields from Keith, Brue and Woods. Sorry, great. Thank you so much. First question on, I guess, casualty reinsuring. This year, like January 2023, we saw not only significant increases in property cap, but we saw changes in program structures with higher attachment points. Is there anything analogous to that that we should see on the casualty resize in 2024?

The game of being overly optimistic there is still a lot of risk out there theres still a lot of uncertainty when we priced the business whether again, it's all about casualty loss trends in particular, that's an area that we're watching carefully so we'd rather.

It's been our model for many many years is pick.

Pick a realistic out a bit more conservative.

Initial loss pick on.

When we booked the business and then react to the data when it comes it so.

We're hopeful there could be good news down the road, but for the time being we're very happy with our loss picks.

Meyer Shields: Is it just going to be a great story? Probably more of a great story. The buying pattern on GL is mostly on a quarter share, there's a lot of our capacity on those of you who have followed us for years. This is what we prefer to focus on capacity. On the excess of loss, people don't buy a whole lot. People don't go out, let's say like 60, 80, 100 million dollars a minute, so we don't have a similar kind of risk economic risk vertical is not as big.

Okay. Thank you for that.

Second question is a follow up on the reinsurance core combined ratio obviously it was very strong.

You mentioned that a lot of it's due to business mix shift shifting towards property.

And then because of that and then you can actually have that improving combined rate loss ratio there.

Just curious if we were to think about.

Going forward the run rate.

<unk> ratio for your reinsurance segment based on the comments. So far is it fair to sort of assume that it's going to be closer to what you printed over the last two quarter and probably better than the prior quarters is that a fair way to think about it just from a modeling perspective.

Meyer Shields: In terms of events, like a cap portfolio, you could see where things are accumulating, they can generate hundreds and hundreds of thousands of exposure. In the liability side, it's not the same. You don't really have a necessarily a one or two event activity impact, you know, such a wide one area of your GL. So I think we'll see a lot more further in sort of answer more on a quarter share basis and some of the excess of loss here and there.

Again.

I mentioned like the thinking around trailing 12 months, which is where I would start to help you.

With assumptions I would if you are going to we think about it in totality around the combined ratio, but if you breakdown the loss and the expense ratio, yes, maybe there is a bit given the growth maybe there's potentially the latest quarter of Opex is probably more sustainable given what we've been able to.

Meyer Shields: It's not very similar, it's not at all similar to the property market. Thank you very much. Okay, that's very helpful. And second question and hopefully I can ask this in a way that makes sense. When we talk about reserved problems from older accident years, ultimately driving casualty rate increases to accelerate, if that's the industry can over earn in 2024 and backfill or it's because the recalculated older years losses mean that current rates are actually not as adequate as we thought.

To generate that premium that growth with the same level of resources.

But on the loss ratio side I think it's just I would be careful not to over.

I mean give too much weight to delay the latest quarter.

Meyer Shields: I think it's a ladder. I mean, there's a bit of the firm former to be honest with you, when people have to recognize those losses, if they haven't. I do believe, as we talk about Mario, you know that as well as we do, you're an actor yourself, the reserving process, feeding the pricing process. And clearly, if we have a reserving that's a bit higher than expected, you will help inform your loss ratio historically, you have to put the trend on them.

Okay. Thank you and congrats again on the quarter.

Thank you.

Thank you.

One moment for our next question.

Our next question comes from the line of Brian Meredith from UBS.

Thanks, a couple of questions here first just on the EMS segment.

Meyer Shields: The young level analysis that helps get you to the pricing increase that you're looking at. So, the path as it's developing will have will inevitably lead you to having to charge more. And the reason we don't do a lot of large GL for that matter is precisely because of your second point, which was it's been historically a little bit wanting in on the rate level. Okay, that's, you know, worrisome about recent years for the industry, but that's very helpful. Thank you.

I know theres, clearly some market pressures, but NII W definitely down year over year and it looks like just looking at some of the stats you all had been losing some market share.

Meyer Shields: One moment for our next question.

And the Ams segment is that intentional.

Do you have any concerns about.

The outlook here on the EMI as far as delinquencies or is it more related to perhaps just better use of capital elsewhere.

It's more the latter than the former.

I would actually say tell you Brian that the market is better this year than it was even last year. So.

One would argue that we might we might change.

The way, we interact with the market over the next 12 to 24 months, but certainly at heart.

Francois Morin: Our next question comes from the line above Huang from Morgan Stanley. Hi, thank you. Congratulations on the quarter. Just a quick question on your insurance segments loss ratio year on year loss ratio improved for about 30 did. But just given just the strong E and S pricing environment, shouldn't we expect a little bit better improvement in loss ratio, is there anything in the loss trends that probably differ from how you thought about your loss picks in the past.

We have been saying that to you historically hasnt changed last quarter, which in terms of the relative returns based on the three segments on the underwriting segments.

<unk> is a third one but a very strong one I would say at this point in time, but.

Again, it's more a reflection of the relative opportunity between the units than anything else in.

And the market, Brian I'll tell you the market is very very disciplined we're very impressed by the by the industry of the <unk> industry.

Good good to hear and then I guess my second question Mark as I think about it.

Francois Morin: Just see if there are any comment around that. Maybe, I mean, I think the answer is really around like us being printed and saying initial loss picks, we don't want to get into the game of being overly optimistic is still a lot of risk out there. There's still a lot of uncertainty when we write the business. Whether again, we've just been talking about casualty of loss trends in particular, that's an area that we're washing carefully.

This next leg is coming through the third act on the casualty reinsurance side.

I guess that probably comes through a lot on the ceding Commission side, if you get what you get.

Better ceding commissions should we continue to see kind of the acquisition kind of expense ratios on the reinsurance side kind of moving down here.

As we head through 2024, given what's going on with the casualty reinsurance market, particularly since you play quota share.

Francois Morin: So we'd rather, you know, and that's been our model for many many years is, you know, pick a realistic kind of bit more conservative, you know, initial loss pick on, you know, when we book the business and then react to the data when it comes in.

Well, yes, I think the.

The ceding commissions.

Over to three right now and we'll see where that ends up there might be slight change or we'll see how it ultimately be depend on how the underlying market is improving as our reinsurance player, but I think you know.

Francois Morin: So we're hopeful there could be good news down the road, but the time being where you get very happy with our loss picks. Okay, thank you for that. My second question is follow up on the reinsurance core combined ratio. Obviously, it was very strong. And I think you mentioned that a lot of this due to business shifts, right, shifting towards property. And then because of that, and then you naturally have a improving combined rate of loss ratio there.

Whats the acquisition cost line on our reinsurance is mid <unk> low.

<unk>. So I think if you have more of a portfolio. Even if this argued it's a 30% ceding commission. So you might see next year, the acquisition going up a little bit, but again I mentioned, our Shanghai all the time to talk about what we have these questions about expense ratio and loss ratio, but matter of starting to return and whether the combined ratio lend us.

Sell through return whether it comes from losses or expenses went up over the losing CPA.

Francois Morin: Just curious, if we were to think about going forward the run rate combined ratio for your reinsurance segment based on the comments so far is a fair to sort of assume that it's going to be closer to what you printed over the last two quarters. And probably better than the prior quarters, is that a fair way to think about it just from a modeling perspective. Again, I mentioned like the thinking around twirling 12 months, which is where I would start to help you with the assumption that I would, if you're going to, we think about it in totality around the combined ratio, but if you're bringing down the loss and the expense ratio, yeah, maybe there's a given the growth, maybe there's potentially the latest quarter of affects is probably more sustainable.

So I think this is a fair point, but yet.

And it was going to say I guess, maybe the right way to think about it is that as you are leaning more into the GL. The underlying combined ratios may actually move up some here.

Okay.

I have a different return profile exactly right right right.

Okay. Thank you. Thank you.

Thank you.

One moment for our next question.

Our next question comes from the line of Scott <unk> from RBC capital markets.

Yes. Good morning, just on the <unk> wondering if you could expand on the.

The growth opportunity internationally you referenced in your commentary I know, Australia is a big market for you but.

We're also you've focused outside of the U S or is it mostly just Australia.

Francois Morin: Given we've been able to generate that green in that growth with the same level of resources, but on the loss ratio side, I think it's just, you know, I would be careful not to over, I mean, give too much weight to the latest quarter. Okay, thank you and congrats again on the quarter. Thank you.

<unk> two <unk>.

Great question I think.

Non the non USAA is also the CRT, which is granted exposed to the U S army as the excess of loss.

The program that the GSE that developed a reliable we felt debacle that 11 12 years internationally.

Operator: One moment for our next question.

Piece of it we see it in our financial supplement internationally, we have Australia as you know we have a good side great relationship.

Great Great presence there we're very pleased with it. We're also we're also getting a bit more market share there, even though the mortgage origination is a slowdown there as well. The other piece is really it's really development is the international with European specifically, SRT, which are 90% mortgage back.

Brian Meredith: Our next question comes to the line of Brian Meredith from UBS. Thanks. A couple questions here.

Francois Morin: First, it's on the MI segment. I know there's clearly some market pressures, but you know, NAIW definitely down year every year, and it looks like just looking at some of the stats, you all have been losing some market share in the MI segment. I mean, is that intentional? Are you any concerns about, you know, the outlook here on the MI as far as, you know, the link with these or is it more related to perhaps just better use of capital elsewhere?

Risk transfer data look a lot like the CRT business that we have in the U S.

Most of it is done because banks need to release capital Basel III led the transactions and we've been doing it for a little while and we've partnered up with actually with another European company Who's very steep in that in that area. So that's a growing area right now because F&B.

Francois Morin: It's more the latter than the former. I would actually say tell you, Brian, that the market is better this year than it was in the last year. So one would argue that we might change the way we interact with the market for the next 12 to 24 months, but certainly at heart, you know, we have been saying that to you historically and hasn't changed last quarter, which in terms of relative returns based on the three segments on the underwriting segments.

Francois Morin: You know, MI is the third one, but the very strong one I would say at this point in time. But again, it's more reflection of the relative opportunity between the units that anything else. And the market, Brian, I tell you the market is very, very disciplined. We're very impressed by the industry or the industry.

There's a lot more need for capital as you know Scott not only in the U S Europe similar.

Consideration. So it helps us will be there for them to provide more capital relief and that's certainly something that we're focusing more efforts on.

Okay. That's helpful and then just.

So the risk profile and their credit quality and the default ratios on those I would assume those are very favorable, but how does that all compare to.

Outside of the U S and internationally versus versus the U S book.

I don't want to say too much because you get more competition in the second okay.

Hi.

High level of their comparable sometimes better than at CIBC.

Brian Meredith: Good, good to hear.

Still feel a bit more work to be done there.

Marc Grandisson: And then I guess my second question mark is I think about, you know, if this next leg is coming through the third act on the casualty, you know, reinsurance side. You know, I guess that probably comes through a lot on the seating commission side. If you get, you know, you get better seating commissions, should we continue to see kind of the acquisition kind of expenses on the reinsurance side kind of moving down here.

For those who are trying to get in the business that you should talk to us versus will help you get in the business.

Yeah.

I appreciate it thanks welcome.

Thank you.

This time I would now like to turn the conference over to Mr. Mark Granderson for closing remarks, okay. Thank you so much everyone for listening to our commentary this quarter looking forward to the end of the year happy Halloween.

Marc Grandisson: You know, as we had through 2024, you know, given what's going on with the casualty reinsurance part, particularly since you play quota share. Well, the, yeah, I think the, the sitting commissions, you know, are about to start with a three right now. We'll see what that ends up. You know, the money slight change or both the how it's also going to be dependent on how the underlying market has been growing as a return player.

Uh huh.

Ladies and gentlemen, thank you for your participating in today's conference. This concludes the program you may all disconnect.

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Marc Grandisson: But I think you know, what's our position cost right now to make sure it's not low, those 20. So I think if you have more report for you, even if that's argued it's a 30% sitting commission, so you might see actually the acquisition going up a little bit. But again, that performance and all the time talk about when we have these questions about the expense ratio and not just the return. And whether the combined ratio lend itself to return and where it comes from, lots of the expenses will have overly losing seats.

Marc Grandisson: So I think this is a fair point. I guess maybe the right way to think about it is that it's you're leaning more into the GL, the underlying combined races may actually move up some here. You know, return profile.

Operator: Thank you.

Scott Heleniak: One moment for our next question. Our next question comes from the line of Scott Heleniak from RBC Capital Markets. Yeah.

Scott Heleniak: Good morning. Just on the MI unit. I wonder if you could expand on the growth opportunity internationally. You referenced in your commentary. I know Australia is a big market for you, but where else are you focused outside of the US? Or is it mostly just Australia that you were referring to?

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Francois Morin: Great question. I think in a non-U.S, base is also the CRT, which is granted, you know, exposed to the USMI, the excess of loss program that the GSE has developed over the last 12 years. You can actually, so that's a piece of it. You see it in our financial supplement. Internationally, we have Australia as you know, we have a good side great relationship and great presence there. We're very pleased with it.

Yes.

Francois Morin: We're also getting a little more market share there, even though the mortgage origination is slowed down there as well. The other piece that's really, it's really in development is the international with European specifically SRTs, which are, you know, 90% mortgage back, you know, credit. It's a risk transfer. They look at a lot like the CRT business that we have in the US. Most of it is done because banks need to release the capital, the basil tree, you know, let the transactions.

Francois Morin: And we've been doing it for a little while and we've partnered up with another European company who's very steep in that area. So that's a growing area right now, because I think the, there's a lot more need for capital. As you know, Scott, not only in the United States, you're a similar consideration. So it helps us, you'll be there for them to provide more capital relief. And that's something that would focus you more efforts on.

Francois Morin: Okay, that's helpful. And then the, just the risk profile and the credit quality and the default ratios on those, I would assume those are very favorable. But how does that all compare to, you know, outside of the US and internationally versus versus the US book? I don't want to take too much because you're going to get more competition. High level, high level, bit comparable and sometimes better than the CRT, but, you know, we feel a little bit more work to be done there. But those who are trying to get into business that you should talk to us first will help you get into business. Appreciate it. Thanks.

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Good day, ladies and gentlemen, and welcome to the Q3 2023 arch capital earnings Conference call.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded.

Before the company gets started with its update management management wants to first remind everyone that certain statements in today's press release and discussed on this call may constitute forward looking statements under the federal Securities laws.

These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently actual results may differ materially from those expressed or implied for more information on the risks and other factors that may affect future performance investors should.

View periodic reports that are filled by the company with the SEC from time to time.

Additionally, certain statements contained in the call that are not based on historical facts are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

The company intends the forward looking statements in the call to be subject to the safe Harbor created thereby.

Management also will make reference to certain non-GAAP measures of financial performance.

The reconciliation to GAAP for each non-GAAP financial measure can be found in the company's current report on form 8-K furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website and on the Sec's website.

I'd now like to introduce your host for today's conference Mr. Mark Grandison and Mr. Francois Morin Sirs, you may begin.

Thank you Gigi good morning, and thank you for joining our third quarter earnings call I hope everybody is safe and well.

Yesterday, we reported another excellent quarter highlighted by strong performances from each of our.

Operating segments that resulted in an annualized operating return of 25%.

A 4% increase in book value per share.

Overall, our team capitalized on good underwriting conditions.

The light catastrophe losses to produce.

An outstanding 721 million of underwriting income in the quarter.

Our property casualty teams continue to lean into favorable market conditions to $3 billion of net premiums up 26% from one year ago.

Mortgage insurance once again delivered impressive high quality underwriting earnings that we redeployed into our P&C segment or opportunities abound.

Broadly we continue to achieve rate increases above loss trend in most sectors of the P&C market.

Although rate increases are slowing its online.

We're accelerating and others, which is a good reminder, that there is not a single insurance cycle with net.

As always arch is well positioned to navigate across these many cycles by reallocating capital to this segment with the best risk adjusted returns.

One of our core differentiating principle is that our underwriters are aligned with our shareholders through our unique compensation structure. Our underwriting teams are always seeking to maximize opportunity as long as they meet our shareholders target.

As we near the end of 2023 and look ahead to 2024, I believe that although the dynamics shift this hard market will continue to support profitable growth.

Let's take a moment to recap the current state of the market and where we are likely headed.

I see it as a play in three acts.

The first at the credit card market started in primary liability insurance in 2019, and then it has a unique circumstance of a two year pause a claims activity.

A global pandemic.

Second Act introduced Hurricane Ian as a main character where property reinsurance has to adjust both that pricing and risk appetite. In addition capital get more expensive and the industry has to respond to meet new expectations from investors.

While property has been the most recent driver of this market as we move into Act III.

We are faced with increasing evidence of casualty rates wildly underpriced and oversold doing the laptop market needs to increase.

We expect this third act of the extended hog market already one of the longest in memory to persist until the industry's reserving issues are resolved the hemp deal casualty rates generate positive results.

<unk> is well positioned to capitalize on this operating environment.

As new hard market underwriting opportunities arise are incredibly nimble reinsurance group allows us to grow more quickly and significantly than in our insurance group and is therefore, where we are most likely to deploy capital of course.

The market trends point to a reinsurance driven.

<unk> hard market and we stand ready to act the third back that's been started but things are very promising for March.

Now some color on our operating segments.

Our reinsurance group has once again driven by growth with third quarter net premium written of $1 6 billion up 45% from the same quarter in 2022 and 60% over the last 12 months underwriting.

Underwriting performance in the reinsurance group was excellent with a combined ratio of 80% for the quarter.

Our expectation is that we will continue to see hot property market conditions to next year's renewal cycle as uncertainty in loss activity remains elevated as noted above we expect increased opportunity and liability as well.

Francois Morin: Welcome.

Operator: Thank you.

Marc Grandisson: At this time, I would now like to turn the conference over to Mr. Mark Grandeson for closing remarks. Thank you so much everyone for listening to our commentary this quarter. It'll be forward to the end of the year. Happy Halloween.

Our insurance group also remains in growth mode in both our North American and international units.

While net premium written in the insurance segment up 16% over the last over the past.

12 months are more modest than in reinsurance we are more broad based because of our focus on small and medium sized specialty accounts underwriting income continues to build with increased earned premium and a strong combined ratio of 99%.

Operator: Ladies and gentlemen, thank you for your participating in today's conference.

Operator: This concludes the program. You may all disconnect.

Today, there are still plenty of opportunities to grow profitably and insurance prop.

Property and short tail lines pricing and terms and conditions remained very strong with rate increases in excess of 15%.

Operator: Thank you for your time, and I'll see you in the next video. .

Casualty pricing is increasing in response to the overall casualty trends in the market and our programs unit continues to achieve rate increases of upfront profession.

Professional liability rates softened in the quarter with net premiums written down 9% in the third quarter of 2002, we shared the marketplace sentiment about the D&S segment with both IPO and M&A activity decreased at the same time as great pressure from competition and Securities class action activity increase.

Operator: [inaudible] and thank you very much[inaudible] your time, and thank you very much[inaudible] your time, and thank you very much[inaudible] And now, let's go to the next episode of the show. Let's go to the next episode.

Operator: Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder[inaudible] Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Dr. Jamminder Bhullar, Thank you, Gigi.

However, we found in that segment are still strong.

In the same vein, we maintain a positive outlook on fiber pricing on an absolute basis despite rate decreases in the 50% range.

Our outstanding mortgage group continues to deliver quality earnings for our shareholders at higher persistency of our in force portfolio.

To offset the slight decrease in <unk>, which had been affected by lower mortgage origination.

Although we tend to focus our comments on the U S primary market is worth noting that nearly 40% of our mortgage segment underwriting profit. This quarter came from non U S operations compared to just over 10% in 2017.

International business represents a significant growth opportunity for the mortgage group at arch and our strategic decision to diversify our mortgage operation is yielding positive results that further differentiate arch from our competitors.

We are currently in a positive cycle on the investment side of our business.

We're increasing cash flows from growth are being invested into today's higher yield environment.

Rates are well in excess of our book yield, which should continue to boost our investment income over time and provide us with an additional ongoing tailwind.

It's late October which for baseball fans I mean, it's time for the World series.

Meanwhile, is somewhat unique in that it's one of the few team sports that isn't limited to a specific length of time.

Core's menu runs as possible until the other team gets three up to meet the current hard market feels like a baseball game, we know theres only nine innings to be played but we have no idea how long ago was earnings will take.

We've got a great lineup, we're happy to keep hitting our singles doubles and occasional homerun.

Until the evening.

At <unk>, we remain committed to being good stewards of the capital entrusted to US we do that by following a tried and true data driven approach that maximizes the capability of our diversified platform.

Diligently at the years towards cycle management philosophy, and is centered around superior risk selection and prudent reserving.

Marc Grandisson: Good morning, and thank you for joining our third quarter running call. I hope everybody is safe and well. Yesterday we reported another excellent quarter highlighted by strong performances from each of our three operating segments that resulted in an annualized operating return of 25% and a 4% increase in book value for share. Overall, our teams capitalized on good underwriting conditions and relatively light capacity losses to produce an outstanding 7 out of 21 million underwriting income in the quarter.

Marc Grandisson: Our property casualty team continues to lean into favorable market conditions to like 3 billion of net premium up 26% from one year ago. More great insurance once again delivered impressive high quality underwriting earnings that we redeployed into our PNC segments for opportunities about broadly we continue to achieve rate increases above loss trend in most sectors of the PNC market. Other way increases are slowing in some line. They are re-accelerating in others, which is a good reminder that there is not a single insurance cycle, but many.

All the while our underwriters are fully aligned with our shareholders.

These principles are foundational to our playbook and underscore our long term commitment to superior value creation.

As we close out 'twenty three we had significant momentum in all three of our businesses in a reliable and high quality earnings engine.

Marc Grandisson: As always, art is well positioned to navigate across these many cycles by reallocating capital to the segment with the best risk of just the return. One of our core differentiating principles is that our underwaters are aligned with our shareholders through our unique compensation structure. Our underwriting teams are always seeking to maximize opportunity as long as they meet our shareholders target. As we need the end of 2023 and look ahead to 2024, I believe that although the dynamics we shift, this hard market will continue to support profitable growth.

Mortgage group that are helping fuel our growing investment base. All the pieces are fitting together nicely and we are well positioned for the future.

Now ill follow up on the on deck circle and will return to answering your questions. Shortly.

Thank you Mark and good morning to all and thanks for joining us today to add to the baseball team I would also emphasize that while this long winning streak has certainly been fueled by it finally and dynamic offense.

We're also very much aware that team defense has played an important role in our success, we've been working hard not to waste any offensive production with careless errors and by executing well accurately and on the PEO. We produced exceptional third quarter results from high quality earnings across all of our platforms.

Highlights of the <unk> team effort are numerous and include after tax operating income of $2 31 per share for an annualized operating return on average common equity of 24, 8% and a book value per share of $338 62.

September 30 up four 3% in the quarter and 18, 4% on a year to date basis.

Similar to last quarter's results. Our reinsurance segment grew net written premium by 45% over the same quarter last year led by the property other than catastrophe line, which was 73% higher than the same quarter one year.

As for our property catastrophe business, it's worth mentioning that the net written premium in the third quarter, one year ago and included approximately $34 million of reinstatement premiums, mostly as a result of hurricane here.

If we adjust for the impact of reinstatement premiums our growth in net written premium for this mine would have been approximately 64% year over year.

The quarterly bottom line for the segment was excellent with a combined ratio of 80% 73, 5% on an accident year ex cat basis, producing an underwriting profit of $310 million.

The insurance segment had another very strong quarter with third quarter net premium written growth of 11% over the same quarter one year ago.

Similar to last quarter's results, we experienced good growth in most lines of business with the main exception being professional lines, where the market remains competitive, particularly in public directors and officers liability.

If we exclude professional lines net written premium would have been 20% higher this quarter compared to the same quarter when you're.

Overall market conditions for our insurance and reinsurance segment remain attractive and we expect the returns on the business underwritten this year to exceed our long term targets by a solid margin for some business units.

Profitable growth during periods of favorable market conditions as one of the hallmarks of our cycle management strategy and the current hard market is definitely giving us the opportunity to deploy meaningful capital in many areas.

Marc Grandisson: Let's take a moment to recap the current state of the market and where we are likely headed. I see it as a play in three acts. The first act, the current hard market started in primary liability insurance in 2019 and then has a unique circumstance of a two-year pause and claims activity due to a global pandemic. The second act introduced Hurricane Ian as a main character where property re-insurers had to adjust both their pricing and the risk appetite.

Our mortgage segment batting average has consistently been a.

Legal leader and this quarter was no different with a four 7% combined ratio.

Marc Grandisson: In addition, capital got more expenses and the industry had to respond to meet new expectations from investors. While property has been the most recent driver of this market as we move into act three, we have faced with increasing evidence that cavity rates widely underpriced and oversold during the last tough market need to increase. We expect this third act of the extended hard market already one of the longest in memory to persist until the industry is reserving issues are resolved and until cavity rates generate positive results.

Net premiums earned were in line with the past few quarters across each of our lines of business.

Included in our results was approximately 98 million of favorable prior year Reserve development.

<unk> Nevertheless of acquisition expenses with over 75% of that amount coming from U S allies.

The rest of the other underwriting units our delinquency rate at U S. Army remains low based on historical averages and close to 85% of our net reserves at U S EMI or firm post COVID-19 accident periods at the end of the quarter.

Across our three segments are underwriting income reflected $152 million of favorable prior year development on a pretax basis or four seven points on the combined ratio.

Was observed across all three segments driven by short tailed lines.

Current accident year catastrophe losses across our group were 180 million approximately half of which are related to U S. Severe convective storms with the rest coming from the line of wildfire hurricane at Dalian.

In other global events.

Pre tax net investment income was <unk> 71 per share up 11% from last quarter as our pre tax investment income here was up by approximately 18 basis points since last quarter.

Total return for our investment portfolio was a negative 40 bps on.

While the U S dollar basis for the quarter as our fixed income portfolio was impacted by the increase in interest rates during the quarter and most other asset classes had negative returns in line with broader financial market indices, such as the S&P 500, which was down approximately three 7% in the quarter.

Net cash flow from operating activities has been very strong so far this year in excess of $4 billion, which has helped grow our invested asset base by approximately 20% in the last 12 months.

With new money rates on our fixed income portfolio comfortably above 5%, we should see continued meaningful tailwind in our net investment income.

Turning to risk management as of October one on a net basis, our peak zone natural look at P&L for a single event. One in 250 year return level remained basically unchanged on a dollar basis on July one and now stands at 10, 1% of tangible shareholders' equity well below our internal limits.

Our capital base group and got stronger during the quarter and now stands at $18 billion.

Our leverage ratio represented as debt plus preferred shares to total capital is currently under 20%, which provides us with significant flexibility as we look to deploy capital as opportunities arise.

With these introductory comments, we are now prepared to take your questions.

Thank you if you have a question at this time. Please press star one one key on your Touchtone telephone.

Your question has been answered or you wish to remove yourself from the queue. Please press star one one again and if you are using a speaker phone please lift the handset.

Our first question comes from the line of Elyse Greenspan from Wells Fargo.

Thanks, Tom Good morning.

My first question.

Was hoping to get.

Some thoughts on the January one property cat.

Marc Grandisson: Art is well positioned to capitalize on this operating environment. As new hard market underwriting opportunities arise, our incredibly nimble insurance group allows us to grow more quickly and seeing that they can be done in our insurance group and is therefore where we are most likely to deploy capital. First. Today, market trends point to a reinsurance driven GL hard market and we stand ready to act. The third act has very started, but things are very promising for arch.

Renewables on the reinsurance side, so where do you think.

Where do you think rates end up next year.

On a risk adjusted basis.

Well I think it's still early we have a lot of movement in the marketplace in capital and people are as you can appreciate positioning at all the conferences, but our general consensus and the team when we bought the underwriters is that we will still have.

Marc Grandisson: Now, some color on our operating segments. Our reinsurance group has, once again, driven our growth with third quarter net premium revenue of 1.6 billion of 45% for the same quarter in 2022 and 60% for the last 12 months. Underwriting performance and the reinsurance group was excellent, with a combined ratio of 80% for the quarter. Our expectation is that we will continue to see hard property market conditions to next year's renewal cycle as uncertainty and loss activity remains elevated.

Marc Grandisson: As noted above, we expect increased opportunity and liability as well. Our insurance group also remains in growth mode in both our North American and international units. While net premium written in the insurance segment, up 16% over the last of the past 12 months are more modest than in reinsurance. They are more broad-based because of our focus on small and medium-sized specialty accounts. Underwriting income continues to build with increased premium and a strong combined ratio of 90 more than 9%.

Improvement in 124, not as big as 143 over flipping to get.

Slight improvement on the reinsurance side of things. What is also I mentioned before this is not really fully reflecting what we believe has been the re underwriting of the recent melt.

Allocating of capacity by our clients and that remains to be seen how it's going to be reflected and will depend on our clients frankly, but overall, we can expect a very healthy very robust 124 wall profit.

And then on your casualty comments, Mark right, you alluded to that being.

The third act and really leaning in there on the reinsurance side I was hoping you could just give us a sense of timing on how that will play out.

Marc Grandisson: Today, there are still plenty of opportunities to grow profitably in insurance. Property and short-day aligns pricing in terms of conditions remain very strong with rate increases in excess of 15%. The NS casualty pricing is increasing in response to overall casualty trends in the market and how programs units continue to achieve rate increases above trends. Professional liability rate softens in a quarter when net premiums written down 9% in a third quarter of 22%.

That's a 24 event do you see the reinsurance book shifting more to casualty or do you think it's an environment where.

Marc Grandisson: We share the marketplace sentiment above the deal segment where both Agio and NNA activity decrease at the same time as the rate pressures from competition and security satisfaction activity increase. However, returns in that segment are still strong. In the same vein, we maintain a positive outlook on cyber pricing on a natural basis despite rate decreases in a 15% rate. Our outstanding mortgage group continues to deliver quality earnings for our shareholders as higher persistency of our enforce portfolio helps offset the site decreases and IW, which has been affected by lower mortgage origination.

Bolt on property and casualty offer good growth opportunities for the company. It's a great question I think.

We have a big play in property as you saw between the property cat on the reinsurance side that is in the.

Marc Grandisson: Although we tend to focus our comments on the U.S, primary and my market, it is worth noting that nearly 40% of our mortgage segments underwriting profits this quarter came from non-U.S, operations. Congress adjusts over 10% in 2017. International business represents a significant growth opportunity for the mortgage group at Arch and our strategic decisions diversify our mortgage operations. We are currently in a positive cycle on the investment side of our business where increasing cash flows from growth are being invested into today's higher yield environment. The new money rates are well in excess of our book yield, which should continue to boost our investment income over time and provide us with an additional ongoing payment.

The property other than cat the quota shares.

In between so I think we're still very very much keen on that line of business liability is a bit harder to evaluate right now because I think the first order is going to have to be looking at our plan for 2024 looking at our reserve or development that <unk> been talking about our clients towards I think a little bit more time for <unk>.

Marc Grandisson: It's late October, which for baseball fans mean it's time for the World Series. Baseball is somewhat unique in that it's one of the few team sports that isn't limited to a specific length of time. You can score as many runs as possible until the other team gets three outs. To me, the current hard-market feels like a baseball game. We know there's only nine innings to be played, but we have no idea how long the withining will take.

Figure out what is it that you have and what they wanted to do with it going forward in 'twenty four.

So we will have probably some of us things that we may have a renewal they feel a bit more.

It's not as stable as it once was.

Marc Grandisson: We've got a great lineup. We're happy to keep hitting our singles, doubles, and occasional home runs until the ining is over. At Arch, we're really committed to being good stewards of the capital and trusted to us. We do that by following a tried and true data driven approach that maximizes the capability of our diversified platform, ability of the years to recycle management, to lobby and censor it on superior selection and product reserves. All the while, our underwriters are fully aligned with our shareholders. The principles are foundational to our table and underscore our long-term commitment to superior value creation.

So I think we'll probably see the early innings to go back to my baseball analogy of that liability and a possibly at one one.

One beautiful thing about gel or the ones that thing depending on the side of the market.

Marc Grandisson: As we close out 2023, we have significant momentum in all three of our businesses and our reliable and high quality earnings engine. And our mortgage group that are helping fuel our growing investment base. All the pieces are fitting together nicely, and we're well positioned for the future.

A longer term development on a softening and hardening the GL and it will take a little bit longer to get to where it needs to get to because it takes it takes time for you to get the losses reflected in our reserving and we have a good sense of where the ultimate results off from your prior year to adjust and help inform.

The pricing even a half over there. So this is going to be a lot of much more protracted third active second networks.

That's helpful. Thanks for the color.

Thanks.

Thank you.

One moment for next question.

Our next question comes from the line of Jimmy <unk> from J P. Morgan.

Hey, good morning, So first just staying on casualty.

Marc Grandisson: Now I'll call Franco up from that on deck circle, and we'll return to answer your questions shortly as well.

There's been a lot of concern about reserves and obviously casualty is a fairly broad market category, but.

Francois Morin: Thank you, Mark, and good morning to all. Thanks for joining us today. To add to the baseball team, I would also emphasize that while this long win streak has certainly been fueled by a timely and dynamic offense. We're also very much aware that team defense has played an important role in our success. We've been working hard not to waste any offensive production with careless errors and by executing well actively and on the field.

Francois Morin: We've produced exceptional third quarter results from high quality earnings across all our land. Highlights of the team up are numerous and include after the next operating income of $2.31 for share for an annualized operating return on average common equity at 24.8% and a book value for share of $38.62 as a September 30. Up 4.3% in a quarter in 18.4% of the year-to-date basis. Similar to the last quarter of the results are reinsurance segments who net written premium by 45% over the same quarter last year led by the property other than catastrophe line, which was 73% higher than the same quarter one year.

Hum.

What are your thoughts on overall industry reserves in casualty reserves and then maybe any color on the lines within casualty, where you think there might be an adequate season sort of the drivers of that.

What's driven the reserve issues.

That's a great question, Jamie I think there is.

Yes, as you said, it's a broad market certainly we've seen some pressure on our results I think we see so you see both an insurance and reinsurance on the reinsurance side, we see some of our clients recognizing adverse in the wait and see up some planes being reported to US I think is coming through.

Francois Morin: As for our property catastrophe business, it's worth mentioning that the net written premium in the third quarter of one year ago included approximately 34 million of green statement premiums, mostly as a result of hurricane. If we adjust for the impact of rein statement premiums or rate and net written premium for this line would have been approximately 64% in the year over the year. The quarterly bottom line for the segment was excellent with a combined ratio of 80%, 73.5% on the next year XCAT basis producing another righty pocket of 310 billion, for the insurance segment, had another very strong quarter with third quarter net premium working growth of 11% over the same quarter one year ago.

We like to think we've been proactive in addressing those issues, but you never quite know for sure Bill everything comes through but some of the subsets definitely umbrella is an area that.

Francois Morin: Similar to last quarter's results, we experienced good growth in most lines of business with the main exception to professional lines, where the market remains competitive, particularly in public directives and officers like doing. If we exclude professional lines, net written premium would have been 20% higher this quarter compared to the same quarter one year ago. Overall, market conditions for our insurance and the insurance segment remain attractive, and we expect the returns on the business under written this year to exceed our long-term targets by a solid margin for some business units.

Francois Morin: Profitable growth during the fifth period of favorable market conditions is one of the hallmarks of our cycle management strategy, and the current hard market is definitely giving us the opportunity to deploy meaningful capital and many areas. Our mortgage segment's batting average has consistently been a lead leader, and this quarter was no different with a 4.7% combined ratio. Net premiums earned water in line with a basket quarters across each of our lines of business.

Francois Morin: Included in our results was approximately 98 million of favorable prior year reserve development in the quarter net of acquisition expenses with over 75% of that amount coming from US behind and the rest from other underwriting units. Our delinquency rate at USMI remains low based on historical averages in close to 85% of our net reserves at USMI are from post COVID action periods at the end of the quarter. Our costs are three segments are underwriting income reflected 152 million of favorable prior year development on a pre-tax basis for 4.7 points on the combined ratio.

That's something that we're watching carefully.

Good thing I think with our book is again, we werent big players in that space in the soft market here. So we're seeing some pain, but not to the same level, we think that maybe others well.

Francois Morin: It was observed across all three segments during and by short data lines. Current active year capacity and losses of loss of group were 180 million approximately half of which are related to US severe conducted storms with the rest coming from the line of wildfire, hurricane, and dolium, and other global events. Pre-tax net investment income was 71 cents per share of 11% from last quarter as our pre-tax investment income year was up by approximately 18 basis points since last quarter.

But it's a hot topic in Oregon.

Looking at it.

The only thing I would add Jamie to go through what profit has mentioned is that we are in are you hearing from the call that it's going to be more acute more of a pressure point on the larger accounts and the smaller accounts I think that the limits deployed there and the uncertainty and the and.

Francois Morin: So the return for our investment portfolio was a negative 40 bits on a US dollar basis for 4 as our fixed income portfolio was impacted by the increase in interest rates during the quarter and most other asset classes and negative returns in line with broader financial market indices such as the S&P 500 which was down approximately 3.7% in the quarter. Net cash will from operating activities has been very strong so far this year in excess of 4 billion which has helped grow our invested asset base by approximately 20% in the last 12 months.

And the combination of all these years developing is a little bit more.

More than a bit more of a bit more of an urgency in that sector. So we expect a larger accounts, which we don't do a lot of on the insurance side to be the first one on <unk> do you feel that pressure.

Francois Morin: With new money rates and our fixed income portfolio comfortably above 5% we should continue meaningful tailwinds in our net investment, in India. Turning to risk management, as of October 1 on the net basis, our piece-zone natural can't PML for a single event, 1, 250 year return level, women basically unchanged from a dollar basis from July 1, and now stands at 10.1% of tangible shareholders equity. Well, the low points are unlearned. Our capital-based group and got stronger during the quarter and now stands at 18 billion. Our leverage ratio represented as depth plus preferred shares to total capital is currently under 20%, which provides us with significant flexibility as we look at the point capital as opportunities are.

Operator: With these introductory comments, we are now prepared to take your questions. Thank you.

Okay.

And then on mortgage insurance.

Would've thought and I think most investors thought that that's something that at some point you would see sort of a step down in your results still strong earnings, but maybe not as strong as they had been the years following COVID-19 because of the release of Covid related reserves. Just wondering how we can sort of get an idea on how much of the COVID-19 related reserves are.

Operator: If you have a question at this time, please press star 1-1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star 1-1 again. And if you are using a speaker phone, please lift the handset.

Elyse Greenspan: Our first question comes from the line of Elise Greenspan from Wells Fargo. Thanks. Good morning.

Marc Grandisson: My first question was hoping to get some thoughts on the January 1 property cat renewals on the re-enter inside. Where do you think rates end up next year on a risk-adjusted basis? Well, hi Elise. I think the still early, we have a lot of movement and marketplace and capital and people that as you can appreciate positioning after all the conferences, but our general consensus in the team when we talk to underwriters is that we'll still have improvements in 1-1-24.

Tim on your books and could be released.

Marc Grandisson: Not as big as 1-1-23, but we're just going to get side improvement on the reinsurance side of things. What is also, as mentioned before, this is not really fully reflecting, but we believe it has been the re-underwriting and the reach of the re-allocating of capacity by our clients and that remains to be seen how it's going to be reflected and it will depend on the client, frankly. But overall, we still expect a very healthy robust 1-1-24 when we're on property.

Versus.

Maybe.

And ongoing benefit from that in the near term.

In the next few quarters.

Well I made the comment.

<unk>.

Close to 85% of our reserves at <unk> are from post Covid years.

So so that would mean 20 million after but lets remember that when we were coming out of Covid. We saw just a lot of changes in home prices home price appreciation.

And potential overvaluation right. So when we were setting reserves and in the last few years 'twenty one 'twenty two even.

Up until early 'twenty three that was a concern of ours. So we were somewhat.

You would expect us to do somewhat more prudent I'd say in setting our reserves.

How that how that plays out.

Delinquencies cure, we don't know could there be further favorable development, maybe but I would say for the most part what's really been happening. The last couple of years is just state I'd say very much again, a function of the housing market, which has been just exploded and then created a different.

Marc Grandisson: And then on your casualty comments, Mark, you alluded to that being the third act and really leaning in there on the reinsurance side. It was hoping you could just give us a sense of timing on how that will play out. And if that's a 24- event, do you see the reinsurance book shifting more to casualty or do you think it's an environment where they both property and casualty offer good growth opportunities for the company?

Instead of Canada data point that we're trying to analyze and Thats, how we based our way based on reserves on so.

Hopefully that gives you a bit of color on that.

On the question I'll, just add one thing Jamie on the industry the industry is extremely disciplined.

And again very nice thing to see around us so from an ongoing perspective, putting the reserve for a second if I can talk to our expectations and we think that.

There is still risk on your items, but the credit quality of our portfolio. The housing supply imbalance that you hear from crosswalk.

The fact that we have a lot of LP equity into a quality policing policies enforces is.

Really really good and when we say that our mortgage growth is also doing very well and that's what we mean, it and ready to face.

Thank you.

Okay.

Thank you one moment for our next question.

Marc Grandisson: The great question. I think we have a big playing property as you saw between the property cap on the reinsurance side of the property other than the cap on the poor shares and things between. So I think we're still very much keen on that run in business. My build is a bit harder to evaluate right now because I think the first order is going to have to be looking at their client for 2024, looking at the reserve or development that they are and needed to talk about, of the client.

Marc Grandisson: So we're going to take a little bit more time for this for people to figure out what it is that they have, and what they want to do with it from forward to 24. So we'll have probably some of us think that we may have a renewal a little bit more, you know, but not as fable as it once was. So I think we'll probably see the early innings to go back to my baseball analogy of that liability and the possibility of one one.

Marc Grandisson: The one beautiful thing about GL, or the one bad thing, depending on the side of the market, you know, it's a longer term development, you know, on the softening and on the hardening. The GL can, you know, it will take a little bit longer to get to what it needs to get to, because it takes time for you to get the losses, protecting them and reserving, and we'd have a good sense for where the ultimate results are from your prior year to adjust and help inform the pricing you're going to have over there.

Our next question comes from the line of Tracy <unk> from Barclays.

Marc Grandisson: So this is going to be a lot of much more protractive third act than second act was. That's helpful. Thanks for the color. Thank you. One moment for our next question. Our next question comes from the line of Jimmy Bueller from JP Morgan. Hey, good morning. So first, just staying on casualty. There's been a lot of concern about reserves and obviously, casualty is a fairly broad market category. But what are your thoughts on overall industry reserves and casualty your reserves and then maybe any color on the lines within casualty, where you think there might be inadequacies and sort of the drivers of that, or what's driven those are issues.

Marc Grandisson: That's a great question, Jimmy. I think there's, you know, I do said it's a blonde market. And certainly we've seen some pressure in our own results. I think we see. So you see both an insurance and insurance on the research side. You see some of our clients, you know, recognizing adverse and, you know, the latency of some clients being reported to us. I think it is coming through. We like to think we've been proactive and addressing those issues, but.

Sure.

Hey, Mark.

You posted double digit insurance premium growth this quarter or the pace has decelerated a bit over the last year.

It looks like peak insurance premium growth was in mid 'twenty, one and that might be a tough benchmark given you've grown a ton in professional liability and you are shrinking their as you pointed out.

Marc Grandisson: You never quite know for sure. Tell everything comes through, but some of the stuff that's definitely umbrella is an area of that. That it's something that we're washing carefully. The good thing I think with our book is, again, we ordered big players in that space in the soft market here. So we're seeing some things, but not the same level we think that maybe other as well. And, but, you know, it's a topic and we're going to keep looking at it.

Could we expect insurance premium growth at double digits to be sustainable going forward or should we see it fall to high single digits because of the professional lines headwind.

And I'm just wondering if it's fair to assume that you prefer deploying capital into reinsurance now all else being equal.

And in terms of return expectations I think your instinct is right on I think reinsurance is providing right now very very healthy returns.

Marc Grandisson: The one thing I would add, Jimmy, to it, to what Thomas mentioned is that we're, you know, you're hearing from the call, like it's going to be more acute, more of a pressure point on the larger accounts and the smaller accounts. I think that the limits deployed there and the uncertainty and the combination of all these years developing is a little bit more. There's more, there's more of an urgency in that sector. So we expect a larger account, which we don't do a lot of on the interest site to be the first one to refill the pressure.

Second to continue through 24, and 25 to be honest, but the insurance group I think it's one quarter. There are a couple of moving parts due to some accounting thing timing and stuff in there, sometimes but that's about as I mentioned the <unk>.

Growth in our line that we like to see growth into.

I am very pleased to see because this is where I would expect the team to grow it but the market conditions are great there and I would expect.

Even some of those nonprofessional lines to actually maybe carried a david more going forward I won't be surprised that we could go back above 10% next quarter and into 2018 to 24, So im not I don't I don't see one quarter of the trend to be honest.

Jimmy Bueller: And then on mortgage insurance, I would have thought and I think most investors thought that at some point, you would see sort of a step down in your results, still strong earnings, but maybe not as strong as. They'd been the years following COVID because of the release of COVID related reserves. Just wondering how we can sort of get an idea on how much of the COVID related reserves are still on your books and could be released versus maybe, and ongoing benefit from that in the near and the next few quarters.

All right very helpful.

Jimmy Bueller: Well, I made the comment, you know, close to 85% of our reserves as you have a liar from post-COVID years, so that would mean 20 and after, but you know, let's remember that when we were coming out of COVID, you know, we saw just a lot of changes in home prices, home price appreciation and potential overvaluation, right? So when we were sending reserves in the last few years, 21, 22, even, you know, up until early 23, that was a concern of ours.

You slightly shortened the duration of your asset portfolio on September to 2.9 hundred.

Seven years from 3.03 years in June it feels like you're taking duration will asset mismatch because my liabilities are much longer.

Given the shape of the yield curve is beginning to show signs of Steepening to Todd.

Tad bit less inverted going forward would you consider lengthening your asset duration or you feel comfortable with this three year duration level.

Yes, good point I think the duration is probably the lowest it's been in a long long time and that's just.

Our investment professionals here again.

Make the decisions and there is obviously a little bit of tactics that's involved in Uganda.

Where they want to play at a certain point in time, but.

Correct for sure absolutely if interest rates, we think.

The longer the curve ends up being a bit more attractive I mean, we'd certainly consider extending the duration a little bit and we've got a bit of room. There anyway, just to match with our liabilities to make sure that we're not mismatch. There. So that's certainly something that we'll look at in the coming months and quarters, yes.

Jimmy Bueller: So we were somewhat, you know, as you would expect us to do some more improvements, I'd say, sending our reserves, how that plays out when the linkages cure, we don't know, could there be further, you know, favorable development, maybe? But I say, for the most part, what's really been happening in the last couple of years is just a, I'd say, very much again, a function of the housing market, which has been, you know, just exploded and then created a different set of, you know, kind of data points that we're trying to analyze, and that's how we based our resources on.

Thank you.

Thank you one moment for our next question.

Our next question comes from the line of Yao Rone Kinner from Jefferies.

Thank you good morning.

I guess first question. It sounds like you are pretty constructive looking into one 124 could you maybe talk about your prioritization of capital and maybe give us a way to think about maybe potential.

Jimmy Bueller: So hopefully that gives you a bit of color on the question. I'll just add one day to be on the industry, the industry is extremely disciplined, you know, again, very nice thing to see around us. So from an ongoing perspective, putting the reserve for one second, if I can talk to the our expectations, and you know, we think that they're filled with some of your items, but the credit quality of our portfolio, the housing supply imbalance that you hear from Francois, and the fact that we have a lot of LT, you know, equity into a policy, a policy that forces is, you know, it's really, really good. So when we think that, you know, our mortgage growth is also doing very well, and that's what we mean, it's new one moment for our next question.

Available capital you have to.

Deploy into the insurance and reinsurance markets.

Yes.

Well, yes, we are constructive on one one that I think we would mark and I. Both said I think it's a really good market.

In totality, there's some pockets that are certainly better than others.

We think that the internal capital generation, we've been able to.

Generate them.

In the last few quarters is gives us the ability to really grow and take advantage of the opportunities that we think.

Have a good chance of being there.

Sure.

Again, we don't we don't make the market we participate in the market. So the market is as positive as we think it can be then we'll be happy to step in and take a bigger share of it but I.

Jimmy Bueller: Our next question comes from the line of Tracy Bingley from Barclays. Hey, while you posted double digit insurance premium growth this quarter, the pace has decelerated a bit over the last years. It looks like peak insurance premium growth was in mid-21, and that might be a tough benchmark given you grown a ton in professional ability, and you are shrinking there as you pointed out. Could we expect insurance premium growth at double digits to be sustainable going forward, or should we see it fall to high single digits because of the professional line's headwind?

I think the fact that we've got capital flexibility has always been one of the in London.

Maybe the one of the most important things in our strategy. All along is we want to make sure that we have.

<unk> capital to deploy when the market's right and so far we've been able to do that so yeah, Ron if I look at a high level the way we think about.

We think about it is different perhaps than even our underwriting units, meaning that they'd already.

The recovery how much capital is allocated than at the beginning of the period I want to remind everyone that people who are writing the business underwriting the rights of the business.

Jimmy Bueller: And I'm just wondering if it's fair to assume that you prefer deploying capital into re-insurance now, all else being equal. And in terms of return expectations, I think your instinct is right on. I think re-insurance is providing right now very, very healthy returns, and we expect it to continue in 24 and 25 to be on it. But the insurance group, I think it's one quarter, the couple moving parts through that some accounting thing, timing, and stuff here and there, sometimes.

And then after that.

Then with the capital to be using and based on the planning and all of the expectation that we have.

Our message. This road has been there is no capital constraint or issue concerns.

Thanks to you guys. If you see the market being better in even better than we saw feel free to deploy more capital. If you. If you wish to do so so there's definitely this all.

Jimmy Bueller: But that's what I mentioned. The growth in the line that we like to see growth into, you know, I'm very pleased to see because this is where I would expect a team to grow, so the market conditions are great there. And I would expect, you know, even some of those non-professional lines to actually maybe carry the day a bit more going forward. I wouldn't be surprised that we could go back about 10% next quarter into 20 and 24.

All in all hands on deck go forward, if we can invite the business. That's one thing that's really nice and will then.

Attribute the capital up at the written business Thats, what we do every year on that.

Pretty cap side, which is probably more interesting one four quarters' worth to you we're about 85% of allocated to the reinsurance group in terms of our P&L at that <unk> mentioned and I think it's because the returns are there.

Jimmy Bueller: So I'm not, I don't, I don't see one quarter of the trend to the end. Hi, very helpful. You slightly shortened the duration of your asset per foil on September to 2.97 years from 3.03 years in June. It feels like you're taking durational asset mismatch because the MI liabilities are much longer-dreated. Given the shape of the yield curve is beginning to show signs of steepening, I mean, the pad bit less inverted.

Or a little bit more.

Favorable on the reinsurance side and that we have that discussion at a group level I was wondering if that fits so why do we have an acute or a specific area of the capital we will sit down with reinsurance group and reinsurance group with Nicholas Niglet, facilitating the whole discussion and we'll sort of decide roughly broadly where we want to allocate capital.

I appreciate that and then certainly I think the capital availability and the kind of the appetite to deploy it as a very important part of the story and I guess from that perspective is there anything you can offer us in terms of an attempt to quantify the available capacity or is that something that we will just have to watch.

Jimmy Bueller: Going forward, would you consider lengthening your asset duration, or do you feel comfortable with this sub-three-year duration level? Good point. I think the duration is probably the lowest it's been in a long, long time, and that's just a investment professional to your agenda. Make the decisions, and there's obviously a little bit of tactics that's involved in Canada. Where they want to play at a certain one in time, but for like for sure, absolutely.

And Steve.

Yes, I mean, we certainly we have some capital.

We have plenty below weighted capital available we.

We just don't know what the market will look like in <unk>, So that's where I would say.

Jimmy Bueller: If interest rates, we think the longer the curve ends up being a bit more attractive, I mean, we certainly consider extending the duration a little bit. And we've got a bit of room there anyway to match with the liabilities and make sure that we're not mismatched there. So that's certainly something that we'll look at in the coming months and quarters yet. Thank you.

Youre right probably.

Have to wait and see a little bit see how <unk> play out and then what.

Tracy Bengui: One moment for our next question.

We'll have the ability to.

To do something with the excess capital.

Okay and then my other question.

On public D&O and fiber, where we're clearly seeing a little bit of.

Pressure and competitive pressure there.

Useful view rates as adequate there and are they clearing fee loss cost trends yes.

Francois Morin: Our next question comes from the line of your own, Kinner from Jeffries. Thank you. Good morning. First question, it sounds like you are pretty constructive looking into 1124. Can you maybe talk about your prioritization of capital, and maybe give us a way to think about maybe potential available capital? You have to deploy into really the insurance and re insurance markets? Well, yes, we are constructive on 111. I think we, we, we, we, we work and I both said that it's a really good market.

Yes, our returns expectation on both these line fiber and <unk> is still very very healthy.

Thank you.

Yes.

Thank you one moment for our next question.

Our next question comes from the line of Joshua Shanker from Bank of America.

Yes. Thank you for taking my question.

With the higher Retentions.

This quarter in terms of.

Premiums ceded.

Francois Morin: In totality, there's, there's some pockets that are certainly better than others. You know, we think that, you know, the internal capital generation, we've been able to generate in the last few quarters is gives us the ability to really grow. And take advantage of the opportunities that we have a good chance of being there. You know, again, we don't, we don't make the market. We participate in the market. So if the market is as positive as we think it can't be, then we'll, we'll be happy to step in and pick a bigger share of it.

Can you.

Maybe line by line or dig in a little bit about which lines of business. You are retaining more and is that a signal that you've gotten to the point, where you have enough information that you loved the profitability more and want to keep it yourself or if you're looking at your capital and saying we have the cash.

<unk> deployed so let's eat a bigger slice the pie how did that all come together.

You answered the question beautifully I mean by end by asking a question you gave the answer I think it all those things you said are true.

Francois Morin: But I think, you know, the fact that we've got capital flexibility is, there's always been one of the, and you know, one of the most important things in our strategy all along is, you want to make sure that we have plenty capital to deploy on the markets, right? And so far, we've been able to do that.

I guess the delight in a second but to your point is exactly right.

We are growing through this hard market.

<unk>.

There is still value reinsurance you cannot grow without reinsurance you still need it.

For various reasons limits management risk management and also information like reinsurers are providing us on the Asia side with valuable information about what the market is in the market and we don't want to be an outlier out there. So it's always good to have this as an additional value proposition from the reinsurance companies in terms of.

Francois Morin: So you know, if I look at the high level, the way we think about, we think about it is different, perhaps, than even our underwriting unit, meaning that they don't really, you know, there were nobody know how much capital delicates of them at the beginning of the field. I want to remind everyone that people who write the business are underwriting the rights of business. And then we, after that, you know, charge in with the capital to be using and based on the planning and all the expectations that they have, our message that for us then there is no capital constraint or issue concerns that that pertains to you guys.

What we decided to do it after three years Youre quite right. We had been building as Matt mentioned, a significant amount of capital through our mortgage earnings. So thats certainly something that was helpful and available to deploy.

In other areas and that also helps being able to maintain and retain more net I think if you at a high level I think that the patterns of buying we're buying.

Francois Morin: If you see the market being better and even get better than we thought, feel free to deploy more capital if you wish to do so. So there's definitely this all, you know, all hands on deck, go forward if we can and write the business. That's one thing that's really nice. And we'll then attribute the capital up to the original business, that's what we do every year. On the property cap side, which is probably more interesting one for of course work to you.

A fair amount of less on the liability lines, specifically those that went through the first act and what do you have a lot of good uplift.

So we definitely saw that happening on a property.

Even though the property is very hard as we all know.

Since last year.

Is a much more volatile line of business that we still maintain our excess of loss on the cat side until via quota share a significant portion on that business as well so.

Francois Morin: And we're about 85% allocated to the re-intro group, in terms of our PML that Franco mentioned. And I think it's because the returns are there, are a little bit more favorable on the range of slide. And then we have that discussion of the group level. That's one exception. So when we have an acute or specific area of the capital, we'll sit down with the insurance group and the insurance group with Nicholas facilitating the whole discussion, and we'll sort of decide roughly what we want to allocate capital.

Paul.

It's meant to be a balancing act between providing relief or.

Volatility protection to some extent in inflammation, but you're quite right, having more capital definitely helped us take more net on our balance sheet.

And switching gears, a little bit when you have a 25% of our weak quarter youre, making a lot of money and you have.

Francois Morin: I appreciate that. And certainly, I think the capital availability and the appetite to deploy is a very important part of the arch story. And I guess from that perspective, is there anything you can offer us in terms of an attempt to quantify the available capacity or is that something that we'll just have to watch and see? Yeah, I mean, we certainly we we have some capital, you know, have plenty of a little plenty of capital available.

Large team that as contributors to that result.

I assume they would like to be paid for their good work how should we think we've not seen a quarter like this a long time in a year like this how should we think about.

The pattern in the cost of discretionary comp, where it hits, the P&L and how it compared with prior years.

Great question.

Sorry.

We.

Francois Morin: We just don't know what the market will look like at one and one. So that's where I say, you know, you're right, probably have to wait to see a little bit to see how one one's layout. And then we'll have the ability to, you know, to do something with the extra capital.

Just again in terms of timing right our incentive compensation decisions are made.

Made it in the first quarter.

It will be made in February of next year.

But no question that throughout the year, we accrue.

The bonuses.

Based on what we think that we are firm our performance might look like and there is effectively a true up that takes place in the first quarter when the final amounts.

Marc Grandisson: Okay. And then my other question, just on public D&O and fiber, where we're clearly seeing a little bit of pressure and competitive pressure there. Do you still view rates as adequate there and are they clearing the lost cost trends? Yes, I'll return the petition on both these on federal and then you know, or it feels very, very healthy. Thank you. Yes. Thank you.

Are determined.

Yes, it's something we're keeping an eye on so I don't know if there'll be a.

Operator: One moment for our next question.

Early adjustment in the fourth quarter or not something will be looking at carefully so that we don't get.

The store too much the first quarter next year, obviously the board has final say.

And how much.

Money will be available to pay our troops. So that's.

It's a little bit.

Don't want to front run it we wanted to be reasonable and not introduce too much volatility in the numbers on the opex side, but that's certainly something that will take a look at in the fourth quarter to make sure we're not missing anything here.

Joshua Shanker: Our next question comes from the line of Joshua Shankar from Bank of America. Yeah, thank you for taking my question. You know, with the higher retention, this, this quarter in terms of premium seeded, can you go maybe line by line or dig in a little bit about which lines of business you're retaining more? And is that a signal that you've gotten to the point where you have enough information that you love the profitability more and want to keep it yourself?

Thank you very much and congratulations again.

Thank you.

One moment for our next question.

Our next question comes from the line of Alex Scott from Goldman Sachs.

Hi, good morning.

First one I had is on the Attritional loss ratio in the reinsurance segment I was just interested if you could give us.

Joshua Shanker: Or if you're looking at your capital and thing, you know, we have the capital deployed. So let's eat a bigger slice of pie. How did that all come together? I think you answered the question beautifully. By asking the question, you get the answer. I think it's all those things you said are true. You know, I'll get to the line in a second, but to your point is exactly right. You know, we're going through this hard market and we make, you know, we still value reinsurance.

A little more color on just what's driving that this year.

Favorable performance year over year, and if theres anything nuanced, we should be thinking about perfect is just.

The pricing environment being as strong as it is.

Yes.

Two quick things there one is and we've said it before and it goes both ways, we think of reinsurance as a line of business of our segment that we.

Joshua Shanker: You cannot go without reinsurance. You still need it for various reasons, you know, limits, management, risk management, and also information like reinsurers are providing us on the inside. With valuable information about what the market is and the state of the market and we don't want to be an outlier out there. So it's always good to have this as the additional value proposition from the reinsurance company. In terms of what we decided to do it up to three years, you're quite right.

We think is better analyzed on a trailing 12 months basis, we think looking at it quarterly.

There'll be some good it will be sub add and we've said in the past orders, where we have elevated attritional claim activity we said.

Don't panic.

Don't over think it in the same way here I think so we would certainly encourage everybody hears that theyre looking at it on a trailing 12 month basis.

Joshua Shanker: You know, we have been building, as Scott mentioned, the significant amount of capital through our mortgage earnings. So that's certainly something that was helpful and available to deploy. You know, there are areas and that also helps being able to maintain and retain more than that. I think if you are at a high level, I think that the patterns of buying, we're buying a fair amount left on the liability line. Specifically, those that went through the first act and really had a lot of good uplift.

To have a better view of the long term prospects of this segment.

The other thing I'd say is also obviously, we've grown a bit more in properties that relative to the other lines. So bye.

By nature right, our ex cat combined ratio should probably come down and it has as a result of again the growth the significant growth we've got both in property cat and property other than yes.

Joshua Shanker: So we've definitely saw that happening on the property, even though the property is very hard as we all know since last year. This is a much more volatile line of business that we still maintain our access of wealth in the cast line and still buy a quarter share, a significant quarter share on that business as well. So overall, it's meant to be the balancing act between providing relief or volatility protection to some extent and information. But you're quite right. Every more capital definitely helped us.

Got it very helpful.

I wanted to ask a follow up on the comments you made on casualty reinsurance.

Yes.

Interested in.

What is changing and it's causing more of this commentary to sort of bubble to the surface.

We've heard it from some of the European reinsurers as well.

Is it I mean.

Is it truly just there.

Starting to see reserves develop in a poor way for some companies there.

Joshua Shanker: Take more net on our balance, and switching gears a little bit. When you have a 25% R we quarter, you're making a lot of money and you have a large team that has contributed to that result. I assume they'd like to be paid for their good work. How should we think we've not seen a quarter like this in a long time in a year like this? How should we think about the pattern and the cost of discretionary comp where it hits the P&L and how it should compare with the prior years?

Is there something that's changed about the social inflation environment.

Do you think is the underlying driver or drivers.

Yes, I think the industry is.

How does a couple of things along at the same time and they Unfortunately don't go in the right direction for both for all.

All of our industry, if you have different casualty first.

And I mentioned in my comments, we had a bit of a slowdown in activity, including core activity settlement activity.

Joshua Shanker: Great question. I'm sorry. You know, we just again in terms of timing, right? Or in terms of compensation decisions are made in the first quarter. You know, we'll be made in February of next year, but no question that throughout the year we accrue expected bonuses. Based on what we think that performance might look like and there's effectively a truer up that takes place in the first quarter when the final amounts are determined.

And we also have as you as we all know there's a lot of litigation funding is a bit more aggressiveness coming from the plaintiff bar. That's certainly something that you could prescribed to be social inflation, but that's not really something new but there was sort of a lull in this market it was sort of the various.

Spike if you will.

Between 2000 2021 to really middle of this year already of this year. So I think right now you have sort of a refresh and re updating all the information about the losses, and where we are and what could happen with the demand being updated.

And made more current at the same time, we have.

Joshua Shanker: You know, something we're keeping an eye on, so I don't know if there'll be an early adjustment in the fourth quarter or not, something we'll be looking at carefully so that we don't get to, you know, distort too much the first quarter next year. Obviously, the board has final, you know, say in how much money will be available to pay our troops. So that's, you know, so a little bit of, you know, we don't want to front run it.

Price that business as an industry in 2019 with inflation in the 2% inflation is north of 567, depending on where you look at so at the same time of course, we open claims are being adjudicated, we annualize youll have to account for a higher inflation number and that is that is a classic.

Case of having a couple of things going against you.

Nothing nothing that the industry did on its own is just the economy and the environment and the riskiness of the environment. So I think that we're facing all collectively as an industry.

Joshua Shanker: We want to be readable and not, you know, introduce us. There's too much volatility and the numbers on the opposite side, but that's certainly something that we'll look at in the fourth quarter to make sure we're not missing anything there. Thank you very much and congratulations.

Marc Grandisson: Thank you.

That phenomenon and what I like about the industry's capability is it reactive and Thats, what you hear and Thats something that we should be very very happy for collectively as an industry.

Operator: One moment for our next question. Our next question comes in the line of Alex Scott from Goldman Sachs. Hi, good morning. The first one I have to use on the traditional loss ratio in the reinsurance segment. I was just interested to give it a little more color around, you know, just what was driving this year. You know, favorable performance year over year. And if there's anything you want us to be thinking about, or if it's just, you know, the pricing environment being as strong as it is.

The other the other call that you've heard that this quarter recognize it and once we recognize an issue and a problem before a very good and very adept at addressing it and I think thats whats going on but I think there are couple of combination coming in very very short order.

Because of the <unk> surrounding environment I think this is what largely drives what's going on right now.

Thanks for all the detail here.

Thank you one moment for our next question.

Our next question comes from the line of Michael Zaremski from BMO capital markets.

Operator: Yeah, yeah, two quick things there are one is, and we said it before and it goes both ways. We think of reinsurance as a line of business or a segment that we, you know, we think is better analyzed on the training 12 months basis. We think looking at it quarterly. You know, there'll be some good, it'll be some bad. And we've said in past orders where we have elevated the traditional claim activity, we said, you know, don't panic, don't, you know, don't overthink it in the same way here.

Hey, good morning.

Switching gears to the.

To the investment portfolio.

The net realized.

Losses were somewhat outsized again this quarter I know they run below the line, but any color on those have you actually crystallizing to take advantage of.

That higher rates are is there is there noise in there from unrealized stuff or maybe the LPT transactions in the past.

Operator: I think so we would certainly encourage everybody here to look at a training 12 month basis to have a better view of the long term kind of prospects of the segment. The other thing I say is also obviously we've grown a bit more in properties than relative to deadline. So by nature, right, or X cat to my ratio should probably come down that it has as a result of, again, the growth, a significant growth, we've got both in property cats and proper, of the other than, yeah.

Yes. It is.

Mostly around gathered crystallizing some losses I think.

It's a process we go through.

For each of purity on the fixed income side, where we make the determination.

Is it appropriate to this.

Well some of those and redeploy the proceeds of that at higher yields in our investment team does that so yes, there are always going to be some some realized losses coming through the fixed income obviously, the equity portfolio, which is not huge but still there is.

Alex Scott: Got it very helpful. I wanted to ask a follow-up on the comments you made on casualty reinsurance. And yeah, I'm just interested in what is changing, it's causing more of this commentary to sort of bubble to the surface. I mean, you know, we've heard it from some of the European reinsurers as well. Is it, I mean, is it truly just that they're, you know, starting to see reserves develop in a poor way for some companies?

Fbl's security like fair value option securities, including equities that are effectively mark to market and that comes through the realized gains and losses line in the income indeed bottomed yet GAAP statement. So those are the two big items, there is a little bit of other stuff going on that is.

But in the week, so I wouldn't want to go there, but thats directionally hopefully that.

That's just normal course of action.

Okay.

And lastly.

Alex Scott: There, you know, is there something that's changed about the social inflation environment? I mean, what do you think is the underlying driver or drivers? Yeah, I think the industry is, there's a couple of things going on at the same time, and they unfortunately don't go in the right direction for both of, for all our industry, if you have, with casualty. First, we have an, I mentioned in my comment, we have a bit of a slowdown in activity, including core activity, salmon activity, and we also have as you, as we all know, you know, there's a lot of litigation funding, it's a bit more aggressiveness coming from the native bar, that certainly is something that you could describe to be social inflation, but that's not really something new.

On.

On.

My understanding for me to put out a second comment letter maybe different they call it something else, but on the debt.

The potential tax changes that will take place or.

Any way you could offer us some color on.

How how things are going to play out base case over the coming year or two or.

The step up.

And it goes as plan does the step up in tax rate happen in 'twenty four 'twenty five event or both.

Yes.

It's again very early so too early unfortunately to give clear views on what we think.

Alex Scott: But there was sort of a law in this market, it was sort of a sort of a respect, if you will, between 2020-2021 to really middle of this year, early of this year. So, I think right now, we have sort of a refresh, a re-updating audience formation about the laws, is that where we are and what could happen, with the managing of data and, you know, and made more current. At the same time, we have, we have provided that business as an industry in 1519, with inflation, that's 2%.

Could happened or because they are still developing.

The laws and we expect more progress on that before the end of the year, but at a high level. It doesn't start it wouldn't start if it goes through until 2025. So there is not no it back for 2024.

And we will be evaluating.

<unk>.

Mmm made public some some target tax rate that they.

They will try to get to.

Alex Scott: Now, inflation is north of 5, 6, 7, depending on where you look at. So, at the same time, of course, we open things of being adjudicated, re-analysed, you have to account for a higher inflation number. And that is a classic case of, you know, having a couple things going against you, nothing an industry did on its own, is so the economy and the environment and the riskiness of the environment. So, I think that we're facing all collectively as an industry, that phenomenon.

But again more to come I think what we will do our best to keep you apprised of how we think about it probably on the next call, but until we have more finality more clarity on where it's going to land I think it's a bit premature to give you too much too many details here.

Okay. Thank you.

Yes.

Thank you.

One moment for our next question.

Okay.

Our next question comes from the line of Meyer Shields from Keefe Bruyette <unk> Woods.

Alex Scott: And what I like about the industry's capability is it's reacting. And that's what you hear. And that's something that we should be very, very happy for, collectively as an industry. The other, the other calls that you've heard, that this quarter, recognize it. And once you recognize an issue and a problem, people are very good and very adapt that's addressing it. And I think that's what's going on. So, I think we have a couple of combinations coming in very, very short order, because of the surviving environment. I think this is what largely drives what's going on right now.

Alex Scott: Thanks for all the details.

Marc Grandisson: Sure.

Alright, great. Thanks, guys.

First question on I guess casualty reinsurance.

Marc Grandisson: Thank you.

This year January 2023, we saw not only significant increases in property cat, but we saw changes in program structure with higher attachment point is there anything analogous to that that we should see on the casualty re side in 2024 or is it just going to be a rate story.

Probably more of a rate story.

Buying pattern on GL is mostly in our core share, but there's a lot of quota share repurchase in that segment that tells us something.

Michael Zuremsky: One moment for our next question. Our next question comes from the line of Michael Zuremsky from BMO Capital Markets. Hey, morning.

We prefer to focus our capacity on those of you who followed us for years.

This is why we prefer to focus on capacity on the excess of loss <unk> people don't really buy a whole lot of people don't put out.

Francois Morin: I'm switching gears to the morning to the investment portfolio. So, the net realized losses were somewhat outsized. Again, this quarter, I know they run below the line, but any color, are those, are you actually crystallizing to take advantage of, you know, the higher rates or is there noise in there from unrealized stuff or maybe the LPT transactions in the past? Yeah, I mean, it's mostly around kind of crystallizing some losses. I think, you know, it's the process.

Let's say that 60 to $80 million to $100 million limit. So we don't have a similar kind of risk ecmo. The risks vertical is not as big and in terms of event.

Like a cat portfolio, you could see where things accumulate and can generate hundreds and horizontal development exposure in the liability side. It's not it's not the same we don't really have a necessarily a one or two event that could really impact.

Why what area of your GL. So I think we will see a lot more silver and short answer more on a portion of basis and some of the excess of loss here and there.

Francois Morin: We go through, you know, for each security on the fixed income side where, you know, we make the determination, is it appropriate to sell some of those and redeploy the proceeds at high or yield, and our investment can do that. So yes, there are going to be some some realized losses coming through the fixed income. Obviously, the equity portfolio which is not huge, but still there's, you know, FBOs and securities, like fair value auction securities, including equities that are, you know, effectively marked a market and that comes through the realized game that losses line in the bottom income statement. So those are the two big items. There's a little bit of other stuff going on that, you know, is a little bit in the week.

It's not very similar but it's not at all similar to the property market.

Okay, that's very helpful and.

And second question and hopefully I can ask.

In a way that makes sense when we talk about.

Reserve problems from older accident years.

Totally driving casualty rate increases to accelerate is that the industry can over earned in 2024 and backfill or is it because the recalculated older Years' losses mean that.

Current rates are actually not as adequate as we thought.

I think it's a laggard Maya I mean, there's a bit of the FERC formula to be honest with you with people will have to.

Michael Zuremsky: So I wouldn't want to go there, but that's directionally hopefully that's just normal course of action. Okay.

Recognize those losses, if they have them.

I do believe as we talked about Mario as you know that as well as we do you're accurate yourself the reserving process feeds into the pricing process.

Michael Zuremsky: And lastly, I might understand from you to put out there's a second comment letter, maybe it's different, they call something else, but on the potential tax changes that will take place are, you know, any way you could offer us some color on, you know, what's how things are going to play out base case over the coming year or two or, you know, it's the step up. If everything goes as planned to the step up and tax rate happened in 24 or 25 event or both.

And clearly if we have a reserving thats a bit higher than you would expect that it will help inform your loss ratio historically.

<unk> on them to the level of analysis that helps get you to that price increase that you are looking at so that path as it's developing will happen.

Inevitably lead you to having to charge more.

The reason, we don't do a whole lot of large GL for that matter is precisely because of your second point, which was it has been historically a little bit wanting and on the rig level on the renewable side.

Okay.

Some about recent years for the industry, but that's very helpful. Thank you.

Michael Zuremsky: Yeah, but it's again, very early. So it's really unfortunately to give clear again of use on what we think could happen or because there's still developing the laws and we expect more progress on that before the end of the year. But at a high level, it doesn't start, it wouldn't start if it goes through until 2025. So there's no way back for 2024. And we will be evaluating the, you know, they may public some some target tax rate that they they will try to get to.

Thank you.

One moment for our next question.

Our next question comes from the line of Bob Huang from Morgan Stanley.

Hi, Thank you congratulations on the quarter just a quick question on your sure as the segment loss ratio.

On year loss ratio improved for about 30 bps.

But just given just the strong pricing.

Pricing environment.

Suddenly expect a little bit better improvement in loss ratio is there any thing in the loss trends that probably differed from how you thought about your loss picks in the past.

Michael Zuremsky: But again, more to come, I think we'll do our best to keep you surprised of how we think about it probably on the next call. But until we have more finality or clarity on where it's going to land, I think it's a pretty much sure to give you too much. Do any details here. Thank you.

Just any comments around that.

Hi, David.

Maybe I mean, I think the answer is really around like us being approved and say there's any initial loss picks we don't want to get into the.

Meyer Shields: One moment for our next question. Our next question comes from the line of Meyer Shields from Keith, Bruitt and Woods. Sorry, great.

The game of being overly optimistic there is still a lot of risk out there. There is still lot of uncertainty when we priced the business whether again, it's all about.

<unk>, Australia in particular, that's an area that we're watching carefully so we'd rather and that's been our model for many many years.

Meyer Shields: Thank you so much. First question on, I guess, casualty reinsurance. This year, like January 2023, we saw not only significant increases in property cap, but we saw changes in program structures with higher attachment points. Is there anything analogous to that that we should see on the casualty resize in 2024? Is it just going to be a great story? Probably more of a great story, the buying pattern on GL is mostly on a quarter share, there's a lot of quarter share of the purchase in that segment.

Pick a realistic at a bit more conservative.

Our initial loss pick.

Neil.

When we bought the business and then react to the data when it comes it so.

We're hopeful there could be good news down the road, but for the time being we're very happy with our loss picks.

Okay. Thank you for that.

Second question is a follow up on the reinsurance core combined ratio obviously it was very strong.

Meyer Shields: That's also something something. We prefer to focus our capacity on those of you who have followed us for years, know this is what we prefer to focus on capacity. On the access of loss, Meyer, you know, people don't really buy a lot, people don't go out, let's say like 60, 80, a hundred million dollars in it, so we don't have a similar kind of risk, economic risk vertical is not as big.

You mentioned that a lot of it's due to business mix shift shifting towards property.

And then because of that and then you can actually have that improving combined loss ratio there.

Just curious if we were to think about.

Going forward the run rate.

Bind ratio for your reinsurance segment based on the comments. So far is it fair to sort of assume that it's going to be closer to what you printed over the last two quarter and probably better than the prior quarters is that a fair way to think about it just from a modeling perspective.

Meyer Shields: And in terms of event, you know, like a cat portfolio, you could see where things are accumulating can generate, you know, hundreds and hundreds of them. In the lives of these sides, it's not, it's not the same, we don't really have a necessarily a one or two, you know, event activity, in fact, you know, such as wide, what area of the GL. So I think we'll see a lot more, so we're in sort of answer more on a portion basis and some of the access of loss here and there. It's not very similar, it's not at all similar to the property market.

Again.

I mentioned like the thinking around trailing 12 months, which is where I would start to help you.

With assumptions I would if you are going to we think about it in totality around the combined ratio, but if you breakdown the loss and the expense ratio, yes, maybe there is given the growth maybe there's potentially.

Marc Grandisson: Okay, that's very helpful. And second question, and hopefully I can ask, this in a way that makes sense. When we talk about reserved problems from older accident years, ultimately driving casualty rate increases to accelerate, event to the industry can over earn in 2024 and backfill, or it's because the recalculated older years losses mean that current rates are actually not as adequate as we thought. I think it's a ladder. I mean, there's a bit of the firm former, to be honest with you, when people have to recognize those losses, if they haven't, I do believe, as we talk about Mario, you know that as well as we do, you're an actor yourself, the reserving process, feed and the pricing process.

Latest quarter of Opex is probably more sustainable given what we've been able to generate that premium that growth with the same level of resources.

But on the loss ratio side I think it's just I would be careful not to over.

I mean give too much weight to the late latest quarter.

Okay. Thank you and congrats again on the quarter. Thank.

Thank you.

Thank you.

One moment for our next question.

Our next question comes from the line of Brian Meredith from UBS.

Marc Grandisson: And clearly, if we have a reserving method that higher than expected, it will help inform your loss ratio historically, you have to put the trend on them, to the on level analysis that helps get you to the price increase that you're looking at. So the path as it's developing will have will inevitably lead you to having to charge more. And the reason we don't know a lot of large GL for that matter is precisely because of your second point, which was it's been historically a little bit wanting in on the rate level. Okay, that's, you know, to read some about recent years for the industry, but that's very helpful.

Thanks, a couple of questions here first just on the Ams segment.

I know theres, clearly some market pressures, but NII W definitely down year over year and it looks like just looking some of the stats you all had been losing some market share.

Marc Grandisson: Thank you.

And then my segment is that intentional.

Operator: One moment for our next question.

Or any concerns about the.

The outlook here on the EMI as far as delinquencies or is it more related to perhaps just better use of capital elsewhere.

It's more the latter than the former I.

I would actually say tell you Brian that the market is better this year than it was even last year. So.

One would argue that we might we might change.

The way, we interact with the market over the next 12 to 24 months, but certainly at heart.

Scott Heleniak: Our next question comes from the line above Huang from Morgan Stanley. Hi, thank you. Congratulations on the quarter.

We have been saying that to you historically hasnt changed last quarter, which in terms of relative returns based on the three segments on the underwriting segments.

Francois Morin: Just a quick question on your insurance segments, a loss ratio year on year, loss ratio improved for about 30 did. But just given just the strong, you know, pricing environment, shouldn't we expect a little bit better improvement in loss ratio, is there anything in the loss trends that probably differ from how you thought about your loss picks in the past. Just see if there are any comment around that. Um, maybe I mean, I think the answer is really around like us being proof instead of saying initial loss picks, we don't want to get into the game of being overly optimistic is still a lot of risk out there.

<unk> is a third one but a very strong one I would say at this point in time, but.

Again, it's more of a reflection of the relative opportunity between the units than anything else in.

And the market, Brian I'll tell you the market is very very disciplined we're very impressed by the by the industry of the industry.

That's good to hear and then I guess my second question Mark as I think about it.

This next leg is coming through the third act on the casualty reinsurance side.

I guess that probably comes through a lot on the ceding Commission side. If you get you get better ceding commissions should we continue to see kind of the acquisition kind of expense ratios on the reinsurance side kind of moving down here.

Francois Morin: There's still a lot of uncertainty when we write the business, whether again, we've just been talking about casualty, loss trends in particular, that's an area that we're washing carefully. So we'd rather, you know, and that's been a model for many many years is, you know, pick a realistic kind of bit more conservative. You know, initial loss pick on, on, you know, and when we book the business and then react to the data when it comes in. So we're hopeful there could be good news down the road, but the time being we're going to be very happy with our lawsuits.

As we head through 2024, given what's going on with the casualty reinsurance market, particularly since you play quota share.

Francois Morin: Okay, thank you for that.

Well, yes, I think the.

The ceding commissions.

Over to three right now we will see where that ends up there might be slight change or we'll see how it's ultimately depend on how the underlying market is improving as our reinsurance player, but I think you know what.

What's our acquisition cost of our non reinsurance is mid <unk> low.

<unk>. So I think if you have more of a portfolio even if it's our view that the 30% being commission. So you might see actually the acquisition going up a little bit, but again, that's part of our medicine at.

Francois Morin: My second question is follow up on the re-insurance core combined ratio. Obviously it was very strong, and I think you mentioned that a lot of this due to business shifts, right, shifting towards property, and then because of that, and then you naturally have an improving combined ratio there. Just curious, if we were to think about going forward, the run rate combined ratio for your re-insurance segment, based on the comments so far, is it fair to sort of assume that it's going to be closer to what you printed over the last two quarters and probably better than the prior quarters?

All the time to talk about what we have these questions about expense ratio and loss ratio, but matter of starting to return and whether the combined ratio lend ourselves to return whether it comes from losses and expenses went up over the losing CPU.

So I think this is clear but yet.

And it was going to say I guess, maybe the right way to think about it is that if you're leaning more into the GL. The underlying combined ratios may actually move up some here.

I have a different return profile exactly right you're right.

Francois Morin: Is that a fair way to think about it just from a modeling perspective? Again, I mentioned like the thinking around twirling 12 months, where I would start to help you with the assumption that we think about it in totality around the combined ratio, but if you're bringing down the loss and the expense ratio, maybe there's a given the growth, maybe there's potentially the latest quarter of affects is probably more sustainable. Given we've been able to generate that premium that broke with the same level of resources, but on the loss ratio side, I think it's just, you know, I would be careful not to over give too much weight to the latest quarter.

Thank you. Thank you.

Thank you.

One moment for our next question.

Our next question comes from the line of Scott <unk> from RBC capital markets.

Yes, good morning, just on the Mou that.

I'm wondering if you could expand on that.

The growth opportunity internationally you referenced in your commentary I know, Australia is a big market for you, but where.

I also you focused outside of the U S or is it mostly just Australia.

Trying to.

Great question I think.

Non the non USB is also the CRT, which is <unk>.

Granted exposed to the U S army as the excess of loss.

The program that the GSE that developed over like we felt the level of that 11 to 12 years internationally.

Francois Morin: Okay, thank you, and congrats again on the quarter. Thank you.

Brian Meredith: One moment for our next question.

A piece of it and you see it in our financial supplement internationally, we have Australia as you know we have a good side great relationship.

Great Great presence there we're very pleased with it. We're also we're also getting a bit more market share there, even though the mortgage origination slowed down there as well. The other piece is really it's really development is the international with European specifically, SRT, which are <unk>.

Brian Meredith: Our next question comes from the line of Brian Meredith from UBS. Thanks. A couple questions here.

Francois Morin: First, it's on the MI segment. I know there's clearly some market pressures, but you know, NIW definitely down year-to-year, and it looks like just looking from this batch, you all have been losing some market share. In the MI segment, is that intentional? Are you any concerns about, you know, the outlook here on the MI as far as, you know, the link with ease, or is it more related to perhaps just better use of capital elsewhere?

90% mortgage back credit.

Our risk transfer data look a lot like the CRT business that we have in the U S.

Most of it is done because banks need to release capital to Basel III.

The transactions and we've been doing it for a little while and we partnered up with actually with another European company was very steep in that in that.

Francois Morin: It's more the latter than the former. I would actually say, tell you, Brian, that the market is better this year than it was in the last year. So one would argue that we might change the way we interact with the market for the next 12 to 24 months, but certainly at heart, you know, we have been saying that to you, historically, and hasn't changed last quarter, which in terms of relative returns based on the three segments on the underwriting segment.

Areas. So that's a growing area right now because I think the.

There is a lot more need for capital as you know Scott not only in the U S. In the bank at the similar.

Acceleration so it helps us we'll be there for them to provide more capital relief and that's certainly something that we're focusing more efforts on.

Okay. That's helpful and then just.

The risk profile of the credit quality in the default ratios on those I would assume those are very favorable, but how does that all compare to.

Francois Morin: You know, MI is the third one, but a very strong one I would say at this point in time. But again, it's more reflection of the relative opportunity between the units that anything else. And the market, Brian, I tell you the market is very, very disciplined. We're very impressed by the industry or the industry.

Outside of the U S and internationally versus versus the U S book.

I don't want to say too much because you can get more competition in the second okay.

Yeah.

The high level of the comparable is sometimes better than at CIBC.

Brian Meredith: Good, good to hear.

Still a little bit more work to be done there for.

Marc Grandisson: And then I guess my second question, Mark, is I think about, you know, if If this next leg is coming through the third act on the casualty reinsurance side, I guess that probably comes through a lot on the seating commission side. If you get better seating commissions, should we continue to see kind of the acquisition kind of expenses on the reinsurance side kind of moving down here, as we had through 2024 given what's going on with the casualty reinsurance part, particularly since you play quota share.

For those who are trying to get the business that you should talk to us versus will help you get in the business.

Yes.

I appreciate it thanks welcome.

Thank you.

This time I would now like to turn the conference over to Mr. Mark Grandison for closing remarks, okay. Thank you so much everyone for listening to our commentary this quarter looking forward to the end of the year happy Halloween.

Uh huh.

Ladies and gentlemen, thank you for your participating in today's conference. This concludes the program you may all of this.

Marc Grandisson: Well, yeah, I think the seating commissions are about to start with a three right now, we'll see what that ends up. They might be slight change or we'll see how it's also going to be dependent on how the underlying market is improving as a reinsurance player. But I think you know, what's our position cost right now to make sure it's not low, low 20. So I think if you have more report told you even if this argued it's a 30% seating commission, so you might see actually the acquisition going on a little bit.

Marc Grandisson: But all the time talk about what we have these questions about the expense ratio and what matters are to the return and whether the combined ratio length up out to return and where it comes from law for the expenses, we'll have over the seat here. So I think the right way to think about it is that it's your leaning more into the GL, the underlying combined ratios may accidentally move up some here. You have a different, you know, return profile.

Marc Grandisson: Thank you.

Scott Heleniak: One moment for our next question. Our next question comes from the line of Scott Helen from RBC capital markets. Yeah, good morning. Just on the MI unit, wondering if you could expand on the growth opportunity internationally, you referenced in your commentary. I know Australia is a big market for you, but we're also you focused outside of the US, or is it mostly just Australia that you were referring to?

Francois Morin: Great question. I think in the non, the non U.S, base is also the CRT, which is granted, you know, exposed to the USMI, the excess of loss. The program that the GFC has developed over the last 12 years. International, that's a piece of it. You see it in our financial supplement. International, we have Australia, as you know, we have a good side, great relationship and great presence there. We're very pleased with it.

Francois Morin: We're also getting a bit more market share there, even though the mortgage origination is slowed down there as well. The other piece that's really, it's really in development is the international with European specifically SRT's, which are, you know, 90% mortgage back, you know, credit risk transfer. They look at a lot like the CRT business that we have in the US. Most of it is done because banks need to release the capital, the basil tree, you know, let the transactions.

Francois Morin: And we've been doing it for a little while and we've partnered up with actually with another European company who's very steep in that area. So that's a growing area right now because I think the, there's a lot more need for capital. As you know, Scott, not only in the US and the bank, you're a similar, you know, consideration. So it helps us, you'll be there for them to provide more capital, and 30-something that we're focusing more at first on.

Francois Morin: Okay, that's helpful. And then just the risk profile and the credit quality and the default ratios on those, I would assume those are very favorable, but how does that all compare to outside the U.S, and internationally versus the U.S, book? I don't want to take too much because you're going to get more competition in this segment. Okay. High level, high level, they're comparable and sometimes better than the CRT. But you know, we feel a little bit more work to be done there. But those who are trying to get in the business that you should talk to us first will help you get in the business. I appreciate it. Thanks.

Operator: Welcome.

Marc Grandisson: Thank you.

Marc Grandisson: At this time, I would now like to turn the conference over to Mr. Marc Grandisson for closing remarks. Thank you so much everyone for listening to our commentary this quarter. So before the end of the year, happy Halloween. The next time.

Operator: Ladies and gentlemen, thank you for your participating in today's conference.

Operator: This concludes the program. You may all.