Q3 2024 Skyward Specialty Insurance Group Inc Earnings Call

October 30, 2024

[music].

Good day, and thank you for standing by and welcome to the Q3 2024 Skyboard Specialty earnings conference call. At this time, all participants are in listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you would be in here an automated message advising your hand is raised to withdraw your question. Please press star one one again, please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your first speaker today Nathalie School Schoolcraft.

Speaker Change: Mr Relations. Please go ahead.

Thank you Antoine good morning, everyone and welcome to our third quarter 2024 earnings Conference call.

Nathalie Schoolcraft: Today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson, and Chief Financial Officer, Mark Castle.

Nathalie Schoolcraft: We will begin the call today with our prepared remarks, and then we will open the lines for questions.

Nathalie Schoolcraft: Our comments today may include forward looking statements, which by their nature involve a number of risk factors and uncertainties, which may affect future financial performance.

Nathalie Schoolcraft: Such risk factors may cause actual results to differ materially from those contained in our projections or forward looking statements.

Nathalie Schoolcraft: These types of factors are discussed in our press release as always in our 10-K that was previously filed with the Securities and Exchange Commission.

Nathalie Schoolcraft: Financial schedules containing reconciliations of certain non-GAAP measures along with other supplemental financial information are included as part of our press release and available on our website Skyward insurance Dot com under the Investor section, but that I will turn the call over to Andrew Andrew.

Andrew Robinson: Thank you Natalie.

Andrew: Everyone and thank you for joining us.

Andrew: We had another solid quarter reporting adjusted operating income of 71 cents per diluted share.

Andrew: Through nine months, our adjusted operating income of $2.26 per diluted share is up over 50% compared to 2023.

Andrew: Despite an active catastrophe quarter for the industry in over 25% of our portfolio and property. We reported a 92, 2% combined ratio, which includes less than three points of cat losses.

Andrew: Testament to our disciplined underwriting and risk management strategy.

Andrew: Our fully diluted book value per share was up 19% from the beginning of the year to $18 99.

Andrew: And our annualized return on equity through nine months was an outstanding 19, 1%.

Andrew: While in pockets the market is becoming more challenging I'm pleased with our execution and remain bullish on our outlook I'll talk more about this later in the call.

Speaker Change: With that I'll turn the call over to Mark to discuss our financial results in greater detail Mark.

Mark Castle: Thank you Andrew for the quarter, we reported net income of $36 7 million or <unk> 89 per diluted share compared to $21 7 million or <unk> 57 per diluted share.

Speaker Change: Excuse me for the same period a year ago.

Speaker Change: On an adjusted operating basis, we reported income of $29 4 million or <unk> 71 per diluted share compared to $25 million or 65 cents per diluted share for the same period a year ago.

Speaker Change: Gross written premiums grew by 12, 4% in line with our expectations for the third quarter with transactional E&S surety captives programs in agriculture, each each contributing meaningfully to growth year to date gross written premiums grew by 19%.

Speaker Change: Third quarter 2024, net written premiums were $268 million and excluding the impact of the quota share reinsurance contract that was canceled in the third quarter of 2023 net written premiums grew by 16, 5% in the quarter.

Speaker Change: Turning to our underwriting results for the second quarter combined ratio was 92, 2% and our ex cat combined ratio was 89, 4%.

Speaker Change: With four point improvement compared to the third quarter of 2023.

Speaker Change: The current accident year non cat loss ratio of 66% was consistent with the prior year.

Speaker Change: During the quarter catastrophe losses, principally from hurricane Helene and to a lesser extent other cats in the quarter only accounted for two eight points on the combined ratio our year to date cat loss ratio of one five points as 0.3 better than the same period of 2023.

Speaker Change: We are still assessing the impact of hurricane Milton barring any further major events, we maintain the guidance. We previously provided for our full year cat loss expectations to two to two five points.

Speaker Change: The expense ratio was comparable to the third quarter of 2023 and in line with our expectations of a sub 30 expense ratio.

Speaker Change: Lower acquisition costs were primarily driven by the impact of canceling the quota share reinsurance contract in the third quarter of 2023. We also continue to get leverage from the increase in earned premiums.

Speaker Change: Turning to our investment results our strategy to Derisk. The portfolio continues to pay off with net investment income of $19 5 million in the quarter, an increase of $6 4 million compared to the same period of 2023.

Speaker Change: Consistent with our investment strategy to deploy free cash flow to fixed income in.

Speaker Change: In the third quarter, we put a $118 million to work at five 8% the.

Net investment income from our fixed income portfolio increased 15, 5 million from $9 5 million in the prior quarter, driven by improving portfolio yield and significant increase in the invested asset base.

Speaker Change: Our embedded yield was 5%.

Speaker Change: At September 30th versus four 1% a year ago and four 8% at June 30.

Speaker Change: Yes.

Speaker Change: We reported a one one we reported a loss of $1 1 million and our alternative and strategic investments portfolio compared to a loss of <unk> 1 million in the prior year quarter.

Speaker Change: Both periods were impacted by a decrease in their fair value of limited partnership investments that was previously classified as opportunistic fixed income at.

At September 30, this portion of the portfolio only comprised 6% of our overall investment portfolio.

Speaker Change: At September 30, we had approximately $206 million in short term investments in our yield on short term investments was four 6%.

Speaker Change: We finalized the credit facility with the federal home loan Bank and we used 57 million of proceeds to pay down a portion of the revolver.

Our financial leverage is modest as we finished the quarter with a low 13% debt to capital ratio.

Given the new facility and our current leverage we have ample financing flexibility.

Speaker Change: Lastly, I am pleased that our board of directors has approved a share repurchase program of up to $50 million of skyward ordinary shares.

Speaker Change: <unk>, our repurchase program as part of the maturation of scoured as a public company and underscores our commitment to maximizing shareholder value give.

Speaker Change: Given our strong cash position cash position, our cash generation as well as our financing financing flexibility. We can fund any repurchases for me their operational liquidity or via our credit facility that has undrawn capacity of $107 million.

Speaker Change: We remain confident in the strong growth trajectory and the additional growth opportunities, we are targeting and our ability to act on the share repurchase program in an appropriate way.

Speaker Change: Now I will turn the call back over to Andrew.

Andrew: Thank you Mark.

Andrew: The consistency of our results reflects our disciplined approach to underwriting and executing on our rule our niche strategy.

Andrew: Our emphasis to seek out growth and high return areas that are less exposed to the P&C cycles appears to be prudent and we're making good progress for skyward. This currently includes A&H surety captives mortgage credit and agriculture, which accounted for 37% of our $400 million of gross written premiums this quarter.

Andrew: This aspect of portfolio management has increasingly been an area of focus and our drive to consistently deliver top quartile underwriting returns.

Andrew: Beyond the portfolio focus I, just noted with double digit growth in six of our eight divisions in.

Andrew: In industry solutions negative growth was again driven by our intentional actions in commercial auto, which I have discussed at length in each of our last three quarters' earnings calls.

Andrew: In professional lines, it's a tale of two cities, where we have strong market a strong market backdrop for our health care professional liability products and services and we anticipate that our recently launched <unk> liability unit will be a significant contributor as we look forward to the coming quarters.

Andrew: The flip side, we remain in a defensive posture on D&O.

I have experienced a significant change in competition in our miscellaneous unit.

Andrew: That said I remain bullish on both of these divisions given the adjustments we have made and anticipate they will return to growth without margin compromised in the quarters ahead.

Andrew: We continue to deliver outstanding growth in our transactional E&S and surety divisions as well as consistent strong growth in the other divisions.

Andrew: I am confident that our strategy the diversity of our portfolio and our team's execution gives us a formidable platform and that we're well positioned to deliver strong and profitable growth as we look out over the coming quarters.

Andrew: Turning to operational metrics, we had a strong quarter on pricing, we delivered mid single digit plus pure rate and new business pricing was above our trailing 12 month enforced pricing.

Andrew: Global property and to a far lesser extent, our other property units continued to be impacted by downward pricing trends.

Andrew: It is too early to assess the impact of the recent hurricanes on property pricing, but our working assumption is that the recent activity may slowdown, but not arrest the softening in the property market.

Andrew: As I mentioned, we will continue we continue to see an intensely competitive backdrop in D&O and now in miscellaneous <unk>.

Andrew: Conversely, the market backdrop on casualty in occurrence liability continues to be supportive decent rate, although the loss cost inflation environment continues to be challenging and thus we're being selective in our growth in these areas.

Andrew: Retention was in the mid Seventy's for the quarter, driven by business mix and our intentional actions on commercial auto.

Andrew: Lastly, we continue to see strong submission activity, which was up over 25% from the prior year quarter.

Speaker Change: It is hard to believe that we're approaching the end of our second year as a public company and we are hitting our stride as we continue to deliver outstanding and consistent earnings growth and upper teens Roe as.

Speaker Change: We remain laser focused on executing our <unk> strategy and delivering top quartile returns at all parts of the market cycle.

Speaker Change: Lastly, I'd like to take a moment to again acknowledged by 560 colleagues.

Speaker Change: Recently, we were recognized as one of the best places to work in insurance, but business insurance and best companies group.

Speaker Change: This marks our second consecutive year, earning this prestigious recognition, which is a true testament to the dedication and passion of our entire team.

Speaker Change: Cannot be more grateful to our team for their continued efforts in making skyward, a standout organization in our industry.

Speaker Change: I'd now like to turn the call back over to the operator to open it up for Q&A operator.

Speaker Change: Thank you.

This time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one of your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from Matt Karr Lady.

Speaker Change: From citizens JMP. Please go ahead.

Speaker Change: Hey, Thanks, good morning.

Speaker Change: Andrew you talked a bit about.

Speaker Change: Obviously some of the new initiatives that you are optimistic about driving growth going forward I think media liability is one of the newer ones.

Speaker Change: Can you talk a little bit about <unk>.

Speaker Change: Zoom out to kind of 30000 foot level.

Speaker Change: You've added a lot of pilots puzzle pieces since going public and examples like that.

Speaker Change: What other puzzle pieces or are there. Many other puzzled puzzle pieces that you would look to continue to add going forward.

Speaker Change: Yes, good morning, Matt and thanks for the question.

So well look I think that as we have talked to you and to others in the past. The first thing I'd say is that we're very strategically oriented right. So we're not it's not sort of we're thinking about something now that we werent thinking about one or two years ago and in most cases.

Speaker Change: We're talking about starting with talent that oftentimes, we're in conversations with for multiple quarters, sometimes multiple years before we're able to get them across and that was.

Speaker Change: True and AG was true in mortgage it was true media liability.

Speaker Change: And I expect that for the next set of things that will come that'll be true as well and to that extent.

Speaker Change: Timing is a little uncertain right because sometimes we're focusing on an area that we want to enter into the market but.

Speaker Change: We don't we don't control when the.

Speaker Change: The person or persons that were talking to actually are sort of ready to come free and join our team.

Speaker Change: What I will say to you is is that I don't believe at this particular moment to sort of achieve what we believe we need to achieve on the next turn right Sir.

Sort of continued very profitable growth in our organization to be able to distinguish ourselves bolt on the underwriting wanted on the growth line that we really need to add anything most of what we're doing.

Speaker Change: At this particular moment is just filling out.

Speaker Change: Some of the investments that we've already made we are adding some adjacencies around those and so in that regard I actually feel very good.

Speaker Change: That said.

Speaker Change: As I think we've experienced like just in my four and a half years at the company right. I came in there was this crazy pricing environment and access and there was a crazy when pricing environments, cyber and crazy with pricing environment and public D&O, though we had a crazy pricing environment and property.

And in every one of those instances, we have seen the sort of the turn going the other way now access is coming back again, and so I think a big part of how we're trying to think about this is just to ensure that sufficient portion of our portfolio is well positioned to deliver that top quartile underwriting outcomes, we're talking about and buttress against the.

Speaker Change: Kind of cycles that we see and I would say that that's sort of a never ending process, but I feel very good about where we are today, but what I like to add more to that sure I'd like to add more to that but I don't there's nothing I have to announce what I will say is.

Speaker Change: A final comment.

Speaker Change: Because when you look at something like media liability right.

Speaker Change: In a short period of time, we have a market leading team literally I mean, we accumulated some of the best underwriters.

Speaker Change: Claims professionals and our position in the market with a product that I believe is unmatched by anybody if we are if.

Speaker Change: If we're not.

Speaker Change: <unk> product if were not admitted in every state maybe theres one outstanding large state that we're waiting on and.

Speaker Change: And that's just going to bode really well for our ability to sort of take that particular category by storm and put our put our sort of skyward imprint on that market.

Speaker Change: And Thats the way, we do things and I think it's a really great example of how.

Speaker Change: In light of other things that are going on in professional we're really well positioned to make sure that that portfolio shaped for us in the right way.

So I said a lot there, but hopefully that gave you at least some color and texture too.

Speaker Change: You better understand your question.

Speaker Change: For sure no that was great and then one other if I could.

Speaker Change: Obviously for the industry.

Speaker Change: Casualty reserves are in pretty good focus.

Speaker Change: You guys have had.

Speaker Change: Very stable results.

Speaker Change: Public and for a while now can you just peel back the onion, a little bit and give us a little color on kind of what youre seeing if theres any moving pieces of note kind of behind the scenes as you think about it.

Speaker Change: Managing that part of your book.

Speaker Change: Well, well look I think that that.

Speaker Change: The first thing I would say to you, though that on sort of outlook is that.

Speaker Change: It's a pretty decent rate backdrop on occurrence liability casualty.

Speaker Change: And I think the reason is is that everybody is properly recognizing social inflation, which I feel like we have been talking about even though we're a small company and we don't necessarily command the attention of others I feel like we're talking about in front of others.

Speaker Change: <unk>.

Speaker Change: I'll remind you and others on the phone that we consistently talk about reserving and a very conservative level and so for us that might mean that if our indication on a on a particular book of business is X, we might reserve at X, plus 3% or X plus 5%.

Speaker Change: And oftentimes with the best knowledge that we have about what loss cost inflation looks like and.

Speaker Change: And in some cases in our in our casualty portfolio.

Speaker Change: At plus 3% that 3% or 5% buffer that we set it with Mike today have eroded to being two or 3% or one or 2%. It's not across our portfolio. There are some places in our portfolio, particularly point to the liability side of our of our transactional E&S business, where we reserve.

Very conservatively, but above our indications, but we've seen development that's been favorable to our indication. So it's not it's not sort of a single.

Speaker Change: Profile across our entire book, but certainly for us and I have been saying listen we talk about it in context commercial auto bodily.

Speaker Change: Bodily injury exposed.

Speaker Change: Risk for us in particular.

Speaker Change: The place where you can see the sort of a changing severity and the good news for us is that by and large.

Because we are conservative relative to our indications that the current the current position is inside of where we are reserved meaning that we havent backed up and thus why you haven't seen necessarily any any.

Speaker Change: Reserve movement from us on the negative over over the last few quarters and we expect that we'll continue to see.

Speaker Change: Thats sort of conservative position that we've taken to provide dividends for us as we look forward.

Speaker Change: Okay. Thanks for the insights Andrew much appreciate it.

Speaker Change: Thank you Manuel and before our next question.

Speaker Change: Our next question comes from Greg Repeaters from Raymond James. Please go ahead.

Speaker Change: Hey, good morning, everyone, Hey, Greg.

Speaker Change: Okay.

Greg repeaters: I guess I'm going to build on part of your answer.

Speaker Change: So the previous questions.

This is the end of the year I know budgets are being submitted.

Speaker Change: And just trying to triangulate between your commentary on pricing certain lines you call commercial auto <unk>.

Speaker Change: Financial lines, you called out.

Speaker Change: Property, where rates could be under pressure depending on what the outcome is of hurricane season for the fourth quarter here.

Speaker Change: So.

Speaker Change: I put those negatives and then we hear a lot of positives about areas of growth for you just trying to figure out how how youre thinking about topline growth because.

Speaker Change: The share repurchase program at Mic signals that you don't have.

Speaker Change: You don't have opportunities to invest in internally, so just trying to figure it all out.

Speaker Change: Yes.

Speaker Change: Well, thanks by the way I'm glad we're being asked this question and one of the reasons we wanted to.

Speaker Change: Get out the share repurchase.

Speaker Change: Program announcement as part of our earnings release and be able to then.

Speaker Change: And then address it on this call. So I'm glad you asked the question.

Speaker Change: So let me just say this first as I just will amplify what Mark said in his prepared remarks, there's just a maturation of the company.

I'll remind you that.

Speaker Change: In our first year, we almost eliminated the entire overhang of west name and since then we're famous exited so are our with.

Speaker Change: With the full float of our company out in the public markets now so.

Speaker Change: I would just tell you that kind of we've gotten to the point, where we've grown up as a company a public company in terms of the float and and we view this as just a sort of a sensible thing to do.

Speaker Change: It's just part of the maturation, we note that it's not a particularly large buyback which is an.

Speaker Change: Indication of really how we want to use it.

Speaker Change: You want to just talk a moment about how we want to use it which is that if you look over the last quarter and I think many of you have heard from from us on this.

Speaker Change: We believe that in spite of the rise in our share price.

Speaker Change: We're still a company that the full value is not appreciated by the by the by.

Speaker Change: By our investors and we understand that that will take time for us to continue to deliver consistent outstanding results.

Speaker Change: For us to be fully value, but if you look at what happened over the last quarter. There are two periods where.

Speaker Change: Following our disclosures after the Q and then and then when.

Speaker Change: When <unk> came out of the remaining four 5% 5% of the stock.

Speaker Change: The stock went way down and we didn't have this tool in our toolkit and we would have liked to have this tool in our toolkit because we believe it would have been an incredible buying opportunity. When you look at our our share price and you look at our performance on a relative basis against others and I'll remind you that our 13% debt to capital rate as compared to others. We are very under Levered. So if you put proper leverage into our.

Speaker Change: <unk>.

Speaker Change: You start to understand the intrinsic value of this company.

And so for US this is much about the buttress against.

Sort of any moments in time, where we believe that that.

Speaker Change: There is a.

Speaker Change: Yes.

Speaker Change: A situation, where the company is not sort of seeing the full and fair value of our stock in.

And as I said, we experienced that and this is just an instance, where if we had this tool in our tool kit for the last quarter, we probably would have acted on it.

Speaker Change: That.

Speaker Change: Makes absolute sense, but.

Speaker Change: 3% of <unk> and its about its about 3%.

Speaker Change: Totally.

Speaker Change: Totally the messages is crystal clear on that Triangulating back to just the budget outlook.

Speaker Change: I'm sorry the growth.

Speaker Change: Hey, listen.

We last year. This time, we told you and others, what our internal plans look like and as we look forward to next year. When we're ready, we'll certainly we'll communicate again, what our internal plans call for but what I would say to you is is that at this moment in time, despite what I would characterizes.

Speaker Change: By and large a more challenging market and the reason I say that is that because it's the rate backdrop for casualty, maybe better right now than it was this time last year I think that there is a fuller appreciation of the industry that that rates required given maybe starting point loss cost inflation et cetera, what I would say about our business is that.

Speaker Change: We feel as good about our growth growth outlooks right now next five quarters.

Speaker Change: As we did when we entered this year and you saw.

Speaker Change: You saw the growth that we've had over the first three quarters.

Speaker Change: If you listened closely to marks comment he would tell you that in his comments in his prepared remarks. The 12, 4% was consistent with our expectations for this quarter. We did we had expectations we understood enough about our book about how things have some seasonality and some ebb and flows that we looked at our 12, 4% growth this quarter and.

Speaker Change: That was entirely consistent with the 15% plan that we set out at the beginning of the year. So there's nothing about this quarter that surprised us and there is nothing about this quarter that gives us concern and as we look out we feel we felt darn good about our growth outlook.

Speaker Change: And again, it'll be up to us to execute and it'll be contextualized, whether we see that sort of market.

Speaker Change: Sort of condition that that we see it in right now and so I would say very positive.

Speaker Change: Okay. Thanks for the color just just a follow up in your comments you mentioned submission activity.

Speaker Change: And obviously it continues to be quite strong can you give us some context about what that means and how that translates to.

Speaker Change: Your topline results for us.

Speaker Change: Yes, listen we definitely see.

Speaker Change: Submission activity increasing.

Speaker Change: Talk a little about this in the past, but I'll break it into sort of three parts part number one is.

Speaker Change: Is kind of almost if you think about like same store sales right. So underwriters that were sort of fully institute this time last year.

Speaker Change: Obviously, you've added a lot of new underwriters.

Speaker Change: Almost every instance, because of the markets we compete in the business tends to follow those folks like they have their strong relationships. The trading partners tend to want to trade with those underwriters. So the books of business will oftentimes follow them and we will see a lift as a result of that so that's sort of part two and then part three there is no question that in.

Speaker Change: In.

Speaker Change: In a number of areas in our in our business and most notable things that are in surplus lines, but not only in surplus lines.

Speaker Change: We're seeing a what I'd say a considerable increase flow.

Speaker Change: DNS is the easy part right because you still have a lot of business, that's coming out of the admitted markets.

Into the surplus lines market, what I will say is that in select instances, we're seeing we're seeing sort of more pitches, but theyre not necessarily pitches that we're swinging at rates or maybe more stuff's coming in but it doesn't necessarily fit entirely with what we're looking for but by and large I just will say that for the surplus lines part.

Speaker Change: Of the equation the flow is increasing and so when I sort of put those three equations together the first being <unk>.

Speaker Change: Same store sales were still seeing increases simply because we're delivering technology and things that improve.

Speaker Change: The efficiency of our underwriters, we've added a lot of new underwriters, which of course gives us growth.

Speaker Change: And in a number of our markets were just seeing an increased amount of submission activity because those markets either economically or in the case of surplus lines are gathering a larger share of the market.

Speaker Change: Got it thanks for the detail.

Speaker Change: Beth.

Beth: Thank you.

Speaker Change: My primary question.

Speaker Change: Our next question comes from Paul Newsome from Piper Sandler. Please go ahead.

Paul Newsome: Hi, good morning, Thanks for the call.

Paul Newsome: Totally different topic, perhaps can we revisit the investment income portfolio.

Paul Newsome: Changes that you've made.

Paul Newsome: Just sort of what is left to be done as we try to get a better sense of.

Paul Newsome: Our investment income will change respectively.

Mark Castle: Hey, Paul its mark.

Paul Newsome: I would say is whats left to be done is very little we like the structure of the portfolio.

Paul Newsome: We like the we like the asset allocation I like the duration, so theres really not much left to do in the portfolio.

Paul Newsome: Well the only thing that we are that we are.

Focused on or more focused on is the redemptions out of opportunistic fixed income or the alts. That's in line with exactly what we thought it would be 424 and will be a very small portion of the portfolio at the end of 'twenty five so in its simplest form Paul think about about about $1 4 billion.

Paul Newsome: In in core fixed income that I said, the embedded yield as it is right at 5%. We continue to have about 200 ish million in short term investments were the yield there was $4 six I recognize that there may be pressure on short term rates.

Paul Newsome: And we are looking at that in terms of putting that to work longer term, but in terms of the overall portfolio I feel great about where it is and I don't think we need to be doing anything different having said that if the interest rate backdrop does change we have the flexibility to move.

Paul Newsome: And then different portions of the portfolio.

Paul Newsome: But the impact of the liquidation of the alternatives portfolio is large.

Paul Newsome: <unk>.

Paul Newsome: Current run rate or not.

Paul Newsome: Yes.

Speaker Change: Okay, great. Thank you.

Paul Newsome: Sure.

Paul Newsome: Yes, I mean, just.

Speaker Change: Paul just to qualify one of the thing I mean, the last part of that.

Speaker Change: What was formerly opportunistic as well.

Speaker Change: Less than 6% of our portfolio and as Mark noted it's.

It's in redemption will be out of those obviously were going to redeploy that.

Speaker Change: And it will generate returns that are probably less volatility with them is what I would say and as you think forward look we obviously are putting a lot of cash to work we have been.

Just our paid and incurred have been running.

Speaker Change: And the kind of mid sixties.

Speaker Change: Worst case low seventy's for a number of quarters, we're putting a lot of cash to work. We expect to put continue to put a lot of cash to work.

Speaker Change: And what's working probably against US for next year, we're at a 5% embedded yield on fixed income I don't know if were going to go much north of that.

Speaker Change: But if you look at the first three quarters.

Speaker Change: As you look forward Theres, probably on average over the first three quarters Theres some upside to it the thing that works against US is that we had unbelievable yield on the circa $300 million of cash that had been sitting on the balance sheet.

Speaker Change: We will not be replicated next year, regardless of where we put it to work whether you put it into core fixed income or or or.

Speaker Change: State with a heavy heavy dose of cash.

Speaker Change: It's not something that we can replicate just simply because.

Speaker Change: While we were able to earn our money market was extraordinary this year and so that's the one thing thats probably working against US as we look forward to next year.

Speaker Change: That's great. Thank you very much for the help I appreciate.

Speaker Change: Appreciate it.

Speaker Change: Paul.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from urine Qunar from Jefferies. Please go ahead.

Speaker Change: Thanks, Good morning, everybody.

So Andrew I hear some caution on professional lines and commercial auto pricing I don't think Thats really new here. So I was hoping maybe you could touch on why the professional lines and industry solutions gross premiums written.

Speaker Change: Sorry declining this quarter.

Yes.

So thanks for the question.

On professional it's really easy.

I'll remind you that first our D&O portfolio is.

Speaker Change: <unk>.

Speaker Change: Has virtually no.

Speaker Change: Public unit right. So it's been a private company portfolio predominantly and over time has become almost an entirely private company portfolio.

Speaker Change: And.

As we are in the whatever X number of quarters of what has been I think just I'll note and the same public D&O pricing market.

Speaker Change: We clearly have seen just quarter on quarter continued pressure into the private company market right. So it's not like that has followed exactly the public D&O market. It's a lot worse today than it was a year ago. So that's that's one sort of small change when we take a defensive posture I will tell you our loss ratios are absolutely outstanding I mean like.

Speaker Change: Literally outstanding where we're planning for next year, we're seeing indications that are coming down 567 points.

Speaker Change: We probably won't react to that.

Speaker Change: But it tells us that our guys are underwriting it.

Speaker Change: Very very thoughtful way the big change I will tell you is what's happening on the miscellaneous side and maybe a little bit of history here will be helpful, which is as the cyber micro kind of blew up a couple of years ago.

Speaker Change: Our miscellaneous.

Speaker Change: Business, our unit, which is just probably.

Speaker Change: 15, plus of the best underwriters I've ever met a number of which had worked for me in my prior life.

Speaker Change: We built an extraordinary book of business in a very short period of time, largely because the brokers were so overwhelmed during this sort of difficult cyber period.

Speaker Change: With that that we were just seeing incredible opportunities for us in the miscellaneous side. We built the book of business terrific book of business. We added a lot of technology to it that gives our underwriters leverage in ways that they haven't had and then what we've seen in the course of the last couple of quarters is just.

Speaker Change: Competition.

Speaker Change: From a number of folks who are finding it difficult in other areas of professional most notably in and D&O Private company D&O reallocating time capital resources towards the miscellaneous.

Speaker Change: A portion of the market and we just we've seen a just a fundamental change in that that is probably the thing that I would just describe as most notable.

Speaker Change: It's a great book, it's incredibly profitable for US we have an incredible team, but the market has changed in a very short period of time.

Speaker Change: <unk>.

Speaker Change: Yes, I'm sure that if you listen closely to some others you'd probably hear some version of this of this message.

Speaker Change: And then on the industry solutions.

Speaker Change: I think that what I would describe to you is if you again, if you listen closely to my remarks.

Speaker Change: We are in a great rate backdrop.

Speaker Change: But we're being more cautious not because we have concerns with in fact I would argue that our energy book is probably our second or third most profitable and second or third highest returns on capital.

Speaker Change: And what that.

Speaker Change: Thats one of two reconstruction being the other piece of it other piece of it.

Speaker Change: But I would tell you the loss cost inflation backdrop is something that that.

Speaker Change: I'm sure every CEO is taking taking sort of attention to in our case I'm generally.

Speaker Change: Sort of taking a more cautious view and believe that.

Speaker Change: If were to deploy capital in our business I wanted to deploy it in places where I feel a little bit better about the loss cost inflation. So we've kind of suppressed the growth over in those areas and I think what youre seeing here in this quarter is that sort of commercial auto impact really come through I do.

Speaker Change: Suspect that if you look out maybe one or two quarters, given some adjustments that we made.

Speaker Change: Entrants into in our energy business some of the things that we're doing in renewables I suspect what youre going to see is that.

Speaker Change: That will be sort of returning to the kind of growth trajectory that maybe are more accustomed to.

Speaker Change: Got it.

Speaker Change: Helpful and comprehensive.

Speaker Change: Other question, just because of the cat catastrophe guidance.

Speaker Change: You are offering for the full year.

Speaker Change: Maybe that comes about four points or over $10 million of cat load in the fourth quarter, which would be the highest in the company's history is that just a matter of conservatism here or do you have greater weighted exposure to western Florida Milton head yes.

Speaker Change: I think.

Speaker Change: The way I would interpret what Mark said, which is that we're going to be within the two to two and a half point guidance that we gave at the beginning of the year barring any unforeseen additional cats.

Speaker Change: Is consistent with normally what you get from US is that we are providing commentary that.

Speaker Change: We believe reflects secretive view.

We know our claim count on Milton It has not changed now for probably 678 days.

Speaker Change: We have a loss quantum on that and I would just say to you that we feel very good about our cat results for the fourth quarter I'm not going to say more than that I think you jumped to the $10 million.

Speaker Change: <unk>.

Speaker Change: I wouldn't I wouldn't necessarily jump there is what I would say.

Speaker Change: Right. Thank you.

Speaker Change: Thank you one moment for our next question.

Our next question comes from Mayor Shields from K B W. Please go ahead.

Speaker Change: Perfect great. Thanks, so much.

Speaker Change: Good morning.

Speaker Change: Andrew was hoping you could talk about whether we're seeing any changes in.

Mayor Shields: Companies and for surety business I know you had a couple of other companies have talked about growing that book and lines track record is phenomenal is that manifesting itself in pricing or commissions in any way that's different from the last couple of years.

Speaker Change: To be honest, Matt no I mean, just straight up no.

Speaker Change: We monitor.

Speaker Change: Our rate levels, and <unk> never really had a hard market recently and while I'm sure you guys will call. It a soft market, it's clearly not a soft market given the results that we're generating.

If you look at theirs.

Speaker Change: There is a relationship between sort of size of bond size of program.

Speaker Change: And the rate per unit of exposure.

Speaker Change: What I will say to you that's really a positive thing is is that this is the one part of the of the P&C World where inflation is a wildly good thing for us because our bond that maybe you bond at four years ago for $10 million and at the same work today is let's say $18 million just using kind of.

Speaker Change: A number well.

Speaker Change: Its not like Youre loss likelihood has changed and so once you pay out commissions alright.

Speaker Change: Everything else in there is higher exposure for effectively if you have let's say your loss ratio target and surety as a 'twenty or in <unk> or 'twenty two.

Speaker Change: You are generating more profit and.

Speaker Change: It's been a really positive thing we have not seen a change in in competition, but I also will tell you and it's maybe the first place that I would brag about our company is we have built a genuinely world class surety business.

Speaker Change: Argue that in the part of the market, where we compete we are one of one I mean literally.

Speaker Change: We have a great team, we everyday are tracking talent, who are coming to us. It's it's been almost overwhelming you saw an announcement last quarter, we got another one coming.

Speaker Change: That's going to be equally equally compelling.

Speaker Change: And the breadth of what we do on the commercial contract SBA transactional all the different areas. We just have a great business and then the last part of it is that.

Speaker Change: We recently got approval, we're restructuring our sort.

Speaker Change: Sort of organization of our statutory entities, which which re stacks are capital such that we can.

Speaker Change: Effectively double our T lifting and so that's going to give us just another tool in our toolkit as we look out to I think that that normally is a six months away from the end of the year. So by mid next year, we'll have that approved and Thats just going to be another tool in our toolkit. That's going to just continue to drive what is a really outstanding business for us.

Speaker Change: Situated with some of the best people in the industry on the on the underwriting and the claim side that I've ever met.

Speaker Change: Okay, that's very helpful.

Speaker Change: Second question I guess, if we look at the accident and health book should we think of medical inflation as being sort of the key risk.

Speaker Change: Out there or is it some other factor that we should also be monitoring.

Speaker Change: Yes, because because because it's a stop loss book.

And so youre covers are specific and then like in aggregate loss.

Speaker Change: I think that the.

Speaker Change: So the medical inflation part, we really get in terms of how we structure I think the bigger thing is.

It's starting to be like the prevalence of designer drugs.

Speaker Change: Genetics things like that that are our.

Speaker Change: Changing.

Speaker Change: Some of the course of actions that directly or the kinds of things that that.

Speaker Change: Think about what our product is right it's in excess product.

Speaker Change: The kinds of things that would expose us in what I would say is is that.

Speaker Change: Without.

Speaker Change: Without going too far into this because I'd prefer if we had our experts at the table on this that we understand that part of the issues.

Speaker Change: And I think that we're building product and our business with full consideration for that.

Okay.

Speaker Change: Yes.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Mark Hughes from <unk> Securities. Please go ahead.

Mark Hughes: Yeah. Thanks, Good morning, Andrew I Wonder if you might talk a little more about the property market.

Mark Hughes: I know you all do more sophisticated underwriting.

We participate in a lot of.

Mark Hughes: Towers, how do you find the.

Mark Hughes: Supply demand the competition for that property business now.

Andrew: Good morning, Marc and thanks, Great Great question. So.

Speaker Change: So the first thing I'd say is it's definitely not even across the various places where we write property. So.

Speaker Change: But by and large I would say that the marine market.

Speaker Change: Yes definitely.

Speaker Change: Definitely seeing some competition, we're seeing probably more pressure on terms than price in.

Speaker Change: And transactional E&S.

Speaker Change: Again I'll just remind you. We're generally are writing property exposures that are measured in single millions or low double digit millions kinds of exposure and probably 60% of our business is we're writing the entire <unk>.

Speaker Change: Entire Ti V and maybe 40% of the business, we're writing the primary.

Speaker Change: As an excess above us.

Speaker Change: That's still we're seeing a lot of flow its definitely a more competitive market from a price perspective, but we're talking about pricing that.

Speaker Change: We can make a really really really attractive returns. So you are coming off of a really good position.

Speaker Change: Global property is an entirely different story.

Speaker Change: Crazies have taken over to be honest, we have we have <unk>.

Speaker Change: Examples of companies doing things that.

Speaker Change: Are every bit as irresponsible as maybe what you've heard in the D&O market.

Speaker Change: <unk>.

Speaker Change: I'm thinking of some recent accounts I will give you. One example, where we were a lead line on.

Speaker Change: And our large accounts, so writing a significant portion of the primary $100 million, we wrote that for a 20% rate. So just think of you wrote that entire line that's a.

Speaker Change: $20 million premium.

Speaker Change: And this year.

Speaker Change: That that primary layer.

Speaker Change: Which we came off of was renewed with with the leaders, taking a 300 million stretched out of $100 million stretch for $21 million. So they added $200 million of vertical exposure for an additional million dollars.

Speaker Change: That is just irresponsible theres no justification for that.

Speaker Change: And we see these kind of spot examples popping up with more regularity and so.

Speaker Change: Despite the fact that you've heard from me about our rural or any strategy or really any strategy and global property has everything to do with our long standing position strong relationships with risk managers and most importantly, we bring a lot of capacity given our quota share support.

Speaker Change: Just not going to let you know.

Speaker Change: We're just not going to follow the market down when it when it behaves that badly.

Speaker Change: It's coming from a number of places London and.

Speaker Change: Some of the large multinational players and it's just it's just a grab for a lot of premium and it's being done in an irresponsible way and let them have added and it will come back around to us once they once they sort of get there their sort of their full experience of what it's like to write that business at that kind of price.

Speaker Change: With that in mind is that <unk>.

Speaker Change: Growth business as we think about the next four quarters.

Speaker Change: No I would say that our plan coming into this year.

Speaker Change: Last year in global property. If my memory serves me correctly, we wrote around $235 million.

Speaker Change: Specifically in global property. This year, we came in with a plan below that and already this year next year I know that that is an area, where I already know what our plan looks like for next year and yes, we will we will.

Speaker Change: Within our assumptions make sure that we are.

Speaker Change: We are holding line on what we believe is appropriate which means that we're going to be letting business go.

Speaker Change: Thank you.

Speaker Change: By the way the flip side of this is this could turn into Rob.

Robinson: Robinson said.

Speaker Change: Let me just say that one of the reasons, we have the portfolio that we have is that when we see these kinds of changes in the market that we are incredibly well positioned to continue to drive attractive profitable growth that's distinctive relative to our peers because we have a portfolio allows us to do that.

Speaker Change: It doesn't feel great when this happens.

Speaker Change: But but I certainly feel very good about the outlook of our business, regardless, because we have enough other great things in place.

Speaker Change: That that this would not overwhelm us the way it might some other organizations.

Speaker Change: Yeah understood I appreciate that.

Speaker Change: Thank you.

Speaker Change: Thank you we'll move next question.

Speaker Change: As a reminder to ask a question you need to you would need to press star one one of your telephone and wait for your name to be announced.

Speaker Change: Our next question comes from Michael Zarinsky from BMO. Please go ahead.

Hey, good morning.

Speaker Change: Hi, good morning, Mike.

Speaker Change: I guess.

Speaker Change: The first question so.

Speaker Change: Global property in agriculture, I'm not sure how big Agriculture is I don't know if you could size that up but.

Speaker Change: Data, we've seen points to the at least the U S.

Speaker Change: Crop season.

Speaker Change: Looking particularly profitable better than a normal year I don't know if you all have that.

Speaker Change: Closure to that.

Speaker Change: Yes, so Mike.

Mike: Last year rough numbers and by the way as we roll into next year.

Speaker Change: Going too.

Speaker Change: Be changing our divisions last year was our first year with AG and so.

Speaker Change: It was tiny in really we tried to put it in a place where it made sense.

Speaker Change: It was probably about $30 million this year.

Speaker Change: It is considerably above that.

So youll see those numbers as we as we round the quarter corner for next year.

Speaker Change: Relative to the U S crop exposure I don't have the numbers in front of me, but I'll remind you that our business is a global business so across the Americas, we write in Canada, Brazil U S.

Speaker Change: And the U S multi peril crop probably is I'm going to guess.

Speaker Change: Maybe 20% of our business there is a separate U S program dairy and livestock that we participate in Thats independent of the PCI.

Speaker Change: But we would agree that it's.

Speaker Change: It's a it's a good year, what I will say to you is that <unk>.

Speaker Change: Given the size some of the very large sophisticated primary writers will adjust their loss picks over the course of the year, we set our loss picks and an incredibly conservative level and we've not in any way reflected that sort of that positive outlook that youre describing in our in our fixed but we see it.

Speaker Change: Okay, that's super helpful.

Speaker Change: Lastly, as a follow up I think this was asked but.

Speaker Change: A bit I don't know if you could provide any more color on any kind of puts and takes.

Speaker Change: There are noticeable on on reserve releases or small ads in the major lines or anything.

Speaker Change: Or anything.

Speaker Change: Was that already covered.

Mark Castle: Hey, it's Mark no there were no puts our ads during the quarter.

Mark Hughes: Yes, I would describe this quarter as a very quiet quarter for us.

Mark Hughes: And I go back to what I said earlier, which is that again.

Mark Hughes: By and large are reserving we're reserving consistently above indicated so should there be erosion. There is a delta between indicated in where we booked in.

Mark Hughes: For us.

Mark Hughes: The most important thing is that we always say on the right side of the booked in.

Mark Hughes: But this quarter was a very quiet quarter for us.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Michael Phillips from Oppenheimer <unk> co. Please go ahead.

Speaker Change: Thanks, Good morning.

Michael Phillips: Andrew I want to maybe just drill down a little bit deeper on a couple of prior questions on your earlier answer to the industry solution segment, you talked about maybe in a couple of quarters, we will see some things turned to normal there.

Speaker Change: Does that mean.

Speaker Change: You are where you want to be in your commercial auto book or is there still more cuts to come I think the cuts were kind of offsetting that were being offset by buy rate maybe that wasn't the case here because you are being more cautious but are you where do you want to be with that segment or is there more kind of cuts to come in commercial auto.

Speaker Change: There is so so thanks for the question Michael.

Speaker Change: So so far.

Speaker Change: The first thing I will say to you is that you are correct in that.

Speaker Change: Rate is hiding a further reduction in exposure right. So if you're if you're hitting that category with 10 plus percent rate.

Speaker Change: Then obviously units are coming down even faster than that so that is true for commercial auto I think that we probably have two more quarters of.

Speaker Change: Some some adjustments that we're making that.

Speaker Change: Don't know if it will come through in our results I'll certainly be talking about it but I think as we look out probably to the end of the first quarter of next year.

Speaker Change: The things that I've been talking about for the last three quarters, where I think we were probably one of the the first to basically say its no longer acceptable to deliver 10 11, 12% rate against what is a difficult loss cost inflation backdrop, regardless of the profitability. Whether you are at whether you are booking at a $60 65 or wherever.

Speaker Change: You are regardless of the profitability.

Speaker Change: That's just a really tough loss cost inflation backdrop and so so.

So we still have some exposure reduction that we're going after and that probably run through the fourth quarter into the first quarter.

Speaker Change: Okay. So when you were talking earlier about inflation and that energy solutions and Youre more cautious was that specific to that commercial auto or is that also part of energy.

Speaker Change: And construction is well the inflation you were cautious about it.

Speaker Change: It's commercial auto first for sure, but we write auto as part of the solutions for construction and energy.

What I would say to you is that energy for US is we're very it's a very profitable business, it's been that way for a long time.

Speaker Change: Very well seasoned business, but at the same time like some of the things that we're entering into on the renewable side, which will be a liability focused principally exposure. It doesn't have the kind of bodily injury things that you might see.

Speaker Change: In other parts of our portfolio construction is frequently a bottling injury exposed.

Speaker Change: Book of business and it really is I think it is bodily injury, specifically, where we are seeing.

Speaker Change: And that can happen in both auto as well as on liability, where we're seeing the greatest loss cost inflation occur and so the parts of our portfolio that not every not every exposure in GL is equivalent right some have.

Speaker Change: Heavy prime ops exposure some some don't.

Speaker Change: And so.

Obviously, we're making adjustments with a view towards where I'm, describing we see some of the greater loss cost inflation, but rest assured it is first and foremost driven by auto.

Speaker Change: Okay no. Thanks for the details and then just one more if I could.

Certainly appreciated your comments on kind of the reserves and the conservatism maintain above.

Speaker Change: Where things might go.

Speaker Change: But I guess on <unk>.

Speaker Change: You mentioned before the liability of current stuff.

Speaker Change: So quiet quarter, but you have said recently.

Speaker Change: That you're seeing some extra emergence and some of that business and I guess it sounds like that extra margins didnt continuing to get worse or kind of just stayed where it was but just kind of want to see what your thoughts there.

Speaker Change: Yes, I'll take a shot at trying to clarify and then Mark will probably clean up what I say right. So.

Speaker Change: So I think what Mark has said in the past is that is consistent with what I described which is that.

Speaker Change: If you look across let's say liability general liability as an example occurrence liability it's not like we see consistent patterns again on one hand, if you look at our E&S transactional E&S book like if if our indicated was X and we're picking our booked was at X plus five or X plus six.

Speaker Change: We've seen that develop to below X right. So its more favorable than what our initial indicated has been and we havent responded to that and there are other parts of our portfolio, where again it might be at X plus three or X plus five in terms of where we're booking with exiting the indicated and some of that positioned indicated has eroded it hasnt been consistent.

Speaker Change: Key part for US is is is to not sort of be.

Speaker Change: <unk> position relative to our booked right we might start to back up from our initial indicated but not but not booked in <unk>.

Speaker Change: And again I think that some of what we saw last quarter. We didn't it didn't repeat itself this quarter and by the way I mean, let's be practical right.

Speaker Change: We have we have 400 $450 million of direct written premium running through our books on every quarter, it's made up of lots of pieces and so.

Speaker Change: Unsurprisingly, you're going to have a large loss in a quarter or two large losses, and you're like Oh, well that that really changes our view over here.

Speaker Change: But it isn't necessarily replicated across our business and might not even be replicated from period to period.

Speaker Change: Yes, okay. Good. Thank you that's why I appreciate it.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Our next question comes from Gregory <unk> from Raymond James. Please go ahead.

Speaker Change: Greg Yes there.

Speaker Change #100: Sorry about that sorry about that I had my phone on mute.

Speaker Change #101: Thanks for letting me squeeze in one last question.

Greg: Hey, Andrew.

Greg: There's been a fair amount of activity in the delegated underwriting market over the last year.

Greg: <unk>.

Greg: And I'm just curious if you could just.

Greg: Help us frame your perspective on how you are approaching that market.

Greg: And your views, it's certainly and when I go over to London, and certainly seems to be quite a hot topic.

Speaker Change #103: Great question.

Greg: Thanks for that Greg.

So.

Speaker Change #104: I guess, what I'd say is this.

Speaker Change #104: There are some really great.

Speaker Change #104: <unk> program administrator is out there people that I have long standing relationships with some of the underwriters who are some of the best out there.

And have great appreciation.

Speaker Change #104: I believe that the frothiness thats out there is.

Speaker Change #104: Way over cooks the quality.

Speaker Change #104: There is a lot of business that I would describe as kind of like.

Speaker Change #104: Dirty admitted or light E&S.

Speaker Change #104: <unk> business, a lot of have prem ops kind of exposure.

Speaker Change #104: Where.

Speaker Change #104: The industry's fooling itself in terms of what that profitability of disposition.

Speaker Change #104: I have.

Speaker Change #104: Unsurprisingly have great respect for for very select competitors and.

Speaker Change #104: And one of our competitors said on this call that I would encourage you to go look at the schedule piece of the fronting companies I thought that was a really thoughtful thing to say I would agree with that.

Speaker Change #104: Thats a transformer into some portion of the MGA market. So look there are parts that are that are very attractive.

Our whole philosophy is rule our niche so if we can partner with somebody who can.

Speaker Change #104: Where we can go rule, our niche in a category and not replicate what they do owing to some technology distribution. Some some dimension of their business.

Speaker Change #104: That's where we will seek to partner if it's in a category that is strategically relevant to us and we have a number of those efforts already obviously in place and then we have a number that are underway.

Speaker Change #104: But I would describe our sort of our approach as being more selective in and I think I would just echo some of the best.

Speaker Change #104: Underwriting companies out there who are we.

Speaker Change #104: Rewarded with really high valuations, who are staying pretty much the same thing which is that there are parts of the market.

Speaker Change #104: We really arent very good and it's just a matter of time before that sort of sorts out.

Speaker Change #105: Fair enough thanks for the color.

Speaker Change #106: Thank you one moment for our next question.

Speaker Change #107: Our next question comes from Alex Scott from Barclays. Please go ahead.

Alex Scott: Hey, Thanks for squeezing me in here at the end.

Alex Scott: I had a question on transactional E&S. So I just wanted to see if you could.

Alex Scott: Dig into.

Alex Scott: Some of the details of what's driving the really strong growth there I mean on the property piece of that are you seeing some of the same competitive dynamics that I think we're more comments on the global property.

Alex Scott: Yes.

Speaker Change #109: Alex and <unk>.

Speaker Change #110: Good to have you with us by the way so.

Speaker Change #110: What I'd say is that.

Speaker Change #110: That transactional E&S for us has been.

Speaker Change #110: He is and continues to be terrific.

Speaker Change #110: The bulk of that is.

Speaker Change #110: As I mentioned on the property side, we're talking about writing.

Speaker Change #110: Exposures that are measured in the millions of dollars to low double digits and about 60% of our book is the full limits and 40% were writing the primary and somebody is already in the excess and on the liability side. The bulk of it is primary wood you're right. We do write a book of access.

Right almost no commercial auto exposure at all.

Speaker Change #110: In our E&S in excess.

Speaker Change #110: And so it's a real it's truly a GL book.

Speaker Change #111: Look I think it's really simple we have a great team. The majority of that team has been connected to be professionally.

For a number of years, so so dating back to my prior life and we've added that team with some incredible talent some of which we've been public around announcing and then I think just the backdrop is there's just still a very strong flow.

Speaker Change #111: <unk> portion of the growth that you hear about when I talk about 25% increase in submissions one of the big sort of weighted average contributors to that is still E&S.

Speaker Change #111: And.

Speaker Change #111: And I don't see anything thats going to change that to be honest I feel very good and terms and price.

Speaker Change #111: Continue to be very good I'm property, there coming off a little bit but from what I would describe us as historically profitable levels and on the liability side I think just generally the loss cost inflation backdrop in general is.

Speaker Change #111: Putting a sort of a nice.

Lift into the into the GL market for us on our transactional E&S liability in and I feel great about it as I said almost every turn when we do another actuarial review, we're like Oh, well we booked.

Speaker Change #111: Above our indicated and then we're like Oh. This is developing favorable or indicated that tells us that we're in a really great position.

Speaker Change #111: With a book in terms and conditions that.

Speaker Change #111: Even if we were to see a bit of a deteriorating market.

Speaker Change #111: We'll be delivering outstanding returns and probably would not immune the way that.

Speaker Change #111: Because of the way that we book it would not immune or sort of our underwriting profitability.

Speaker Change #112: Got it very helpful.

Speaker Change #113: And maybe a quick follow up on gross to net.

Speaker Change #114: Premiums can you help us out a little bit in terms of just what do you expect in <unk>, because we still sort of have I think the weird comparable associated with the quota share cancellation last year.

Speaker Change #113: Yes.

Mark: It's mark the way, we think about it is.

Mark: Just assume low <unk> in terms of gross to net for the full year, yes for the full year. It can bounce around due to the way we book excess of loss treaties, but just think about it in the low <unk> yes.

Mark: I'm sorry.

Mark: I might be wrong, so let us follow up but I don't believe that in the fourth quarter.

Speaker Change #116: What what we what we addressed in the third quarter repeats itself, but third quarter was unusual because because with the cancellation of the quota share. We unwound what was in the first and second quarter. So you recaptured three quarters of ceded premium thus distorting the third quarter of last year I think the fourth quarter is a very has a very.

Speaker Change #116: Very good reference points and.

Speaker Change #116: The one thing I would just pay attention to a question that was asked earlier.

Speaker Change #116: <unk>.

Speaker Change #116: I always remind folks that our gross to net is pretty normal except for.

Speaker Change #116: <unk>.

Speaker Change #116: Two areas, which is which is captives and a global property cat.

Speaker Change #116: That's structurally the way it works in global property, because we are a large line writer with Cigna.

Significant quota share supports long standing quota share supports so if global property becomes a smaller portion of overall overall percentage, obviously youll start to see that drift up and then and then as a company is our balance sheet gets bigger and bigger.

Speaker Change #116: Risk appetite goes up and so.

Speaker Change #116: We'll try to.

Speaker Change #116: To take back some of the underwriting profit, where we believe that we can.

Speaker Change #116: And I think as we get to the turn of the year.

Speaker Change #116: When we give you guidance for next year will be specific on what that looks like for the full year in the interim I believe that Mark's guidance is pretty good.

Speaker Change #117: Got it thank you.

Thank you.

Speaker Change #117: Thank you.

Speaker Change #118: I'm showing no further questions at this time I would now like to turn it back over to Natalie Schoolcraft for closing remarks.

Natalie Schoolcraft: Thanks, everyone for your questions for participating in our conference call and for your continued interest in and support of <unk>.

Natalie Schoolcraft: I am available after the call to answer any additional questions that you may have we look forward to speaking with you again on our fourth quarter earnings call. Thank you and have a lovely Halloween.

Speaker Change #120: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.