Aspen Insurance Holdings Ltd (AHL) 2015 Q1 法說會逐字稿

Good morning. My name is Janice. I will be your conference operator today. At this time, I would like to welcome everyone to the first-quarter 2015 earnings conference call.

(Operator Instructions)

Thank you. I would now like to turn the call over to Kerry Calaiaro. Please go ahead, ma'am.

Thank you. Good morning. The presenters on today's call are Chris O'Kane, Chief Executive Officer and Scott Kirk, Chief Financial Officer of Aspen Insurance Holdings Limited. Last night, we issued our press release announcing Aspen's financial results for the first-quarter 2015. This press release, as well as corresponding supplementary financial information, can be found on our website at www.aspen.co.

This presentation contains and Aspen may make, from time to time, written or oral forward-looking statements within the meaning under and pursuant to the Safe Harbor provisions of the US federal securities laws. All forward-looking statements will have a number of assumptions concerning future events that are subject to a number of uncertainties and other factors. For more detailed descriptions of these uncertainties and other factors, please see the risk factors section on Aspen's annual report on Form 10-K filed with the SEC and on our website.

This presentation contains non-GAAP financial measures which we believe are meaningful in evaluating the Company's performance. For a detailed disclosure on non-GAAP financial statements, please refer to the supplementary financial data in our earnings release posted on the Aspen website. I'll now turn the call over to Chris O'Kane.

Thanks, Kerry. Good morning, everyone. Aspen reported diluted book value per share of $46.02 at March 31, 2015, an increase of 2% from the end of 2014. We delivered annualized operating return on equity of 12.4% in the first quarter of 2015. Our strong first-quarter performance is the result of the continued execution of our strategic plan. The fine performance in both our insurance and reinsurance segments highlights how an established diversified platform can succeed in the face of an environment that has become somewhat more challenging.

Our reinsurance segment has a history of outstanding results. This quarter continued that track record in really quite a difficult environment. At a time when the property catastrophe market is faced with continued pressure, we are able to leverage our long-established expertise in other sub-segments. We previously explained our plan to grow in specialty re, which currently equates to 22% of our reinsurance gross written premiums over the last -- and over the last five years has an average ROE of 18%.

In special re, we can take advantage of a diverse set of lines in geographies where rates are less pressured and we are able to offer our clients creative, thoughtful solutions across a wide spectrum of classes such as credit, surety, political risk, personal accident, crop and so on. We also highlighted previously that we expected to grow in our other property segment, which currently equates to 23% of total reinsurance GWP.

In other property, we are reaching markets where there are not as many competitors with a presence on the ground. We are bringing clients this these markets our sweeter product offerings. In the first quarter, we achieved 20% growth in specialty re and 7% growth in other property. The other key aspect of our reinsurance strategy is leveraging our regional offices across the world. In 2008, we began opening our regional offices in Zurich, Singapore and Miami, which covers Latin America. Our underwriters are very active in these markets and well-known to our clients.

In the first quarter, we grew 25% across Asia-Pacific, Latin America and Middle East/North Africa. We expect that growth to continue. The overall reinsurance GWP grew slightly at 3%, while achieving rates down just 5%. The growth we are achieving in these market conditions is deliberate, targeted growth. As expected, property cat was under the most pressure with rates down 11%. In the more commoditized mainstream property cat areas where pricing is falling, we have managed our exposures down with -- both by moving capital away and by utilizing Aspen Capital Markets.

We're then redeploying that capital where rates are less pressured. We are getting paid for our thoughtful, nimble approach to underwriting. The reinsurance loss ratio for the first quarter was 42%. There is some help in that loss ratio due to relatively low catastrophe expense. But if you look at specialty re, the loss rate was 48.6%; and in other property, the loss ratio was 41.9%. These are great results and demonstrate the quality of the risks we continue to write.

This growth is not coming by chance. It comes from a history of our close relationships with our clients and brokers who have confidence that we are considerate and creative when analyzing risks and suggesting solutions to difficult to understand risks. They view us as a responsive and highly regarded trading partner.

During the quarter, we obtained a good share of a couple of major new deals in the market that are priced well above our expected 2015 group ROE of 11%. These deals were offered only to a small number of reinsurers and speak to Aspen Re's stature in the business that we are a prominent participant on the short list and we're allocated exactly the line sizes that we requested.

We turn now to our insurance segment where pricing is less pressured. Overall, insurance pricing fell by 1% in the quarter, but the dispersion around the mean is quite wide. With the exception of offshore energy property insurance in the Gulf of Mexico, which behaves a bit like property cat reinsurance, the biggest price reduction we saw was minus 6% in US property insurance. But we also had price increases of as much as 5% in areas such as programs, US excess casualty and professional and technology risks.

In a market like this, you have to be very selective. You need to move your capital away from those areas where prices is becoming challenging and redeployed in the more promising areas of the book. This is exactly what our insurance team is doing. We were able to grow our top line 13.3% while achieving an accident year, ex-cat loss ratio of 60.8%, with which we're extremely happy.

Now, I'd like to turn the call over to Scott. Then I'll make some closing remarks.

Yes, thank you, Chris. Good morning, everybody. Operating earnings per diluted share for the quarter were $1.39. Book value grew 2% from December 31, 2014 to $46.02. Annualized operating return on equity was 12.4% for the first quarter. Gross written premiums for the group of $919 million increased 7% in the first quarter compared with a year ago, with underwriting income of $66 million. The combined ratio was 88.9%, with $14 million or 2.3 percentage points of net catastrophe losses in the first quarter and $28 million or 4.6 percentage points of favorable prior year reserve development.

I'll now provide some color on our segments starting with reinsurance. In reinsurance, gross written premiums increased 3% to $485 million despite $11 million of downward premium adjustments due mainly to commutations. We achieved premium growth in our other property, casualty and specialty reinsurance sub-segments partially offset by a decline in property cat reinsurance. The segment recorded underwriting income of $58 million in the first quarter.

The resulting reinsurance combined ratio was 76.7%. There were $8 million, or 3 percentage points of net cat losses in the quarter related to a winter storm in Europe and a cyclone in Australia. We had $13 million or 5 percentage points of favorable loss reserve development reinsurance in the quarter with releases across all four sub-segments. The ex-cat accident year ratio was an impressive 44.5%.

In our insurance segment, gross written premiums increased 13% to $434 million in the first quarter. The US teams accounted for the majority of the growth as they continued to gain scale. We also recorded growth in credit and political risk and UK property and casualty, as the UK economy continues to recover. The combined ratio for the insurance segment in the first quarter was 93.5% with $6 million or 2 percentage points of net cat losses.

The corresponding ex-cat year accident year loss ratio for the insurance segment was 60.8%. The US team, once again, profitable with an ex-cat accident year loss ratio of 60.4%. In insurance, there were $14 million or 4 percentage points of prior year favorable development in first quarter, largely from our short tail lines. We continue to observe good progress with our initiative to restructure our ceded reinsurance and retrocessional programs.

Our retention ratio defined as net written premium as a percentage of gross written premium increased 150 basis points to 83% in the first quarter of 2015, compared to the first quarter of 2014. We have achieved this through more efficient reinsurance purchasing, in addition to taking advantage of favorable pricing for our ceded reinsurance purchases. This initiative is expected to increase net income by $20 million in 2015.

For the group, the expense ratio has increased marginally in the quarter. This is mainly attributable to a one-off profit commission adjustment in combination with some commutation adjustments in our reinsurance segment. There were also an increase in the operating expense ratio, resulting from a fair value adjustment on equity compensation, as well as expenses related to a few targeted senior underwriting highs in our international platform.

However, we expect the expense ratio to continue downwards over the remainder of the year. I'm very pleased with our US insurance operation whose scales and expense discipline have resulted in a marked improvement in their operating expense ratio, down 190 basis points to 17.1% in the first quarter of 2015.

I'll now move on to investments. Net investment income was $47 million in the first quarter of 2015, in line with the fourth quarter of 2014. We expect this to be about the run rate for the remainder of the year. For the quarter, the total return on our aggregate investment portfolio was 1.1%. The fixed income book yield for the first quarter was 2.56%, down from 2.65% for the fourth quarter of 2014, while the duration of the fixed income portfolio was 3.27 years, including the swaps.

You'll see in our financial supplement that we sold down our available sale equity portfolio during the quarter. We reinvested in some equity trading portfolio as we rebalanced our equity exposures across our subsidiary balance sheets. We continue to activity manage our excess capital. We repurchased $37 million of ordinary shares during the first quarter and have repurchased a further $5 million through April 21.

Additionally, earlier this week, our Board of Directors approved a 5% increase in the quarterly cash dividend to $0.21 per share per quarter. As you know, we have a strong commitment to run a capital efficient organization and to return capital to shareholders if we cannot put it to work at appropriate rates of return.

In summary, our business is performing well in both insurance and reinsurance. We look forward to maintaining our trajectory of profitable growth through the rest of 2015 and beyond. We continue to expect an 11% operating return on equity for 2015. This, of course, assumes normal loss experience, our current view of interest rates and our prospective view of the insurance rate environment. So, with that, I'll now turn the call back to Chris.

Thanks, Scott. So in summary, we're very pleased that both our reinsurance and insurance segments have performed well. This is entirely consistent with our plan of achieving an 11% return on operating equity for the year. But what of the future? We were ready to discuss the particularly challenging reinsurance pricing environment and while conditions are somewhat more benign within insurance, there are certainly areas where rates are under pressure.

Yet in spite of this, we are absolutely convinced that we are positioned to continue on our path of profitable organic growth at an attractive pace. So how can we do this? First, let's look at our insurance operations and in particular our international insurance business. A meaningful piece of our international business is our Lloyd's platform. Aspen was granted approval by Lloyd to establish our syndicate in 2008. We have grown our Lloyd's platform organically and did not have to pay a high acquisition premium to buy entry to the market.

We are represented on accounts of Lloyd's. Our operation has garnered much deserved recognition in the market place. Today, close to $500 million of our gross written premium is written on this platform. We've grown this by a compound rate of 16% over the last five years. We expect this level of growth to continue. At Lloyd's, we specialize in those lines of business for which the laden market has historically been renowned. Lines such as energy and marine related exposures, aviation, professional lines, management liability, financial lines amongst others.

We're also looking to leverage this platform internationally. Specifically, in Asia-Pacific and Latin America, we expect that the Lloyd's global brand and licenses will help position us for the next phase of growth. Our Lloyd's business is a well-established and proven platform. We expect attractive returns from this business in 2015. We're equally excited about the growth rates, profitability and prospects for our US speciality insurance platform.

We've seen attractive growth rates in surety, in professional liability and in environmental. We expect these to continue. This past quarter, the US G&A ratio was 17.1%. We continued to be on track to achieve net earned premiums of approximately $600 million and a corresponding competitive G&A level of 16% for US insurance by the end of this year.

In terms of new growth initiatives, on the international platform, we recently announced a joint venture with CV Starr, which will operate off our Zurich insurance platform and will target European major account property risks. In addition, we have recently commenced underwriting some accident health, which we will underwrite on a global basis from New York and London, covering both insurance and reinsurance opportunities. In the US, we recently began writing some specialty commercial auto.

The premium volumes from these initiatives will not significantly impact 2015, but as we look out to 2016 and 2017 and beyond, they will make important contributions to our organic growth strategy. Today, almost two-thirds of Aspen's business comes from the insurance segment. Yet, of course, we were founded as a reinsurer. Over almost the 13 years of our history, we have both a remarkable strong and valuable brand within reinsurance.

We began the process of geographical diversification in 2007. Today, we manage our reinsurance business on a regionalized basis. The model is straight forward. We have deep pools of technical expertise in centers of core competency such as London, Connecticut, Bermuda and Zurich. We also have supporting distribution and custom management offices on a much more widespread basis.

Wherever the reinsurance buyer is in the world, they will find themselves proximate to some very capable Aspen re personnel. Those personnel will have access to an enviable level of product range and depth of expertise. Our brokers and our clients like this approach, especially as we combine this expertise with the real energy and enthusiasm to do business and to understand and meet our clients' needs.

Future success will come to those reinsurers, such as Aspen, who are propound to understanding of each client's exposures and needs combined with a ready willingness and innovative approach to meeting those needs. That is why reinsurance operation has been willing to retreat from the more heavily commoditized end of the market and has become a reinsurer of choice. We have been successful in forming long standing relationships with those cedents who value a true reinsurance partnership. We're very proud of our accomplishments across insurance and reinsurance, both in the quarter and in the market in general. We're very excited about the future.

Now, we've reached the final item on today's call. It's one that I have to approach with some sorrow. I have to tell you that today a giant is leaving our industry. This giant or giantess may not look very tall, even in her 5-inch heels but the impact she has had over her career in Investor Relations is truly gigantic. I'm speaking, of course, of Kerry Calaiaro, who is retiring after 124 -- I'll say that again, 124 quarterly earnings reports. She'll be leaving Aspen next month.

A big, big thank you to Kerry for everything she has done for Aspen over the past four years. We wish her a long, happy and busy retirement. I know that many of you know and like Kerry, so if you want to get in touch, she will be with us for another couple of weeks.

I expect our Investor Relations team to go from strength to strength under the capable leadership of Kathleen de Guzman, who many of you also know. She will be ably supported by Mark Jones who recently joined us and has made a significant contribution already. With that, we'll conclude -- the prepared remarks are over. We'll hand the call over to Q&A.

(Operator Instructions)

Your first question is from Amit Kumar of Macquarie.

Good morning. Thanks, Kerry, for all your help in answering all those late night questions from us. We do appreciate it.

Thank you, Amit.

Just maybe two or three quick questions. Number one for Chris. Chris, we saw the press release regarding Rupert Villers and the changes. I'm trying to get a better sense as to what exactly is going on. Rupert is leaving down the road. You had a change in the CFO. I think Jim Few resigned last year. Just help us understand how much of, I guess, this is related to the new Aspen strategy? What exactly is sort of going on in terms of the background here?

Sure. I think, there's no connection whatsoever in what Rupert has just been doing and James and John. James and John parted with the Company rather at my instigation. My job is to put the best team together I can. I felt that we had people who were stronger to occupy the roles that those two guys had previously occupied. Rupert is -- sadder, Rupert has been a friend for a working lifetime. He is a little bit older than me and he had actually retired once. He had retired and we had some issues with the financial institution, as kind of [luten], six or seven years ago.

I asked him as a consultant if he'd come and take a look at it. I was very pleased that he did. He did a great job in understanding what was right and what was wrong and how to fix it. Frankly, I liked what he was saying so much, I said, Rupert, why don't you come and run it? He thought about it and he said he would. But he was retired at that point. He said he might stay around for a year or maybe two. That was six years ago. So I think we're very fortunate to have Rupert as a colleague for six years. But he said many times, I might do one more year, I might do one more year. Then this year, we got to the point where he said, I might do one more year and I really mean that.

So come October, Rupert will be leaving the organization. Obviously, we've known this has been coming for some time. We hired a very capable insurance executive called Ann Hall about 18 months ago. When we hired Ann, we thought that she would likely be Rupert's successor and a number two on the international account to Mario Vitale, that's exactly what's happened. So I would call this just perfectly executed planned orderly succession. Something we've known about really for six years. We knew Rupert was never going to be around forever. Not that any of us are, but Rupert had defined time horizons a bit shorter than some.

All right. The other question I had is -- this sort of goes back to the broader discussion into what's going on in the industry. Obviously, we lived through last year's Endurance offer. I'm curious, everyone seems to be buying or selling around you. Any updated thoughts on where you want to figure in that game? Or do you foresee the strategy -- the stand-alone strategy and the ROE strategy as the key point here? Once you get to that point you perhaps say maybe it's time to look at other things? Maybe just help us sort of understand your top process.

Well, I think our thought process is probably the same as it has always been, which is how can we increase value for our shareholders by the safest and fastest and most secure means? That's what we've always been trying to do. As you heard me talk on the call, we have a plan that is working very well.

Our reinsurance operation has produced stellar results these last few years; close to 20, not quite, but close to 20% ROE from reinsurance for the last several years. We're redeploying capital within it. I think some of that commoditized property cat is not as much fun as it was. But Aspen Capital Markets provides growth and Asia-Pacific, Latin America, Middle East/North Africa are all areas that are interesting. So unlike a lot of our competitors, we're able to achieve some growth in reinsurance.

With the consolidation you mentioned going on, I would see that growth accelerating, because not every client wants to double up. Not every underwriter is happy with what's going on in their organizations. So I can tell you a lot of them are talking to us. So I would say short term, let's say the next couple of years in reinsurance, we're going to increase our market share at the expense of some bigger consolidating companies. So naturally, we feel pretty good about reinsurance.

On the insurance side, we talked a little this morning about Lloyd's, which we haven't directed so much attention to before, but there's a great story there. Then the US story, I know you know very well. That continues to execute very well. We've been stable loss rates for three or four years in the US, combined with the declining expense ratio, which we think is a winning formula. So that's all pretty good.

It's all done organically. So now you ask me about acquisitions and combinations. In terms of acquisitions, we haven't felt the need to make any. But it's always open and always under review. I suppose we look at 10 or so opportunities a year. Frankly, we always think we're better off going organic than those, but that could change. May be change, as we'll tell you about it. The other question is, are we better off with another Company? It doesn't look that way, but the Board is a very open-minded group of people. They would look at what came up and if it looked like a better thing than the go-it-alone strategy. We'd give the consideration it deserves. But we're not looking for that. We don't regard it as a likelihood.

Got it. That's very helpful. Just very quickly, any exposure to Brazil's Petrobras crisis which seems to be, I guess, developing as we speak?

Yes, it's an ugly situation, but we have no significant exposure, let me say, nothing significant about it. I can't say it's zero because you never know with these things, but it's not an area where we're big, strong and active.

Got it. Fair enough. That's all I have. Thanks for the answers.

Okay, Amit, thank you for your questions.

Your next question is from Josh Shanker of Deutsch Bank.

Good morning, everyone.

Josh, good morning.

Chris, I'm going to dig into the 11% a little. Please, excuse my aggressives on the questions. But in the footnote on the 11%, you had talked about interest rates and P&C pricing having to be with year-end expectation. Right now, given where interest rates are and given where P&C pricing are compared to where it was when you first set 11% for 2015, are you on track? Or is it getting harder to conceive of that option?

We're on track. Emphatically, we're on track. We took a view and it's only a view, about where interest rates were going. We didn't think they were going to go up as some commentators said, they've actually gone down about 30 basis points this year so far. That obviously could change tomorrow. But we've got something built in there that I think is realistic. On pricing, we thought the trend was downward, a bit more in reinsurance than insurance, that's the way it's playing out. So pretty much as I say, we're on track.

Okay. Then when I think about the initial guidance of $185 million in normalized cat load for you, that's about 4% of ROE. Excluding catastrophes in the quarter, you guys did about a 13% ROE. It seems to me -- not that -- catastrophe's are lumpy. You can't just go one quarter to the other, but in terms of trying to think of a normalized -- you're -- it seems like 1Q was slightly below target. Am I reading that correctly? Or is that -- do you think this was a normalized 11% ROE quarter?

Hey, Josh, it's Scott here. I just thought I might be able to provide you a little bit of color on that. Yes, the cat losses you're right to point out were about $13 million odd for the quarter, but there were also a couple of headline losses. One being in aviation, a fairly prominent loss there and another one in offshore energy, where there was an offshore production and storage facility where there was a -- quite a significant loss there. So, I think in the absence of those, we -- we're in much better shape.

And --

I think Scott's saying, we had just a little bit more of that medium-size attritional loss than we'd expected in the whole quarter, allow for that and you get back to your tracking at 11% figure?

Okay. That's perfect. About that aviation loss, are you guys fully reserved for a total loss on that, your participation on that program or can it go higher?

Josh, we are fully reserved for that one.

Okay. Thank you very much. I appreciate the answers.

Thank you, Josh.

Your next question is from Brian Meredith of UBS.

Thank you, guys. I've got a couple questions for you. A couple questions for you, Chris. The first one, could you expand a little bit on the specialty reinsurance? What exactly products are the big growth coming from?

Sure. As I said on the call, it is a pretty diverse set of things. It amounts to some 20% odd of reinsurance, that's a substantial block of premium. But we do a lot of different things in there. The biggest single area would be credit and surety reinsurance. There's two parts of that, one is principally continental European; it's trade credit reinsurance. The other one is Latin America. That's really surety bond reinsurance. I would say today, the surety bond reinsurance is probably more encouraging than the European trade credit. There's probably more growth there and probably more margin there. But trade credit has been very kind to us over the years. We backed a few insurance companies that are very, very good at what they do. We're very happy that we sit behind them and watch their expertise. So that would be the biggest block.

Okay.

I think I didn't mention on the call, I mentioned the sort of areas you're less familiar with, so I mentioned crop. We've got pretty widespread in crop. We're not that big in the US. We have a few exposures, a few situations, but we've looked at places as diverse as Italy, China, right around the world internationally. We tend to be a little opportunistic there. I think that the crop business tends to price up and down. It tends to react to losses quite dramatically. So when a loss has happened to somebody else, we often like to step in and say take those higher prices but, then some of the buyers will push the prices down and we may not stick around as much. We may, but we may step back.

But crop I would say, we do nicely. I wouldn't say it's one of the more stellar areas but we do nicely in it. What else? It's areas like personal accident, you tend to run very well. It's a small part of our book. Thinking about travel, PA that sort of stuff and we reinsure that, some of it is cat business. I should say, actually, most of what we're talking about here other than the trade credit tends to be on an excessive loss basis. Then you got some marine and you've got some aviation. You got some space. Again, I think you have to be opportunistic, something bad happens, you probably want to step in and expand your book. Nothing bad happens for a couple of years, the prices start falling and you need to get back out of that book.

The guys who operate it for us, really understand. I think they understand market timing as well as underwriting. That's maybe a little different than what we're doing in maybe most of the rest of our reinsurance operations, which are big solid long-term relationships with big insurance companies within the specialty re areas. It's very often smaller insurance companies with much more specific needs. It's growing for us. As I said on the call, it's made us about 20% ROE over the last five years -- actually, the previous five years wasn't too bad, either. So clearly it's an area where I'm very happy to see a bit of growth.

Great. Then another question here, been a lot of talk in the marketplace about the energy -- offshore energy markets and is the competition there and the decline in premium from just less capacity out there? What impact is that having on you guys? Will it have any impact here going forward as far as volumes?

Well, I mean, I agree with your summary of the market. I said on the call, I think that -- especially the Gulf of Mexico, basically tracks property cat reinsurance. So you're almost -- your property cat is off 11%. It's off 11%, probably goes up 15%. It's off 15%. So we're writing less of that stuff. Now we had a change in management of that area of business about -- a couple years ago. The new guy, who is a very, very good underwriter called Chris Wild. He previously ran an operation in Singapore.

He has a much more globally diverse understanding of business than we had earlier. So a guy like Chris knows the Norwegian North Sea situation very well. He understands [Turkey] and Asia very well. He understands the Australian market very well. So what I find with Chris, he's able to use connections around the world that replace the sum of that offshore energy physical damage that we're losing. But in the Gulf of Mexico, we buy some reinsurance, we buy the reinsurance defensively. We're protected well by our reinsurance cover but mostly rates are falling. You just have to get out of the way. There's not a lot you can do in the Gulf.

Got you. Then last question, Chris, a little more strategic thinking forward here. You talked about potential opportunities to get teams of underwriters and other things from the consolidation going on in the industry. What are your thoughts about potentially sacrificing at least in the near term that 11% ROE target because there's some investment opportunities out there given the consolidation going on?

Brian, I think it's a really, really profound and interesting question. But I think our view is, we nailed our Costa mass. We said it's going to be 11% as far as it's within our control. Loss experience will be what it will be. So we're not really interested in giving up on 11%. So we have got to be really careful how many we hire and who we hire. But how much of that will, if we hire people who start later in the year, you've got to ask yourself, how much that will to expensed to 2015.

I'm very, very interested in -- always interested in whether they're good people and they want to work for Aspen. We want them in here. A lot of you don't know [azalia] and they tend to refract more. So I think we are probably getting more calls and a lot of people saying, what's doing? What's happening? I'm very confident that we will be expanding both the client base and the size of share appliance, a business as well is bringing on board some new people. I'm not sure we'll be announcing anything in the next few months. I think it's probably more likely to be a little bit later in the year as the consolidation moves to a conclusion or in some cases maybe it doesn't move to a conclusion, who knows?

Great. Thank you.

Thank you, Brian.

(Operator Instructions)

You do have a follow-up question from Josh Shanker of Deutsch Bank.

Thank you. I just wanted to hear a little bit of your thoughts on the aviation market. You said it was a good growth market for you towards the end of last year. It wasn't necessarily mentioned in the press release this year but obviously there continues to be activity. What do you see from your participation?

Josh, I'm sorry sir, I can't remember saying aviation was a good growth market for us, unfortunately. I might as well tell you about our aviation book. It's a very odd book. It's -- we've done $100 million, a little over $100 million in that area each of probably the last seven or eight years now. I think maybe they once or twice got a combined ratio over 90%, maybe in the early 1990s. Typically those guys are in the high 70%s, low 80%s. So we're very happy what we've got. We don't do US airlines. We don't do Japanese airlines. We don't do aviation products liability, certainly not for critical components.

By avoiding those things, we avoid most of the losses. What do we do? The aviation war, the terrorism we quite like. We do a product called the deductible buyback, at which we're very good. We're a market leader and we do very well out of it. We also like to do some of the smaller airlines, not the necessarily the European sent out American household names. But Latin America and Asian lines, some eastern European lines up.

We find in those we get better risk adjusted return. So that's a good formula. I think we've got a great book there. But the pricing environment is very, very tough. I don't really see it as a growth area. I think it's a hold. We may even had to cut the volume back in certain respects. So, I think our aviation guys are probably having to work harder and harder to keep approximately the same size book of business with approximately the same return ability in it. Does that help?

Okay. No, that's perfect. Thank you very much for all the color.

Okay, Josh, thank you.

Your next question is from Mike Zaremski of Balyasny Asset Management.

Good morning, thanks.

Mike, nice to hear your voice on our call.

Good to speak to you, too, Chris. Just one question on prior year development. It was the lowest it's been in a while in reinsurance and the highest it's been a while in the primary insurance segment. I don't know if there's any color you can provide us, for example, did the development from reinsurance come from our recent accident years or older accident years? Any color would be helpful.

Mike, it's Scott Kirk here. Good to talk to you. Just in relation to those -- the reserve releases from the prior years, always a little unpredictable. There's certainly no trend to take from any of that. The reinsurance number was down a little bit but it's -- last year we were able to release some old reserves back in our specialty reinsurance segments, so that was really a one-off. But other than that, nothing really all that much going on. A little bit more from insurance this time around. It was -- we had some favorable experience over the last couple of years, so all quite good. All coming from the short-tail lines, which is another important factor to think about. But about to hard to trend going forward.

Thanks for the color.

Thank you, Mike.

There are no further questions.

Okay, well, thanks, everyone, for listening to our first-quarter earnings call. Have a good day.

Thanks, everyone.

Thank you. This concludes today's conference. You may now disconnect.