Argo Group International Holdings Ltd (ARGO) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2011 Argo earnings conference call. My name is Janayta, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Michael Russell, Director of Investor Relations. Please proceed.

Thank you, and good morning. Welcome to Argo Group's conference call for the first quarter of 2011. On the call today is Mark Watson, Chief Executive Officer, and Jay Bullock, Chief Financial Officer. We are pleased to review the Company's results for the quarter, as well as provide Management's perspective on the business.

Before I begin, I would like to mention we'll be participating in the Macquarie small and new cap financial conference being held June 14th and 15th in New York. Should you be attending, please take the opportunity to sign up for one-on-one meetings with Argo Group Management.

I would like to remind you this conference call is being recorded. Following Management's opening remarks, the operator will provide instructions on how you may queue in to ask questions. As a result of this conference call, Argo Group Management may make comments that reflect their intentions, beliefs and expectations for the future. Such forward-looking statements are qualified by the inherent risks and uncertainties surrounding future expectations generally, and may materially differ from actual future results involving any one or more such statements. Argo Group undertakes no obligation to publicly update forward-looking statements as a result of events or developments subsequent to this conference call. For a detailed discussion of such risks and uncertainties, please see Argo Group's filings with the SEC.

With that, I'd like to introduce Mark Watson, CEO of Argo Group. Mark?

Thank you, Mike, and hello, everyone. We appreciate you taking the time to join us today. I know it's been a very challenging quarter. In a few moments, our CFO, Jay Bullock, will provide you with additional financial details, and then we'll take your questions, but first let me open with a few remarks.

In our February 18th earnings call, I mentioned how the test of cat events that occurred in 2008 and 2010 demonstrated the stability of our platform in two very different types of stressed environments. Little did we know that events in the remainder of the first quarter would again test the industry so soon. The toll of this series of natural disasters has had, at least in terms human life and casualties, it's been pretty tough, and our hearts go out to all of those affected by these tragic events.

When unexpected losses like these occur, it's critically important for a Company like ours to respond to the needs of our insureds and reinsureds in the most expedient manner possible. After all, our Company exists to enable people and businesses to quickly recover and rebuild, and at Argo Group, we take that responsibility seriously.

I'm pleased to say that our platform again responded well to this unusual series of catastrophes, which had a significant impact on our first quarter financial results. Nevertheless, after experiencing the most difficult of the last five quarters, which were all marked by major cat events, Argo Group's financial position and balance sheet remains strong.

Fortunately, the extraordinary catastrophes in the first quarter and, indeed, the past year were well within our capacity to manage. The biggest challenge has been maintaining momentum against the cross currents created by the abnormally high frequency with which these events have occurred, and all of this first quarter activity followed a year that delivered in each of its quarters significant natural and man made catastrophes across the globe. Any one of these significant events would have been in line with our expectations for loss during the year, but experiencing four such events in a single quarter is fairly unprecedented.

With regard to the overall market environment, this consistent series of catastrophic events may have begun to tip the scales, if only a bit. For the past several conference calls, I've said that we were bouncing along the bottom of a soft market. I now think we're actually moving beyond that. While there are plenty of variables that can affect the market, I'm cautiously optimistic as we begin to see prices firming up across the board. This is particularly true in our businesses with international property exposure, which recently experienced an increase in rates at a pace which I believe will only accelerate throughout 2011.

To a lesser extent, we've seen the primary insurance markets begin to tick upwards as well, both inside and outside the U.S., with property and energy exposed risks leading the way.

We are starting to see rates firming in our Excess and Surplus Lines business as well, partly because there appears to be less underwriting capacity available, but mainly because there appears to be more pricing discipline. While the first quarter was challenging, we are now seeing rates improve and premiums stabilize in the second quarter. We are finally seeing some signs of improvement in the U.S. economy as well, with some momentum for the small- to medium-sized business community we typically serve, and I -- well, I'll get into more of that in a little bit.

For the past two years, excess market capacity has translated into continued and intense competition in just about every business line we write. Increasing market share in a highly competitive environment or renewing business at unprofitable rates was not part of our strategy and will likely come at a hefty price in future periods for those who have. We, on the other hand, continue to follow a conservative underwriting strategy, exercising discipline, and holding firm on rate and underwriting standards.

For the most challenging part of the cycle, this discipline increasingly dictated that we let unprofitable opportunities go elsewhere or exit certain lines of business altogether. And while this discipline dramatically reduced our written premiums, we feel Argo Group is poised to capture a growing share of what we think will be an improving marketplace.

Let me go through the Group's results at a high level, and then I'll let Jay get into a little bit more of the detail in a minute.

As we stated in yesterday's earnings release, we reported first quarter pre-tax cat losses of $113.1 million net of reinstatement premiums, of which virtually all was attributable to the natural disasters in Japan, New Zealand and Australia. Of these losses, approximately 60% were attributable to our reinsurance operations, with the remaining 40% occurring in our Lloyd's operation.

Total cat losses accounted for 43.4 points on our first quarter combined ratio. As a result, we reported a first quarter net loss of $3.34 per diluted share and net after-tax operating loss of $2.82 per share. We experienced our first decline in book value per share since the financial crisis in the fall of 2008, down 4.8% from December 31st, but still higher compared to year-ago levels by 3.3%.

You may have noticed that our segment names changed when we reported our results yesterday, and I just wanted to go through that for a couple of minutes, and then I'll talk about each one. The bottom line is that our London operations are now being reported under the name of Syndicate 1200, and our operations in Bermuda and other parts of the world will now be called International Specialty. We made the change because during the first quarter, we evaluated the operating structures of both business segments in conjunction with the recent Management changes impacting those operations. To better align our operating structure with their respective Management teams, we've concluded that our operations in London will have a singular focus on our Lloyd syndicate, while our operations in Bermuda will serve as the center for all of our international insurance, reinsurance and global strategic initiatives. Therefore, our Bermuda operations will now be identified as our International Specialty segment, while our Lloyd syndicate operations managed in London will be more appropriately called Syndicate 1200.

With that, I'd like to briefly comment on each segment. We'll start with the syndicate, which reported cat losses of $44.4 million net of reinstatement premiums, related primarily to the earthquake and tsunami in Japan, the February 22nd earthquake in New Zealand, and the floods in Australia. Cat losses represented 85 points on the syndicate's first quarter combined ratio. The reduction in Syndicate 1200's gross written premiums for the quarter reflected modest rate decreases, but primarily the continuation of our shift in the portfolio to better align the syndicate's business with our desired risk profile.

I am happy to say, though, that the beginning of the second quarter is a much better story. Not only have rates stopped declining, they are now going up. We are seeing property insurance through our direct and facultative books moving up low single digits, and I think I may have mentioned earlier on my comments that our international treaty portfolio is seeing rate increases of 20% to 50% on many of our renewal accounts. And also, our liability account is now starting to trend upward, although modestly, but at least it is not heading downward. And for the first four months of the year, excluding some of these exogenous events that have occurred, we're actually on plan going forward into the year. So I'm actually cautiously optimistic about how we can finish this year, notwithstanding the losses that have happened.

Let's talk about International Specialty for a minute, which includes our reinsurance Casualty and Professional Risks operations, as well as our operations in Brazil and Dubai. For the first quarter, International Specialty reported cat losses of $68 million net of reinstatement premiums related to the events in Japan, the most recent earthquake in New Zealand, and flooding in Australia. Cat losses represented 245 points on the segment's first quarter combined ratio.

The increase in International Specialty's gross written premiums reflect reinstatement premiums for 2011 cats, as well as growth in Casualty and Professional Risks. While our reinsurance businesses saw January renewals soften modestly, April renewals, specific to the U.S., showed some reaction to the series of global events, and we also saw rates rising in cat-affected markets like Japan and for retro programs.

Our Casualty and Professional Risks business saw energy rates increasing overall and non-energy rates stabilizing, and actually are now starting to turn slightly positive, while rate increases for professional ones remain very competitive.

Let me talk about our U.S. segments, as well. Our Excess and Surplus Lines segment in the first quarter reported a slight underwriting loss, with 101.6 combined ratio, which at this point in the cycle is not unexpected. The U.S. non-admitted marketplace remains very competitive, but as I mentioned previously, we believe capacity constraints are starting to surface and having a positive impact on rates. For the last two years, we've watched the overall opportunity in this segment shrink, due in part by a severely weakened U.S. economy. This has led to lower rates in both property and casualty lines and a shift in product and policyholder mix.

Additionally, the slow economic recovery in the U.S. has caused the decline in the number of start-up businesses and led smaller businesses to reduce their level of coverage. As we continue to focus on underwriting profitability rather than premium growth, this caused a 15% decline in the segment's first quarter gross written premiums. Fortunately, as I said earlier, the economy is starting to improve, and we are seeing more submissions in the second quarter, and I think actually we will start moving ahead as rates begin to improve modestly in the second quarter.

Let me now talk about Commercial Specialty, where market conditions remain very competitive in the U.S. admitted market, where both national and regional carriers continue to pursue aggressive pricing policies in our opinion. In this environment, Commercial Specialty produced break-even underwriting results in the first quarter, with a 99.9 combined ratio on slightly reduced gross written premiums compared to last year's first quarter. The disproportionate decrease in earned premiums quarter over quarter was related directly to our discontinued programs for religious institutions and hotels and motels.

Our public entity portfolio continued to perform in line with expectations, and first quarter results were also positive at Rockwood, our unit that underwrites mining operations. Additionally, (inaudible) continues to build innovative partnerships with a number of external carriers to grow underwriting volume, primarily on behalf of other underwriters.

Let me talk about capital management just for one more minute. As we began the second quarter, Argo Group remained in a strong capital position, leading our Board to declare another common dividend of $0.12 per share payable on June 15th to shareholders of record on June 1st. I should also add that during the first quarter, we repurchased 479,790 shares for approximately $17 million. We will continue to closely manage capital and the repatriation of that capital as business conditions warrant.

Let me conclude my remarks by acknowledging that it's difficult reporting a loss regardless of the circumstances behind it, but putting aside for a moment the impact recent cat events had on our first quarter, I have tremendous confidence in the integrity of our platform and believe our business strategy in the current market environment is the right one. Our primary objective in this part of the cycle is to write profitable business and to optimize our franchise so we are prepared to take full advantage of the markets as they recover. Reaching that goals requires us to expand our geographic reach and strengthen our distribution relationships, product portfolio and back office infrastructure, and I'm pleased to report we've made consistent progress in each of these important areas.

With that, I'll turn the call over to Jay.

Thanks, Mark. I'll keep my remarks brief, and then after that, we'll take your questions.

As Mark mentioned, our results this quarter were affected by major catastrophic events in Japan, New Zealand and Australia. The results of these events pushed the overall results for the business to a net loss for the quarter of -$93.7 million. Book value per share was $55.59 at quarter end, down from $58.41 at year-end 2010.

Despite this challenging quarter and the year that preceded it, we've grown book value per share at a compounded annual growth rate of 11% since 2002. In addition, we've returned $20.7 million to shareholders in the form of share repurchases and dividends in the first quarter.

Of note from a revenue standpoint, I want to touch on Syndicate 1200 just briefly. Revenue earned premiums were reduced by the recognition of approximately $4 million of reinstatement premiums paid after the losses occurred in the quarter. Away from this adjustment, the year-over-year decline, which is significant, reflects actions such as the reduction by half of the property binder and personal accident books, and the reduction by two thirds of the medical malpractice book, all part of the intentional shift of the composition of this business into a specialty focused syndicate.

As Mark has already covered the catastrophe losses by segment, I won't repeat them. The three global catastrophic events affected International Specialty and Syndicate 1200 segments. There were no material catastrophic losses in the quarter in either of our U.S. segments.

Let me address reserve development in the quarter. Outside of Syndicate 1200 results, we continue to see overall favorable development, reporting $3.4 million in positive development in total for the U.S. and Bermuda operations. Offsetting this was an adjustment for unfavorable development of $6.1 million in Syndicate 1200 as we changed our estimation of certain reinsurance recoveries in the period. The net result was a modest -$2.7 million negative adjustment for the group on a gross reserve base of $3.4 billion.

Our expense ratio has remained relatively flat year over year, reflecting our continued attention to infrastructure and the implementation of shared services across all segments. Quarter over quarter for the group, our operating expenses were down by approximately 5% and down by 11% from the quarter two years prior. Expense management remains a priority, as does continuing the develop the infrastructure to take advantage of the changing environment.

Now, let me spend some time on Argo's investment results. The first quarter of 2011 continued the trend of expensive assets and low yields. That said, Argo's investment income for the first quarter of 2011 was $33.3 million, a slight increase from the fourth quarter of $33.1 million and a slight decrease from the first quarter of last year of $33.8 million. Total return performance for our portfolio was 1% for the quarter. We continue to keep the direction of the portfolio relatively short, with an overall duration of 2.9 years, which is slightly shorter than our expected liability duration.

Argo's investment portfolios remain conservatively positioned, with an overall rating of AA and over 83% of our assets invested in investment-grade bonds. Argo's net unrealized gain position for the first quarter increased to $236 million from $228 million in the fourth quarter and from $176 million in last year's first quarter. The unrealized gain increase is a function of stability in the value of the bond portfolio and continued strong equity performance during the quarter.

Our portfolio turnover generated $2.3 million in net realized gains, down from approximately $14 million in the prior year's quarter. Our portfolio book yield increased slightly during the quarter, from 3.77% to 3.84%. We continue to believe our conservative investment strategy provides us flexibility to take advantage of investment opportunities as they arise.

As in past quarters, the income statement chart for foreign exchange adjustment is roughly equivalent to the gain we reported in unrealized appreciation on non-dollar assets in our investment portfolio. And finally, the effective tax rate was also impacted by foreign exchange movements in the quarter, as we are a sterling taxpayer in the U.K.

Commenting on our capital structure, Argo Group ended the quarter with approximately $1.9 billion in capital. We find the composition of our capital base provides us flexibility and that, as a group, we remain well capitalized.

Operator, that concludes our prepared remarks, and we're now ready to take questions.

Thank you. (Operator instructions). Your first question comes from the line of Bijan Moazami with FBR Capital Markets. Please proceed.

Good morning. I guess the first question is for Jay. Given the capacity in the past quarter and also approaching the hurricane season and the valuation of the stock, obviously, should we expect an acceleration or deceleration in the share buyback program?

Bijan, this is normally the time in the cycle where we would naturally decelerate the repurchase of shares heading into the wind season. I think the losses in the quarter have an impact on our view, but I think more importantly, this would be the point in the cycle -- this would be the point during the time of the year where we would not normally be repatriating capital other than the regular dividends.

Okay. And also, Jay, could you talk about the yield on the portfolio, how you manage to maintain a relatively high yield on that portfolio, or improve it at least?

Everything is relative, right, when you say high yield. But, no, the improvement in yield comes from really fairly modest changes in allocations in the portfolio. As an example, relative to last year, we would have -- so just to put it into size and context, the portfolio is about $4 billion. We took approximately $100 million almost a year ago and moved it into a high-yield mandate. We have moved a small portfolio into an emerging market debt mandate. And within our equity portfolio, we've focused more on what I would call income-producing equities, all of which had a very modest impact on moving the yield up without really changing the -- I've been able to report the same sort of credit statistics quarter over quarter, so it hasn't really changed the composition or the quality of the portfolio.

Great. And I guess the next question is for Mark. Given that the market is hardy, should we expect that you guys are going to have a little bit more appetite for property and maybe the catastrophe prone businesses? And if you were, would you be writing it more out of the Bermuda or Duluth's operation? Thank you.

Well, I think you're certainly going to start seeing premium going up as rate increases. We may have a little more risk appetite than we did before. I'd like to see how much rates go up first, and then we'll decide where we take it. But I think you're right to suggest that Bermuda is first. We're getting more rate relative to exposure from the Bermuda reinsurance operation than we are in the other parts of the group, so it'll make the most sense to take it here. Having said that, we purposely cut back on our insurance portfolio in the U.S. underwritten mainly through our Excess and Surplus Lines operation, and you will likely see premium growth there for the remainder of the year, but that's more a function, Bijan, of having written so little premium in the last year in the U.S. as rates have deteriorated. As they come up, we'll start to see more premium. I think for the month of April, we actually doubled the amount of property premium in the U.S. through our E&S segment, as an example.

Thank you.

Your next question comes from the line of Amit Kumar with Macquarie. Please proceed.

Thanks, and good morning. Maybe just staying on that topic, I wanted to revisit the discussion on external exposures. Maybe can you talk about how you view your PMLs, and maybe talk about one in 100 as a percent of equity?

Well, Amit, that is the -- we manage our exposures around earnings events and capital events. As Mark pointed out earlier, while each of the events individually wouldn't have -- was not outsized from our expectations, the series of events that followed one after the other was pretty dramatic, and you can do some simple math and come up with a crazy number for our return period, but let's just assume that that was in and of itself a very remote set of events. In total, it cost us about 6% of our capital base. And so, again, that kind of feels like a number that we would expect for a return period that would be something like one in 100. So the numbers, as I said, weren't unexpected. I think that kind of size loss would be something that we would expect from a single event or a series of events that would accumulate to something that would look like that.

Got it. That's quite helpful. And then maybe can you talk about RMS 11 and if you used that already? And if not, if you sort of plug that in, how does exposure as well as your need to purchase reinsurance change?

So I don't think anyone has implemented RMS 11 yet. We're all still -- when I say we, I think most of us in the industry are still trying to get our hands around what RMS 11 really means. It's depending upon what your portfolio looks like and what part of the world you're talking about, mainly the U.S. It's moving numbers around a fair amount. Having said that, given how we buy reinsurance and given that we've been de-risking our portfolio in the U.S. over the last couple of years as rates have come down, I don't think you'll see us buying appreciably more reinsurance. We've just put our reinsurance program in the U.S. to bed for the coming 12 months, and I think we increased our top layer by, I think, $50 million, but that's it. I think for us the real opportunity is will there be more people buying reinsurance, and so how much more of an opportunity is there for Argo Re?

Okay, that's helpful. And just a final question, and I will requeue after this. Can you talk about your exposure through the recent storm losses? You've had the tornadoes, and we've already seen an industry loss estimate of $2 billion to $5 billion. How do you view your exposure to these losses?

So I think that our exposure from the syndicate is minimal. We're not sure of any loss at this point in time. As respects the reinsurance operations here in Bermuda, I don't think we would expect many or any losses to be put to any of the cat programs that we're on, but there may be some per risk losses that come in for individual accounts. In the U.S., I think that we may see some losses from our E&S portfolio, but I think we're primarily going to see losses from our Commercial Specialty segment, and I think we'll see it across the board with all of our businesses in Commercial Specialty. I think our gross losses will still be defined in millions of dollars, and our cat cover kicks in at $7.5 million. So it's possible that we'll have net losses beyond that, but I think right now we're still counting them in millions of dollars, not tens of millions of dollars. It's still too early to tell, as you know, but that's just a preliminary view of what we're seeing so far.

Okay. That's actually quite helpful. That's all for now. Thanks.

(Operator instructions). Your next question comes from the line of Scott Heleniak with RBC Capital Markets. Please proceed.

Yes, the first question I had was on the Syndicate 1200 business. It's had new Management appointments this year, and just wondering -- premiums are obviously down again pretty significantly. I'm just wondering, what inning are we in as far as refocusing the books? Should we expect another year of premiums down 30% or 40% or so? And did the first quarter cat losses that you saw, did that change in any way your thinking of how you're moving forward with that business?

Yes, it did. I don't think you'll see dramatic declines in premium for the remainder of the year. Some of that was things flowing through from last year. Jay, you may want to add something about that before I go on.

We're always making small adjustments as a result of the way the binder business is reported. I think the good news is this quarter that those adjustments have gotten smaller. I think what you saw in the second half of last year is what you should expect to see for the balance of this year. That's sort of the run rate after having made the adjustments and after having dealt with some of the estimation changes on the binder business.

So I think you'll see modest changes to the portfolio in a downward direction -- sorry, in terms of us paring back things a bit more. Having said that, I think that we're in a new rate environment. We've been pushing rate for six weeks now. They're starting to hold for both -- certainly for the property business, and to a more modest level for our liability business. So I think that we will -- you'll start to see premium grow a bit later in the year as we continue to move ahead, but most of the paring has been -- well, a lot of the substantial realignment was done over the last couple of years. It did kind of flow through a bit this year for the reason Jay mentioned with the binder business. I don't think you'll see that much of that for the remaining three quarters, certainly in the second half of the year.

Okay. And then along those lines -- this is not just related to Syndicate 1200, but just the entire Company. You're at about -- 30% of your premiums are property. Where do you see that in a few years? What's sort of the ideal mix as far as property versus casualty?

Well, if rates start to move up, as we think they will, I can see in the short run property becoming 40% of the premium with no more exposure on the balance sheet than we have today. If rates move up more than that, it's possible we would raise the exposure on the balance sheet a bit, but I think by then you'll start to see the liability pricing moving up more, and then I think you'll see liability premium move up more than property, so we'll probably end up actually more like 75/25 liability/property. So let me kind of go through that again. Property has grown because we pulled back so much in the casualty business. If we are going to see across-the-board price firming, it'll happen first in property, which will move property up, but then as liability pricing catches up, the rate of growth there will pass up property. But I'm now describing what I think will happen over a 12- or 18-month period, not in the next couple of months.

Okay. And then, finally, my last question is on reserve releases. Obviously, they're much less significant in most of the lines. I was wondering if you can talk about some of the more recent accent years, if you're seeing any uptick in frequency and severities within your -- obviously you're seeing it in property, but are you seeing it in casualty at all? I was wondering if you could talk about that for a minute.

Sure, Scott. I wouldn't say -- I wouldn't characterize it as broad trends. What I would characterize it as, inside of any given business, there may be one unit or another where we've seen an uptick. I'll give you an example. Professional liability inside of our Excess and Surplus Lines business, we saw an uptick post the financial prices coming out of some exposures in California, and so we've recognized that and gone in and done some remediation on the book and then recognized that in terms of the reserves. So I don't see any broad trends, but for every small -- in this quarter, as an example, the overall number was relatively flat, but that was a combination of some ups and downs in a number of different places.

Okay. That's all I had, thanks.

(Operator instructions). We do have a follow up from the line of Amit Kumar with Macquarie. Please proceed.

Thanks. Just two quick follow ups, and I apologize if I missed this. Did you talk about what sort of industry loss estimate you used for your Japanese losses? And if that number does continue to move upwards, how does your estimate change?

No, we didn't use an industry loss estimate. We were looking at our portfolio and what we thought would happen. We've taken, I think, a -- we've looked at a range of potential outcomes in Japan for a number of accounts and have booked numbers towards the high side of the range, but not at the very top of the range. We are bumping right up against the retro program for Argo Re, so to the extent that Argo Re has additional losses, most of that would likely go into the retro program. As respects the syndicate for our D&F book, we may see a few -- I guess it's possible we could see a few million dollars more in losses, and then we will be getting closer to the attachment point of our reinsurance program there. And it may be that we've used up a fair amount, if not all, of our retro program for our treaty portfolio within the syndicate, but I think we've pretty much touched every account there, so I don't see our losses changing. I don't see them changing, but if they do change, I would see it changing in millions of dollars, not tens of millions of dollars.

That's actually quite helpful in terms of that range. And the only other question is on the runoff book. We continue to see deals being done where asbestos reserves are being shipped off the balance sheet and then sort of the clean balance sheet, and you can go and write more. I'm just wondering, how do you view your runoff reserves at this point? It's still a huge number, I think. I'm just wondering, has that thought process changed in terms of an anticipation of rate changes, or do you still expect to continue to run this off over time?

Well, I think that one could make the argument that at the end of 2002 or the end of 2007, that they were pretty huge numbers. When I look at how much we've paid off since the end of 2007, our asbestos and environmental exposures are now down to less than $100 million net. We're about to settle up on one last reinsurance recoverable, which will, I think, put us in a pretty good spot. That hasn't quite been done. The answer is we've been looking at doing other alternatives as we've seen companies do it, but the reality is we're starting to get our runoff reserves down to a point where, yes, we're still allocating capital to them, but they've performed in a fairly stable manner over the last few years on that, and so I -- if we can get a good trade in a (inaudible) capital, we will do it. So far, no one's put an offer on the table that we thought made economic sense for us to do so. Jay, you may have something else to add.

Well, I guess the only thing I'd add is that from a side standpoint, it actually (inaudible), but our gross A&E is down to 100, our net A&E is down to 80, our comp is down to around 400, and that comp book has actually been -- from the reserves that Mark and the Management team put up, and I think the last time was 2002. We've not had the top off those reserves for the comp book since, and it's been running off pretty predictably. So that's not to say that it wouldn't be a good -- as Mark points out, be a good trade to free up some capital. We just haven't had anybody that's put a compelling offer on the table yet.

And what's the survival ratio on that?

The survival ratio -- I don't have the page in front of me. We've been commuting pretty aggressively over the last couple of years. We actually did a couple in the first quarter, which has the effect of reducing the survival ratio. It's a number, and we can get it out of the K. I apologize I don't have it, but I'll follow up with you. We don't think it's as meaningful a number for us because of the nature of our exposures.

And what do you think is the tail -- if this book is not shipped off to anyone else and there are no good offers, how long do you think it takes for the remainder to run off based on current trends?

Well, the current trends keep changing. I've been running the Company now for 11 years, and we've been looking at the tail and how long we think it will last, and the answer is I don't know, but at the rate things keep going down, I think it becomes less material. I mean, there will be some claims that will probably still be open when I'm no longer running this Company, but I think that the majority has already been closed and settled. We keep talking about what's left, and what's left is about a quarter of what there was when we started. So I think we're getting to a point where I'm not sure it really matters, to be honest with you. I don't mean to say it isn't important to us, but it's not the material issue that it was 10 years ago.

And you just used "no longer running this Company." You've never used that phrase before. I mean, what's going on?

So 10 years from today, there will still be exposure on the books.

Got it. So 10 years is the succession plan, okay. That's all for now. Thanks so much.

Thanks, Amit.

And at this time, we have no further questions. I would now like to turn the call back over to Mark Watson for any closing remarks.

I would like to thank everyone for joining us today. As I've said earlier, it's really tough reporting a loss, particularly one the size of this. But when you have three really big events happen all at one time, unfortunately that can be the consequence. The good news, if there is good news -- and I think there is -- is that rates are starting to firm up a bit for some of our businesses, and as we go through these events, also an improving global economy, particularly the U.S. economy, we are starting to see rates move in the proper direction. I think it'll take at least another quarter before we can look at better financial results -- I should say have these trends reflected in our financial results. But I am definitely looking forward to talking to you at the end of the second quarter so we can try and mark our progress from where we are today. So thank you again for joining us, and I look forward to talking to you in three months.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a good day.