丘博保險集團 (CB) 2008 Q2 法說會逐字稿

Good day, and welcome to the ACE Limited second-quarter 2008 earnings conference call. Today's conference is being recorded. (OPERATOR INSTRUCTIONS).

For opening remarks and introductions, I would like to turn the conference over to Ms. Helen Wilson, Director of Investor Relations. Please go ahead, ma'am.

Thank you. Welcome to the ACE Limited June 30, 2008 second-quarter earnings conference call. Our report today will contain forward-looking statements. These include statements relating to our financial outlook and guidance, business strategy and practices, growth prospects, investments and use of capital, integration and performance of recent acquisitions, our redomestication to Switzerland and it's effects, our stock price, general economic conditions, pricing and market conditions and exposures, losses and reserves, all of which are subject to risks and uncertainties. Actual results may differ materially.

Please refer to our most recent SEC filings, as well as our earnings press release and financial supplement which are available on our website for more information on factors that could affect these matters. This call is being webcast live and will be available for replay for one month. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments. Now I would like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer. Then we will take your questions. Also with us to assist with your questions are several members of our management team. Now it is my pleasure to turn the call over to Evan.

Good morning. As you can see from the numbers, we had an excellent second quarter. All divisions of the Company performed well, and this was the first quarter we consolidated the results of Combined Insurance, which contributed to our growth in both revenue and earnings. I might add, the Combined is on track in terms of EPS accretion and expense and revenue initiatives. After-tax operating income for the quarter was $738 million, up 11% over prior year, while net income was up 15%, and our ROE was almost 18%. Underwriting benefited from good current accident year results and a relatively light level of CAT. losses, including a modest amount associated with the impact of the flood losses on crop insurance portfolio. On that subject, as of today, the ultimate impact from the floods on our crop portfolio may be less than we initially thought.

Additionally, favorable growing conditions, sheer volume of acreage planted nationwide, commodity prices, and the volume of replantings should all contribute favorably to our ultimate calendar year crop results, at least as things stand today. Our second-quarter results also benefited from positive prior period development. About two-thirds of the release was related to property and other short-tail lines, with the balance coming from casualty. The modest casualty-related release resulted from annual actuarial reviews we conducted of certain portfolios during the quarter. We review each of our portfolios in depth once a year, and these studies are conducted throughout the year. Investment income was up 13% in the quarter, and invested assets have increased 5% during the first six months to more than $44 billion. Operating cash flow was quite strong for the quarter at just over $1 billion. In the quarter, we completed the redomestication of our holding company from the Cayman Islands to Zurich, Switzerland. Our shareholders recognized the strategic wisdom of this move, and with an overwhelming level of support -- over 95% -- voted in favor of all move-related proposals.

A consequence of the redomestication was ACE's removal from the S&P 500 stock index, an event we and our shareholders understood could occur. This is currently having a rotation related impact on our share price that we believe is transient. At the end of the day, it is performance that dictates share price. I know some of you are interested in the subject of share buybacks. We currently have no plans to support what we consider a transient impact to our share price with buybacks. Our operating performance will ultimately take care of that. We have better uses for our capital in support of our business. Market conditions remain about the same as in the first quarter, with prices continuing to decline at approximately the same rate, around 10% in the U.S. and aggregate and mid to upper single digits overseas. Market conditions are soft, and this is true of all territories around the world, though pricing conditions vary by line and country.

During the quarter, our net premiums increased 17%. And as I said earlier, this is the first quarter we consolidated Combined and made a significant contribution to our growth. Excluding Combined, our growth was about 4%. Not bad, given market conditions, and it represents a reasonable balance between the market and underwriting. Our global A&H business, excluding Combined, experienced reasonable growth of 18%, with the fastest growth in Latin America and Asia -- 34% and 13%, respectively. And our Global P&C business, excluding A&H, was up 1%. North America was up 1. ACE Overseas General was up 9 and Global RE was down 19%. While P&C growth is obviously under pressure due to underwriting conditions in many lines, this was offset to some degree again by growth in our International P&C business, specifically in continental Europe, Latin America and Asia, and we also benefited from favorable foreign exchange.

A number of our specialty businesses in the U.S., where we judge the pricing to be reasonable, experienced growth, such as E&O, environmental, international coverages for small U.S. companies doing business overseas, our crop business and our political risk business in North America and London. This offset -- this offsets declines in other areas where competitive pressures simply caused us to walk away. On that front, our Lloyd's based wholesale business shrank given marine, property and aviation market conditions. Our U.S. Wholesale Casualty business, our U.S. Retail Workers' Comp, our U.S. Commercial D&O and Medical Professional business; and on the reinsurance side, our Casualty and Risk Property business, all shrank, to name a few. Our Property CAT related insurance and reinsurance business, particularly for U.S.-exposed risks, performed expectations in the quarter. U.S. CAT related pricing, particularly for wind exposure, has remained reasonably disciplined. I believe the soft market conditions will continue for the foreseeable future and the financial crisis and its effects will be with us for some time. Add to that a slowing economy and the spector of inflation, and there is a great deal of uncertainty.

Nonetheless, I remain quite confident in our Company's ability to continue to produce superior results. We are well-positioned for the future. With that, I will turn the call over to Phil, and then we will come back and take your questions.

Thank you, Evan, and good morning. The financial markets continued to be volatile in the second quarter. In spite of this, our book value per share grew modestly during the quarter, and our cash and invested assets increased almost $700 million to $44.4 billion. Cash flow was very strong at $1.1 billion. Globally, interest rates rose significantly during the period, resulting in a level of fixed income price declines not seen in the market since 1994. As a result, our net realized and unrealized losses were about $570 million before tax. This included $740 million from our investment portfolio, partially offset by $170 million of gains from derivatives relating to the GMIB liabilities of our life reinsurance business, and from our share of gains from partially-owned insurance companies, principally AGO.

Substantially all of the loss in the portfolio is a result of market pricing changes. Actual credit-related impairments were approximately $28 million. As we have mentioned previously, we do not invest in CDOs or CLOs, and our subprime exposure remains minimal. The credit quality of our portfolio remains high at AA, with a duration of 3.7 years. As we have highlighted in our financial supplement, the ratings of our mortgage portfolio remain predominantly AAA. In addition, the characteristics have not changed dramatically from our previous disclosure and we don't expect any material losses. 73% of our residential mortgage portfolio is held in Federal agency securities. While the recent legislation doesn't mandate an explicit guarantee of Freddie and Fannie, we believe the mortgages and senior debt are secure, and the ratings will be sustained. Our P&C loss reserves increased $644 million during the quarter; excluding Combined, they increased $293 million.

During the quarter, we completed the financing for the Combined acquisition using $450 million of five-year bank debt, bringing the average rate on our borrowing for the acquisition to 4.8%. $700 million of the $1 billion of repurchase agreements we issued prior to the closing remain outstanding at June 30. These mature in September. We also redeemed $575 million of the 7.8% perpetual preferred shares we issued in 2003. We partially refinance those through the issuance of $450 million of senior debt with an interest rate of 5.6%. Our current debt-to-total capitalization ratio is 19.6%. We expect this to fall to about 17% by the end of the year. Catastrophe losses totaled $58 million for the quarter, comprising a number of losses from around the world, including U.S. crop losses of about $15 million.

Prior period positive development was approximately $100 million for the quarter. Of this, approximately $70 million related to short-tail lines and $30 million related to our casualty portfolios primarily from 2004 and prior years. Our current P&C accident year loss ratios excluding CAT losses was almost flat compared with last year's quarter; however, if we normalized the ratio for the change in mix of our business, the ratio is up 2.5 points. For example, A&H and international P&C are now a greater percentage of our business. Our expense ratio grew by 3.1 percentage points compared to last year's second quarter. Approximately one point of this increase relates to the addition of Combined, and about one point relates to a shift in mix of our business to ACE Overseas General P&C and A&H, both of which have higher expense ratios. We have no uptake to the guidance that we gave on last quarter's call. And with that, I'll turn the call back over to Helen.

Thank you, Phil. At this point, we'll be happy to take your questions.

(OPERATOR INSTRUCTIONS). Our first question will come from Susan Spivak with Wachovia.

Good morning, Evan and Phil. Just a couple of questions. Number one, I wanted to follow up on the inflation issue. Evan, it is something that you have been talking about potentially happening for a couple of years now. I think the industry in general has benefited from such low inflation. When do you think it will really start to hit loss costs? That is the first question. And then unrelated, I am just curious about, you know, what are your views about increasing your reinsurance business potentially through acquisitions. As you know, there is lots of companies out there trading below book value that have only been riding in the hard market, and it would seem as if an area that you would round out your portfolio, or is that something given the opportunity you would just look to grow organically?

Good morning, Susan. Inflation -- I don't know that I have been talking about it a couple of years, but certainly for the last few quarters I have commented upon it. Look, in the short tail lines, we do think, in particular in the foreseeable future, loss costs will increase and we are beginning to see some signs of it. It shows up in both the cost of repair or replacement and in the time element coverages. Commodity prices being where they are, it does have an impact, whether it is property or the technical-related risks such as energy, or even on the marine portfolio, where tonnage is in great demand, shipyards are in great demand, and the cost of repair and the materials for repair are going up. And we are beginning to see it in individual claims, and you always see it -- you got to be leading edge about this -- you always see it in individual claims before it starts to show up in your portfolio analysis in a broader way. So I would make that comment. We don't see it at this time in casualty related.

And, you know, we have been, as you know, conservative -- I might add before I get the question. We have been pretty conservative in our trend factors that we have used. Yes, the last number of years have been benign from a loss cost inflation perspective. We didn't really reflect that because we believed it was fairly transient. So on the other side of the coin, we really don't have to be doing much adjustment to our factors right now and going forward. On the question of acquisition, I really don't want to comment much about that. We look at most everything that might be available. We do have a clear strategy of where we want to take the Company, an acquisition has to fit that strategy. And on the reinsurance business in particular, well, we have a pretty good operation that is quite capable -- has the capability under market conditions to expand rapidly in an organic fashion. And I am not sure what a reinsurance-related acquisition necessarily does for ACE, though I will never say never.

Okay. Thank you very much, Evan.

You're welcome.

Our next question will come from Matthew Heimermann from J.P. Morgan.

Good morning, Matt. I think it is Matt Heimermann.

Correct.

Yes.

But I will answer to that.

Herman or anything. (LAUGHTER).

Just a quick question. One of the, I think, initial steps with Combined was going to be reorganizing the field and streamlining some of the processes. I was wondering if you can just give us an update on that and whether there's any -- if you are substantially through that, if there are any early indications of how that is proceeding?

Yes, you know, I did say that, and we are on track for that; but what I also said that I will remind you, you know, Combined is more akin to life insurance, though it is an accident product and it has a very particular way of doing things. An old, proud, well-established franchise, and it is an agency-related organization for distribution, which says that it's quite emotional in its belief in what it does and how it does it. And you have to be very mindful of that, and it takes a great deal of sensitivity and skill to make substantial changes in an organization like that. And so what I was very clear from the beginning is that the accretion of Combined would come in the immediate future from expense-related; and revenue-related accretion, particularly the reorganization of the sales organization -- the modernization of it in the developed markets like the U.S. and the U.K. -- that would come over time. And so you are not going to see those results for a while, though I can tell you it is on track, it is proceeding.

The tests that we have done of a new model are working they were doing these before ACE showed up on the scene. They are proceeding well; and, in fact, we are going to roll out the changes we are making more quickly than originally thought. The combined operation itself in the field force is kind of screaming for it. So it is on track. It is working, though it will be some time, I think, before we will see it show up in any meaningful way in the results.

Okay, fair enough. And then just a filler, Evan. With respect to the reserve development, can you just give us a sense of what percentage of the reserves get looked -- were looked that the quarter and kind of is it -- is that indicative of what -- well, assuming it is a quarter, is that indicative of what you would look at the rest of the quarter? I was just curious of whether -- how that process flows in terms of the size of the reserves and things like that.

You know, I don't have a percentage in my head. I don't think -- look at my colleagues. None of us really do. But what I can tell you is is that -- I can't say it is exactly one quarter, but we look at a meaningful amount of our reserves each quarter. And because you got to get through the year and it is a work plan, so we kind of spread the work fairly evenly through the year.

Certainly we wouldn't project that based on a percentage, that we would have any development in relation to the amount of the studies, right? I mean, these are just studies that are done.

No, absolutely. I just was -- particularly with the Casualty, I was just curious what that basis was, though.

No, it is throughout the year.

Okay.

We do a substantial number of reserve reviews each quarter.

Okay, perfect. Thank you.

You are welcome.

From Lehman Brothers, we will hear from Jay Gelb.

Thanks. Good morning. I had a couple of numbers questions. First, I don't know if you have available the gross in net premiums for crop for the first half this year versus a year ago?

Jay, I can get you that. We will take it offline, all right?

Okay. Thank you. And then on page 15 of the supplement, it looks like the average market yield of the fixed maturities went up on a linked quarter basis from 5.1 to 5.6. Could you talk a little bit about that? Was that driven by Combined Insurance or the redomestication?

Really it's two things that drive it. One, we have less short-term investments because we used a lot of that to pay for the Combined acquisition. And the second part was -- as you suggested was just the addition of the Combined portfolio. We didn't have any meaningful strategic change in the mix of our investments during the quarter.

Okay. And the finally, on the effective tax rate, what's the right level we should be thinking about going forward?

You know, we haven't given guidance on tax rates; but as you will see if you look over history, we have been ranging from 18 -- you know 19 to 20 -- even 21%, right? So it's a function of where the income falls, and it's in that range.

It's 20% that you will note for six months. Last year was the same 20%. It is in that range, up and down a little bit.

Okay, thank you.

We will go next to Vinay Misquith from Credit Suisse.

Hey, good morning. First a simple numbers question. If you could give me the income on other investments. I think last quarter was negative 6 million.

Yes. I am sorry, what was the question?

Can you give us the number for this quarter please?

Other income was $125 million; and as I mentioned in my commentary, a large part of that is our gain from our investment --our share of the earnings from AGO.

Sure. Right, fair enough. Second question is for Evan. What is the progress being made on the further expansion of Combined Accident and Health business outside the U.S.?

It is proceeding. It is on track. We are expanding right now in Latin America -- beginning to expand in Latin America. We are beginning to expand in Asia. We are improving and working with them on markets that they have already expanded into; and as I said -- as I have said repeatedly, these efforts, while they are under way, you won't see meaningful results for, you know, two or three or four years because this business is written $80 bucks a policy at a time. And you have got to build the agency force and you've got to get them productive. And so it is on track.

Fair enough. And finally, what is the persistency of the business you are seeing in the U.S.? Has this become less because of the soft economy or has it held pretty steady? Thanks.

You are referring to the Combined when you ask persistency?

Yes.

Or P&C business?

No, I am referring to the Combined business.

Okay. The persistency of business is quite steady. We don't see a decline in the persistency as a result of economic conditions. I might add, you know, we do see a little softness -- not material, but there is a little softness -- in the growth in new business at the moment because of gas prices. But what we are doing in the model changes and some of what we are doing in incentives -- switching incentives to gas cards and that sort of thing for agents -- helps to ameliorate that.

That is wonderful, thank you.

You're welcome.

We will hear next from Josh Smith from TIAA CREF.

Morning, hi, and thanks for taking the question. Just quickly on AGO, using the equity method, how are you going to account for the 50% drop or 40% drop in the stock price post 2Q? Is that just going to come on the balance sheet as opposed to running on the income statement?

It doesn't come on the balance sheet. What we will look at is whether we think that there is some kind of a permanent impairment in the value that we carry AGO at. And at this point, we don't see that. We think the underlying fundamentals of the Company are such that we would expect to recover our investment, and so a temporary drop in the stock price won't have any impact on our financial statements.

Right, okay, good. And second question is, a lot of the brokers are talking about in a softer market getting more commissions from clients. I have seen your expense ratio tick up and you did explain most of it by Combined and shifting to A&H. Are you seeing brokers asking for higher commissions?

My whole career, I have seen brokers ask for higher commissions. (LAUGHTER).

Are they getting it?

If it's a soft market or a hard market. I am not trying to be overly humorous there, but that is the nature of the critter. In any soft market as price decline where brokers' revenue is tied and a commission percentage directly to premium, they see their revenue decline and there is always pressure to increase commissions, but we haven't seen a meaningful change in our commission ratios in any -- within most lines of business. There are some lines in the middle market in particular where we like the pricing and where there is a little more commission pressure; but for the most part, I would say it is pretty well behaved.

Great, and then just one last quick one. I mean, Susan asked about buying a traditional reinsurance operation. You have expressed interest in buying life and life-like operations. If there was a profit like that out there, would that be something that you would look at? A life reinsurance operation?

(LAUGHTER) -- I know where you are going. No comment. You know, we do look at everything; but I don't mind telling you in our game plan, we have far more interest in life insurance than we do in life reinsurance from an acquisition perspective.

Thanks a lot.

We'll go next to Brian Meredith with UBS.

Yes, good morning, thanks. A couple quick numbers here -- questions. First, I'm wondering if you could tell us, what was the accretion from Combined in the quarter? What was the earnings impact of it?

It was about $.09.

$.09. Great. And then on the revenue side for Combined, was there a portfolio that came in that maybe inflated the written in earned premium for the quarter?

No.

No? So that is kind of a good run rate number? Or is there seasonality?

Yes -- no, it is a pretty good run rate number.

Okay. And then -- so interest expense -- is there a decent run rate we can kind of think of here going forward?

I'd use -- my thought is around an increase over the history of about $18 million, with the initial financing that we did for Combined -- and remember we also did a financing -- take out the professional preferreds, and that wasn't in investment income, right? It was a dividend. So that would be just a direct increase in interest expense and a reduction of those dividends. Overall in the $18 million range.

Great, thanks. And then last question. Evan, can you talk a little bit about how the Atlantic company's acquisition is going? Kind of plans there, what is going on in that area?

It is going very, very well. It's right on track. The platform we acquired -- actually, I hate that word. The franchise that we acquired -- the systems -- you know it is very, very solid. They are a good, knowledgeable group. Their underwriting is sound. Their back room operations and systems are very good and well-positioned. We filed new product and in throughout the country and are getting approvals. We have combined the parts and pieces that ACE brings to the table in specialties to bring build out their portfolio. That is all coming together very well.

We've added to the management team and added to the leadership with those very knowledgeable in the high net worth area, and they have integrated well into the operation. So I have to tell that you this is on track, but it's a little like the Combined. You don't take something and -- you know, it's like a light switch, you turn it on and immediately things begin to happen. If that was true then anybody can do this. Like the Combined, these policies are much smaller premium. You are in the individual personal space, and it takes time to build out that franchise and see the real power of it in your numbers. And we told you that from the beginning, and we are on track to do that, and over the next couple of years, it will become quite interesting within our numbers.

I just figured there were some of the problems some of your competitors in the business are having and maybe there were a little more opportunities near term.

Yes, there is a little bit of breath of wind at your back, and yes, we're moving. They can always -- the U.S. P&C market has thousands of competitors; when you've got a line of business like this where there's only three or four or five, it feels pretty good.

Yes, thank you.

You're welcome.

We'll go next to Paul Newsome with Sandler O'Neill and Partners.

Good morning, and thank you for the call. I just wanted to ask if you are seeing at least a greater hit rate from brokers on particularly B accounts with companies like Dell or others who are having some recent problems. Has that affected your business in any way, both positive or negative?

Well, it hasn't affected our business negatively. And, you know, look, brokers have a job to do, and clients have a job to do. They need to buy coverage, the right coverage, and they need to buy it from a company that they believe will stand behind their obligation. That is their judgment to make. And they are going to use all available information. And if a company has weakness, they are going to notice that. That's their job to notice that and to make their judgments. And if there is a problem, and any company has a problem -- and in the soft market, that always happens -- you got to know, we are going to take advantage of every opportunity that comes available.

Obviously -- have you actually seen it in some of your submissions loans yet? Or has it just been kind of as you go?

I am going to ask -- to give you just a little color, I'm going to ask two of my colleagues to just comment briefly. Brian?

You know, the areas where we have seen some uptick in both submission and buying behavior are the longer tail, particularly professional liability. I think we have seen people become a little bit more discriminate in who they place their professional liability with. So I would say that probably would be the main area where we have seen some upticks in the U.S.

I think similarly in the international, on the longer tail lines of business and particularly looking at who leads the program, I think there is more discretion and more decisions changing in that area than we saw a year ago.

All right, thank you very much for the call.

You are welcome.

(OPERATOR INSTRUCTIONS). We will go next to Josh Shanker with Citi.

Thank you. My first question regards the crop insurance business also. In terms of thinking of the losses -- you have been pretty emphatic about you not having concern. One of your competitors on the reinsurance side suggested that they needed to reserve for such losses. Will it just be geography that makes a difference between what you might have in your portfolio and what they might have, or do you think there are more variables out there and maybe you can give us some clarifications?

Well, the first thing I say to you, just that I can't comment, and I am not going to try to do a comparison to another company. I don't know what they've got. I know what we've got. But remember, we are crop insurance, and they are crop reinsurance. Very different. And most crop reinsurance, generally it is written on a stop-loss basis for an excess of loss. And so I don't know what they are insuring, where it is, so I really can't comment. If you want more color on the crop season -- is that what you are interested in?

Or, I mean, look, any information you can give is wonderful, given that you said it is reinsurance, that is actually why I am more surprised, given that you are crop insurance, I would assume insurers would have a loss before reinsurers would.

No -- not necessarily -- well, yes, of course, but depends on who they're reinsuring it, where it is. I can't speculate except that they may be doing a small company that is very concentrated in one area, and you don't know the terms of their reinsurance contracts. So, you know, I really can't speculate about that, but I am very confident from the information we know today about ACE's position.

Well, thanks. That is certainly sufficient for what I was asking.

If you want to know more about crop, I will tell you what, I got farmer Brian Dowd here who really can go on and on about crop insurance. And we have a lot we can tell you.

Well, Brian, if there's something you want to share, I will be happy to take it offline, but if there's something you want to share immediately, I always want to listen.

You want to talk a little bit about crop?

The other thing I would share and differentiate us from others, right, we have been in the crop business with our partner Rain and Hail for more than 25 years, and they are either the largest or the second largest MGA/insurer in the business. And so they have been in it for a long, long time; and unlike most crop insurers, we are in every state and every product. So we have diversity in both territory and product. So when you see an event like this year that got a lot of press, that affected largely three Midwest states, you got to roll that into our portfolio and remember they are stop losses by state. So if you were only in those three states, you might have a tougher year than someone who's across the country. The second thing that I would say is that the Midwest floods, while tragic, frankly after the water receded, we've actually had about a month of about as good of growing weather as you can possibly have; and in both Iowa, Illinois and Missouri, the crops have recovered and we are only about a week behind last year's growing cycle. So Iowa, Missouri and Illinois, frankly, are in pretty good shape right now. So we are pretty confident with our staff -- we have over 400 people and we visited virtually every farm that was affected -- and we feel pretty good about where we are in our loss analysis for this stage of the growing season.

Okay. Well, I appreciate the color. And quickly, the other question regards -- I know that people are asking a lot of questions. I hope I can get one with a little differing on -- M&A. You know, we have seen a few transactions go down at fairly high price to books, but the companies were trading at their peaks. Not anything specific, but when you are looking at deals the investment bankers are bringing to you, do they still look expensive in general or have you seen things come down in price -- or asking price over the last, let's call it, nine months or so?

You know, in general, when you just look at the financial side of it, I think there is still some hopeful thinking in the pricing. I think it's -- pricing still has a reflection of the past and not a reality of the future. And, you know, I am sure that as time goes on the bid ask in general will narrow.

Okay. I will take it at that. Thank you very much.

You are welcome.

Your next question, we return to Susan Spivak with Wachovia.

Good morning. Evan, I realize that what we had yesterday, that quake in California, wasn't significant; but I thought it might be a good opportunity for you to just share with us what your potential exposure to a quake on the coast would be.

Susan, right now from what we know of this quake, we haven't really seen -- in its early days, we haven't seen any losses. And and I don't expect -- at this moment from everything I know, I don't expect any material losses to emerge. And as far as our exposure -- well, you know, are you talking about one in 100 event or one in 250 event, one in 500? What are you asking me?

Basically all three. Whatever you can share with us, Evan, would be great.

I hear you. Let me see. Do we disclose that or are -- do we want to take this offline?

Yes.

Susan, if you want to understand more while -- if there is no REG FD, we will talk to you a little more about it offline. We don't have the number just available in our heads right now.

Okay. The reason I am asking, Evan, is because when you look at some of the stat numbers, it comes up with a higher percentage that I know is misleading, so it would just be great to be able to clarify that.

What you do know regardless of peril, you know what our one in 100 and -- or one in 250 appetite is. We talk about that.

Right.

We have talked about that. And so that fits very -- all perils fit within that.

I see.

So there's no outsized here.

Okay. Great. Yes, I will follow that up with Phil offline.

Okay.

And there are no further questions at this time. I would like to turn the call over to Ms. Wilson for closing remarks.

Thank you, everyone, for your time and attention this morning. We look forward to speaking with you again at the end of next quarter. Thank you, and good day.

Thank you. That does conclude today's conference call. We thank you all for your participation. Have a great day.