Credit Suisse Group AG (CS) 2004 Q3 法說會逐字稿

Good morning. This is the conference operator. Welcome and thank you for joining the Credit Suisse Group's third quarter results 2004 conference call. As a reminder all participants are in listen-only mode and the conference is recorded. [OPERATOR INSTRUCTIONS]. At this time I would like to turn the call over to Mr. Renalto Fassbind, Chief Financial Officer of Credit Suisse Group. Please go ahead Mr. Fassbind.

Thank you and good morning to all of you, and welcome. Thank you for your interest in our Company. I will lead you through today's presentation which will be followed by a Q&A session. This Q&A session I will be joined by the CFOs of our business units - Ulrich Korner from Credit Suisse; Neil Moskowitz for Credit Suisse First Boston; and Hans Ulrich Lienau for Winterthur Group - who will help me to competently answer all your questions.

Before I start with my presentation of our third quarter result, I would like to make some general statements. As you all know, I joined Credit Suisse Group just recently. As a matter, I'm still in the last of my first 100 days. Among the many objectives I have for managing my function in Credit Suisse Group, the following points are particularly relevant when it comes to the relationship with the financial markets. Which is, of course, with all of you.

First and foremost, I would like to continue and even enhance the culture of transparency, vis-a-vis the financial markets. Wherever it's feasible and does not compromise our competitive position, I will be as clear as possible in our communications. This, of course, is coupled with an open approach to your information needs and questions, in order to enjoy a clear and straightforward dialog with the investor community.

You can expect direct answers to your questions even if the answers cannot always be given right away. In such a case we will say so and come back to all of you as soon as possible.

We will also soon be back on the road with my colleagues in management, intensifying investor relations activities again, following our Investor Day on December 7. Moreover, you are most welcome to visit us here in Zurich or at one of our locations. Please co-ordinate such requests to our Investor Relations teams, for which we will strengthen the resources going forward.

Finally, I am very much looking forward to personally getting to know you, all of you, as soon as possible in the coming months. Making sure that you understand what our plans are, and in order for us to better understand your views on our Company. After taking note of the legal disclaimer on slide 1, I would now like to turn to slide 2 of our results presentation.

Credit Suisse Group recorded net income of CHF1.35b in the third quarter and CHF4.7b for the first 9 months of this year. The return of equity for the first 9 months stood at 17.7%, which is within our target range of 15% to 20% over the cycle. The earnings per share of CHF1.16 for the quarter brings the year-to-date figure close to CHF4.00 per share.

These quarter results were produced in an environment, which presented a number of challenges to the financial market. You all know market volumes were depressed, reflected of seasonality and historically low volatility, given the absence of clear market trends. These developments, coupled with concerns about the near-term economic outlook and high energy prices, resulted in a cautious market sentiment, which dampened client activity and narrowed trading opportunities.

As we already indicated to you during last quarter results presentation, the second half year normally is weaker than the first half of the year at Private Banking. Consequently, Private Banking recorded lower results, given reduced transaction-related revenues. Nevertheless, the sustained, high profitability level of this business, as evidenced by the year-to-date results, is especially encouraging. As it is achieved despite the fact that we continue to invest in the future growth potential of this business.

Corporate and Retail Banking was less affected by the market environment, delivering solid results. Once again, this business was able to produce solid revenues as well as recording low credit provisions. Institutional securities performed reasonably well, particularly in the fixed income, trading and advisory business.

However, the performance continues to be constrained by the weaknesses in our business, which we continue to actively address to sharpen focus and discipline risk-taking.

As expected, results at Wealth and Asset Management were down from the record second quarter, reflecting a slowdown in the harvesting cycle of private equity investments. What becomes more visible as we progress through the year, is that Winterthur as regained its core earnings power.

During 2004 both Life and Pensions, and Non-Life segment recorded satisfactory growth, made progress towards reducing administration expenses, and recorded high levels of investment income, despite challenging financial markets. We are strongly committed to continue our focus on profitability and operational efficiency. Before I proceed I would like to point out a few significant financial items that affected our third quarter results.

First, you will notice a very low tax rate in the quarter, as CSFB and Winterthur had some positive impact on the tax line, positively effecting the Group's results by CHF257m. More detail on this later. Excluding this tax impact and excluding some CHF211m of non-taxable income arising from the FIN46R related income, the calculated tax rate is 25.6% which is actually slightly above our target range of 22% to 24%.

Second, the results of Private Banking and Corporate and Retail Banking this quarter did include only a very minor impact from the changes in fair value of interest rate derivates, used for risk management purposes, that will not qualify for hedge accounting. ERB had a positive impact of CHF6m, which is down significantly from the CHF136m reported in the previous quarter. Private Banking had a negative impact of CHF9m, which is also a significant change from the positive CHF57m reported in the previous year.

Let me add here that we still continue showing these effects for these two segments, as we did throughout the year, while we will not show these effects anymore going forward in the year 2005 onwards. Because we believe that this will be part of business when our units are further addressing their management versus US GAAP, and therefore it's part of their trading business.

With that I would like to turn to the revenue detail on slide 3 of the presentation. Third quarter 2004 saw consolidated net revenues of CHF11.7b, virtually unchanged compared to the third quarter of 2003, and down CHF1.75b or 13% compared to the previous quarter. Focusing on the comparison to the previous quarter, Private Banking and Corporate and Retail Banking showed a decrease of 13%. Also driven by reduced transaction-related revenues and lower trading revenues.

In addition, more than 50% of the reported drop in revenues is due to the fact that the previous quarter included a sizeable amount from changes in fair value of interest rate derivatives, while the effect on the current quarter was negligible.

Credit Suisse First Boston's business environment in the third quarter of 2004 was characterized by uncertainty around geopolitical issue. These concerns led to directionless market, with accompanying low volatility levels, compounded by the seasonal summer months slowdown.

Despite this challenging environment, fixed income trading rebounded and investment banking advisory businesses performed reasonably well. Equity underwriting and equity trading rebound in line with the industry. And, as anticipated, third quarter realizations of long-term, private equity investments in wealth and asset management were markedly below those of the second quarter.

The year-to-date revenues for Winterthur were up slightly 2%. Non-Life premium growth was satisfactory, reflecting both tariff and volume increases across most markets. Despite low customer demand in the individual life business, resulting from the current low interest rate environment, Life and Pensions recorded a significant increase in deposit business, which includes investment type products such as unit-linked policies.

Now turning to the expense side on slide 4. The Group's total operating expenses in the third quarter amounted to CHF5.9b, down 5% compared to the previous quarter and down 4% compared to the third quarter of 2003. Commenting this chart from bottom to the top, we see that banking compensation costs have declined by 9%, as the banking segments adjusted incentive-related compensation accruals with lower revenue.

And the seasonality of the insurance business - we compare the insurance expenses with the same period last year. Underwriting acquisition and administration expenses were down 6%, given further efficiency gains.

Other expenses and restructuring charges, which includes all banking segments and insurance segments, are up slightly by 2%, as higher expenses at the institutional securities more than offset efficiency improvements at the other segments.

For the banking cost income ratio, which you see at the top of the slide, you see an improvement in the overall picture, as the ratio for the first three quarters of 2004 was down 5 percentage points to 74%, when compared to last year's ratio of 79%.

On slide 5 we can see how provisions have developed over the last 5 quarters. Provision for credit losses continued to decrease in light of the generally favorable credit environment. The Group recorded provision for credit losses of just CHF38m, a decrease of 66% compared to the third quarter of 2003, and a decrease of 71% compared with the second quarter of 2004. Some more detail on this later in the respective segments discussion.

Next, slide 6, shows a similar improvement for the impaired loans. We continue to make progress in bringing down the impaired or non-performing loan portfolio, which was down 41% over the last 12 months. This process has been especially accelerated at CSFB, as we wrote off highly provisioned impaired loans. This was also the reason why we saw a gradual slide in the coverage ratio at CSFB. At the current level 80% still portrays a very healthy and conservative provision policy.

Let's now turn to slide 7 for an overview of our capital ratios. The consolidated Tier 1 capital ratio increased slightly to a strong 11.8%. The risk-weighted assets are essentially flat in the third quarter compared to the second quarter.

There's one minor point I would like to bring to your attention. If you look at our disclosure on page 5 in the quarterly report, you will notice a 65% drop in what is called the market risk equivalent portion of the risk-weighted assets at Credit Suisse. This is a result of the approval of the Swiss Federal Banking Commission to switch from the standard approach to the model-based approach, using bar calculations for deriving the market risk exposure.

A quick word on Winterthur's equity base which is not shown on this chart here. It showed a solid performance and underlying earnings power in the first 9 months of 2004, and that has contributed to an reinforcement of Winterthur's capital position. Shareholders' equity at Winterthur was CHF8.2b as of September 30, 2004, up CHF700m from 3 months ago. This improvement is primarily a result of the third quarter's retained earnings, and the recovery in the net unrealized gains and losses on the bond portfolio.

With that I will now review the segment results, starting with Private Banking on slide 8. As mentioned in the second quarter results announcement in August, we normally experience a noticeable slowdown in client activity in Private Banking in the second half of the year. This was confirmed by this quarter's result, with Private Banking recording lower results.

Net income of CHF511b this quarter was down CHF154m or 23% versus the previous quarter, and nearly unchanged compared to the same quarter last year. For the 9 months period we saw a significant improvement in net income for 2004 by over CHF550m or 42% compared to 2003.

Turning now to slide 9 for a discussion of revenues and expenses. Net revenues were down CHF225m or 12% versus the previous quarter. Commission and fees income were negatively impacted by lower transaction-related income, reflecting low market volumes especially at the Swiss Exchange. In addition, trading income was affected by the drop in revenues for fair value changes of interest derivatives used for risk management purposes.

From the disclosure in our quarterly report, you can see that previous quarters include sizeable gains from this area. The reduction on these gains alone accounted for 30% of the 12% reduction in net revenues versus the previous quarter. Also, trading results were negatively affected by a pronounced seasonal slowdown in market and client activity.

Operating expenses were down about CHF90m or 8% versus the previous quarter, and 3% versus the same period last year. These efficiency gains were solid, especially in light of the further strengthening of our distribution force, particularly in our international operations which will set the stage for future growth.

Cost income ratio is up this quarter, which could be expected given the fact that previous quarters benefited from the mentioned gains from interest rate derivatives. Nevertheless, the year-to-date ratio of 58% is still a clear continuation of the improvement we have seen over the last 2 years.

Now turning to the gross margin for Private Banking on slide 10.

In line with our expectation for lower revenues, the gross margin has come down to 120 basis points in this quarter, driven by the lower transaction-related revenues. I would like to point out that we do not consider this to be a structural change in the business underlying profitability. The year-to-date gross margin is still strong at 136 basis points, well ahead of our targets.

And comparing to the same quarter last year, the drop in our gross margin by 15 basis points has been largely driven by a negative 7 basis points from the change in gains and losses from interest rate derivatives. And a negative 10 basis points from lower sales and brokerage commissions and performance fees. Aside from that, the asset-driven margin remained high at 81 basis points.

Turning to net new assets on slide 11. At the Q2 results presentation, we stated that we expected to see a slowdown in net new asset generation in the second half of 2004. This has been confirmed by the net new assets inflows of CHF3.8b reported in the third quarter. Good net new asset inflows during the quarter, particularly in key European and Asian markets, were partially offset as structural investment products matured and were replaced by shorter-term products which do not qualify as additional assets under management.

Our annualized net asset growth rate stands at 5.9% for 2004 year-to-date, and we remain committed to our mid-term target of 5%. Also keep in mind that we are very much focused on profitable new asset generation. Which means that it is not our aim to take up new assets where the gross margin is not attractive.

Assets under management at the end of the third quarter amounted to CHF544b, slightly above the value of the previous quarter. Compared to the end of 2003, assets under management increased by CHF33b or 6%.

Now over to Corporate and Retail Banking on slide 12. Corporate and Retail Banking was less affected by the market environment, and reported a solid net income of CHF199m, down CHF57m or 22% versus the previous quarter. This decrease versus the previous quarter was mainly due to substantially lower gains from changes in the fair value of interest rate derivatives used for risk management purposes, that do not qualify for hedge account.

Adjusted for this impact, Corporate and Retail Banking achieved a solid quarterly result, and the business remains well-positioned in the current economic environment. Net income in the first 9 months of 2004 was up CHF108m or 20%. Which leads us to the next slide, slide 13, on the segment's revenues.

Net revenues were down 15% versus the previous quarter. I already highlighted that the significant variance reported in the trading results is driven by a change in fair value gains or losses on interest rate derivatives. These amounts are shown in the box on this slide. This alone accounts for over 90% of the decline in revenues versus the previous quarter.

Operating expenses decreased by 5% versus the previous quarter, or 3% versus the same quarter last year, driven by continued efficiency improvements as well lower performance-related compensation accruals. The cost income ratio stood at 65.2%, up 7 percentage points versus the previous quarter. But the year-to-date-ratio of 62% still is a clear continuation of the improvement we have seen over the last 2 years.

Switching gears to the credit side on slide 14. Provisions for credit losses decreased by a further CHF40m, compared to the second quarter of 2004, to stand at CHF20b, representing a very low level of new provisions. Year-to-date credit provisions stood at CHF128m, 23% lower than the same period last year, mainly reflecting the continued favorable credit environment.

Now to slide 15 which brings us to CSFB segments. Let me reiterate again that my comments focus on the comparison to the second quarter this year unless otherwise mentioned.

Starting with institutional securities. Markets were directionless, with depressed levels of activity and volatility, coupled with a typical summer slowdown. Revenues versus the second quarter of 2004 were slightly down, CHF51m or 2%. Fixed income trading revenues rebounded, and in Investment Banking advisory revenues were strong, while equity underwriting and equity trading were down in line with industry trends.

Expenses of CHF2.8b were down marginally, CHF78m or 3%, versus the preceding quarter. The compensation revenue ratio for the quarter stood at 54.8%. This, together with the results at Wealth and Asset Management, resulted in an unchanged compensation revenue ratio for CFSB as a whole of 53.2%, which is the way we manage compensation.

The quarter also benefited from a tax impact of CHF126m, following the favorable resolution of matters with local tax authorities. As did the previous quarter by a positive CHF27m. On a net income basis, the segment reported CHF292m in the third quarter of 2004, which represents an increase of 126% versus the previous quarter. Excluding the mentioned tax impacts for both quarters, the increase was still a healthy 63%.

The third quarter included gains on legacy assets with a net income impact of CHF34m, which is down 63% from the CHF93m reported in the previous quarter. Significantly, the year-to-date net income of CHF1.03b exceeded that of the entire preceding year.

Now looking at the revenues, starting with the trading results on slide 16. Fixed income trading revenues of CHF1.35b improved significantly over the second quarter to 33%, and more than doubled the comparable period of 2003. The increase was principally related to improved risk taking and positioning, mainly in currency trading, as well as the beneficial impact of declining long-term interest rates

In addition, we had strong performance in emerging markets, commercial mortgage-backed securities. Conversely, equity trading results were weaker, reflecting the industry-wide slowdown and the low transaction volumes on many major exchanges. The cash business was down in all regions, given reduced volumes. And we saw a decline in equity options and structured products, offset by a small increase in prime services.

Switching gears to the M&A advisory revenues on slide 17. We reported improved advisory results in the quarter, which were more than offset by the adverse impact of industry-wide declines in both equity and debt underwriting. As a result, Investment Banking revenues of CHF868m decreased 4% versus the second quarter.

Net underwriting results declined 5% against the second quarter, on decreases primarily in the high yield area, reflecting an industry-wide 21% decline in global, high yield, corporate debt underwritings. Offset by improved results from structured products securitization.

Credit Suisse First Boston continues to maintain a global, number 1 ranking in high yield new issuances, and is served in global investment grade new issuances. Echoing the depressed equity markets, the equity new issuance calendar remained light through the quarter, although Credit Suisse First Boston maintained its strong number 3 ranking in global-wide IPOs.

M&A advisory results improved 27%, with CFSB expanding its involvement in significant mergers and acquisitions during the period. Our market share in this sector also improved over the span of the year, with a ranking of number 15 at the end of the first quarter, improving to rank number 8 through September. The pipeline looks respectable, and in particularly in equities the pipeline looks stronger than it has been in a while. This finish the revenue discussion, now over the expense slide number 18.

Expenses of CHF2.8b are 3% below the level of the prior quarter. Compensation expenses were down 13%, reflecting lower revenue levels. This decline was partially offset by a 19% increase in non-compensation expenses. More than half of which was revenue-related, specifically commissions on trading activity, as well as professional fees for securitization.

We also recorded an increase in legal fee accruals regarding litigation. The pre-tax margin saw a small rebound to 7.7%, which is still well below of where we want to be. The year-to-date ratio stands at 12.5%.

Now over the Wealth and Asset Management segments, starting with slide 19. As expected, third quarter net income of CHF30m declined sharply from the preceding record quarter, due to the volatile nature of investment-related gains in our private equity portfolio. And to a lesser extent, the impact of challenging market conditions. Versus the prior quarter expenses declined 5%, reflecting lower commission expenses in line with lower revenues. Now over to the segment's revenues per division on slide 20.

Excluding revenues related to the FIN46R consolidation of CHF147m, revenues declined 39% compared with the second quarter of 2004, driven by 84% reduction in investment-related gains. As the number and magnitude of harvested private equity investments declined. It should be noted that gains from harvesting such investments will continue to be sporadic on a quarterly basis.

Yet, over a longer period our results demonstrate that these gains should not be discounted as non-recurring. For the full year 2003, investment-related revenues amounted to CHF450m, while the first 9 months this year showed revenues from this business amounting to CHF570m.

Management fees at CSAM declined versus the previous quarter, reflecting a shift in business mix towards lower margin products, specifically from equity to fixed income products. Now to the last slide for this segment, the net new asset development as shown on slide 21.

Inflows of CHF1.2b to Alternative Capital, chiefly related to the launch of the Credit Opportunities Fund. This, together with an inflow of CHF400m at CSAM, was more than offset by CHF2.1b outflow in private client services out of money market funds. The result was a CHF0.5b outflow for the quarter for the segment.

Assets under management declined slightly, less than 1% compared to June 2004, as net assets outflows just described, and the negative impact of foreign currency exchange movements outweighed improved market performance at CSAM. This completes the review of CSFB result. Now over to Winterthur who has an excellent performance in this quarter.

In the first 9 months of 2004, Life and Pensions reported net income of CHF370m compared to a net loss of CHF1.859b in the corresponding period of the previous year. Compared with the previous quarter, net income at Life and Pensions increased by CHF79m to CHF164m in the third quarter, despite lower investment income.

Included in the third quarter's result of CHF164m, is a positive benefit of CHF72m from the increase in the valuation of deferred tax assets, as a result of improved expectations for future taxable earnings. On a year-to-date basis, this positive impact on net income was offset by a charge of CHF91m, due to the introduction of the legal quota in Switzerland that was recorded in the first quarter of this year.

As a reminder, the net loss in the first 9 months of 2003 was primarily due to a goodwill impairment of CHF1.5b, and an accumulative effect of change in accounting for provisions for policyholder guarantees and annuities of CHF529m. We go on to slide 23.

Total business volume, which includes gross premiums written and non-traditional deposit business, increased 2% year-on-year. This growth was driven in part by an increase in deposit business of 26%, including a growth of 36% in unit-linked business, compared to the corresponding period of the previous year.

This growth also reflects Life and Pensions ongoing strategy of increasing its focus on less capital-intensive investment by product. In the first 9 months, gross premiums written decreased by 8% or CHF700m. This decrease was driven mainly by lower volumes in traditional business in Switzerland, reflecting current low interest rates.

Expenses were down by 4%, driven by an 8% reduction in administration expenses compared to the first 9 months of 2003, reflecting cost savings in almost all market units. Expense ratio improved by 0.6 percentage points to 9.2%.

Now on to slide 24. Compared to the first 9 months of the previous year, net investment return backing traditional life policies improved to 4.7%. Net current investment return remains stable at 3.9%, while net realized gains and losses increased by 0.1 percentage points to 0.8%. It is important to note that this improvement reflects material reduction of realized losses on investments by CHF900m but realized gains were also lower by CHF800m in the same period.

Now over to the Non-Life segment starting with slide 25. In the first 9 months of 2004 Non-Life reported a net income of CHF383m, compared to a loss of CHF429m in the corresponding period of 2003. Net income increased to CHF198m in the third quarter of 2004 from CHF82m in the second quarter. The third quarter net income included an increase in deferred tax assets in relation to tax loss carry forwards, as described for Life and Pension, of CHF59m.

On a year-to-date basis, this positive impact on net income was offset by a number of special charges related to discontinued businesses, amounting to CHF91m. And in addition, business recorded restructuring charges in 2004 up to September of CHF72m, especially for its operations in Spain and Switzerland.

On to slide 26. Combined ratio improved by 2.8 percentage points to 99.97% in the first 9 months of 2004. The claims ratio decreased by 1.2 percentage points to 74.2%, despite significant hailstorms in Europe. Future reduction in hurricane exposure following the sale of republic financial sales in the US in the third quarter of 2003, and focused underwriting, the effects of the recent storms in the United States, was immaterial to the underwriting result.

The expense ratio decreased by 1.6 percentage points to 25.5% in the first 9 months, compared to the corresponding period of the previous year. As total operating expenses remain stable despite premium bond growth. Administration expenses decreased by 3% over the same period, reflecting further cost savings. In the first 9 months of 2004, net premiums earned increased by 5% to CHF8.020b, compared to the corresponding period of the previous year. This growth represents both tariff and volume increases across most markets.

Now to the last slide for this segment, number 27. Compared to the first 9 months of the previous year, the net investment return improved by 0.7% to 4.7%. Net current investment returns stood at 3.6%, 0.1 percentage points down versus the first 9 months of 2003. And net realized gains and losses increased by 0.8 percentage points to 1.1%. It is important to note that this improvement reflects a reduction of realized losses on investments by CHF170m, while realized gains were also lower by CHF20m in the same period.

This completes the segments results review. Let me finish the results presentation by making some comments on our outlook on slide 28. Credit Suisse Group's businesses are well-positioned to seize growth opportunities. We have the people, the capital strength and the know-how to improve our platform, as well as the determination to realize our full potential.

Moreover, in view of the Group's well-known track record in product innovation, we are confident that we can close remaining gaps. While continuing to offer our clients outstanding products and services, that create value in a less predictable market environment. We are also confident that we can achieve a good result for the full year 2004. But we do not anticipate that the overall market for financial services will grow significantly over the next few quarters.

Consequently, we expect that earnings growth can be achieved primarily through tight cost management and increased market share. The Group's new integrated management structure will further enhance co-operation throughout the Company, and allow clients to be served across multiple business lines. This finally should pave the way for the more efficient allocation of capital and other resources, which will be deployed with a view to expanding Credit Suisse Group's key businesses

This completes this quarter's earnings review, thank you very much for your attention. Let me remind you that for the Q&A I will be joined by my colleagues from the business units. Conference operator, we are now ready to take the first question.

[OPERATOR INSTRUCTIONS]. The first question is from Jeremy Sigee, Citigroup. Please go ahead sir.

Thanks very much. I wondered if I could focus on institutional securities in particular. 3 questions there. Firstly, revenues. The fixed income surprise here was an important feature of the results. You commented on the benefit of interest rate direction, and in fact the text on page 20 of your report makes it sound a bit like it's down to placing the right bets, which is obviously better than taking the wrong bets.

But I just wondered whether you could talk about the sustainability there? Whether there are initiatives that have driven that revenue improvement? Secondly, I wonder if you could come back to your discussion about the comp ratio? Because that's moved from 56% Q1, 61% Q2, back down to 54%. I just wondered what -- if you could just come back on the approach there, and what you think a sustainable level is?

And then thirdly and finally, the non-comp. You said some of that was revenue-related but is it right to interpret the text as suggesting that some of it is a somewhat permanent step-up because of the outsourcing of IT? Thank you.

Starting with the first question with regards to revenue, and in particularly the results in fixed income. Yes, there was an improvement due to our risk-taking and positioning. It was primarily around the movement in the dollar. Basically in the second quarter we got it wrong. In the third quarter we got it right with regards to that portion of it.

But in general, I think the improved results in institutional securities are really in line with some of the traditional business strengths we've had. Particularly good performance in commercial mortgage backed securities, high yield and also in investment banking side, and on the advisory portion of the business.

Your second question was around the comp to revenue, and what I would point out here is that we look at the comp to revenue target across Credit Suisse First Boston. And if you look, what has been consistent is that in the first quarter and the second quarter and the third quarter, that number's remained at 53.2%.

There's been some fluctuation between the segments but, frankly, the way we manage it is looking at the entire business unit, and we've maintained the consistency in that number. Obviously over time we would hope that we could have that number come down but right now we're happy where that's at. And we think it's the proper level.

I'm sorry, if I just clarify that. Are you focused on the headline number there because, if I go back to Q2, there are a lot of abnormal items in the revenues and asset management, which I wouldn't have thought would attract compensation accruals. So are you operating on the basis of the headline number? Trying to keep that steady?

The answer is, we are focused on the headline numbers best we can be. There are abnormal numbers every quarter. Sometimes they can be plus, they can be minus, that's the nature of abnormal numbers. We have them, our competitors have them but, yes, we focus, we try to focus on the headline number.

Okay, thanks. Then finally the non-comp thing. There was a reference to the outsourcing of IT. Is that a permanent step-up of any size?

Well, again, I think with the outsourcing the two big -- the two big portions of the non-comp number, I should say, in terms of the change are really around one where the additional, professional service fees we incurred that were really business-related around -- our commercial mortgage backed structured derivatives business and so forth.

As part of securitizing those business, one realizes extra legal fees generally, and those businesses did well in the third quarter. The second big piece of the rise in non-comp was really around the extra litigation fees that we anticipate setting -- that we've set aside in anticipation of legal costs around private litigation. Around some of the well-known matters - Enron, IPO and so forth.

The outsourcing is something that is a much smaller part of the number and, yes, we do anticipate that continuing.

Thank you very much.

Thank you. Next question please.

We now have a question from Mr. David Williams, Morgan Stanley. Please go ahead sir.

Good morning. It's David Williams from Morgan Stanley here. The question relates to your Private Banking operations, 2 things in particular. One is on the gross margin. At the start of the year when you moved over to US GAAP, I think you gave guidance to the market that you felt that 120 basis points of gross margin was a through the year average that we should expect. Obviously it was much better than that in the first half, it's drifting closer to that level currently.

I just wonder where you feel, going forwards, the appropriate gross margin would be? Especially as you comment that you don't expect to get those non-qualifying hedge gains coming through. So is 120 basis points something that we should look forward to in future years?

The second question on the Private Banking is in relation to the cost element. Obviously, it was a good performance on cost and the question is what is the sustainability? The costs were up in Q2 from Q1 but have moved back to that level. But I was under impression, certainly at the Q2 stage - again from the comments that you made to the marketplace - that was a cost level that we should expect going forward. So I was slightly surprised by the reduction in cost today. So if you could elaborate on those 2 points please?

I can maybe I can take the first question. When we switched to US GAAP, we said that it would have an impact of roughly 10 basis points to the positive side. So the target was, as I said before, it's 120 basis points. And that is still the target going forward given certain market developments.

With regard to costs, it has to be mentioned that, as you know, that normally at least the cost base in the fourth quarter is somewhat higher than in prior quarters. So for Q4 we expect costs to stand something between Q2 and Q3 level. That is what we expect to see in Q4 basically.

Thank you.

Next question please.

We have a question from Mr. Vasco Moreno, KPW. Please go ahead sir.

Yes, good morning. Just a few questions actually. The first one is on the corporate and retail bank. You're compensation cost's down again, 11%, quarter-on-quarter. I just -- I was wondering if you could give us an idea as to if some of this recurring, thinking of fourth quarter and beyond that into 2005? Because that was a reasonably good performance.

The second question is related to the Group Tier 1. At 11.8% now it is the highest of the investment banking group, if you will, in Europe. Could you give us some views as to what you are thinking in terms of both increased dividends, as well as potential buybacks for 2005? And more importantly, could you give us some idea as to what the breakdown is in terms of -- particularly some of the things you were extracting from Tier 1 in the past?

Things like double counting of insurance, for instance. How much -- the level of assurance capital is as of today? And then lastly, on the PSC AUM outflows. I know you mentioned that a lot of this was money market but how much of this money actually outflowed, or flew out, of the PSC units? Or how much is just going into cost [indiscernible] assets? Thank you.

Okay. I hope I was able to write all your questions down. Let me take head on the ratio on dividends and capital because we are not giving any indications on our future dividend payments. When it comes to capital, and the influence of Winterthur. As you know, we are deducting in the Tier 1 calculation 50% of Winterthur's capital in order to get to the Group's Tier 1 capital ratio, which stays at 11.8% as you know right now.

The -- your first question was regarding the compensation in Retail Banking and this, of course, going with the top line as we go forward. And I will give now one specific answer to Ulrich Korner, and then I ask Neil to answer the question when it comes to PSC money.

[indiscernible] benefit Retail Banking, as you say is down 11%. It's basically the effect of two things. First of all, continued deficiency improvements in the area of personnel costs, as well as obviously lower performance-related compensation accruals.

So that is, as we now say it, entirely linked to the development of the bottom line. And again also, here the question if you look at total expenses for Q4, also here we expect that total operating expenses will be somewhere between Q3 and Q2 level. We'll cover Retail Banking in Q4.

With regards to PSC, I don't know if I fully understood your question. I think you had mentioned that we had experienced an outflow of assets, primarily cash assets, and then you would ask -- I didn't get the second part.

I suppose the question is, are we talking about market share erosion or are we talking about just assets flowing into other types of assets, if you will?

Well, the cash assets did leave and therefore we did show a reduction in assets for PCS.

Okay. Can you give us some more clarity on what has happened there?

So it happened with the assets. The assets -- I'm sorry, so the assets just left the PCS. You saw the CHF2b reduction and those assets were primarily assets that are invested in cash type products. Does that answer the question?

I suppose yes. But is there a reason behind that? That seems to me like you're obviously losing market share in that area. I was just wondering if you can clarify as to whether you think that that is something that is just seasonal? Or if there is any issue there that you can give us some more color on?

Yes. I would say I don't think there's a general pervasive issue. I would say that in general the cash product, as you know, is not a high margin product. In the PCS business we are emphasizing some of our new preferred advisor products, and we're emphasizing our Volaris product. So there's certainly a product emphasis maybe in other areas, although I would not say it's the cause of the outflow per se.

Okay, thank you.

Next question please.

The next question is from Mr. Mark Fogey, Lehman Brothers Please go ahead sir.

Thank you very much. Got a couple of questions on Winterthur. I'm looking at page 24 of the quarterly report and the P&L, the Life and Pensions business. Just focusing in on the dividends to policyholders incurred. There was CHF122m credit in the third quarter versus a CHF257m expense in the second quarter. I wonder, firstly, if you could just detail what exactly has happened there? What we should expect going forward?

And then secondly, also on Winterthur. Firstly, are you contemplating, or is it possible, that you could spin-off Winterthur? I know obviously the sale has been mentioned in the past but could you also spin it off? And if you do happen to spin it off, would the business require an infusion of capital? Thank you very much.

Thank you for your question. I may ask -- answer the second one first, and I said it already this morning in the press call. We are really exploring all opportunities which include all options we have for Winterthur. That is what we can basically say. And when it comes to these line items, dividends the policyholder incurred, I give the word to Hans Ulrich Lienau to explain that.

Okay. The shift, or this benefit of the amount of CHF122m mainly reflects a shift from a reserve for future dividends to policyholders, to a reserve for future benefits for policyholders, and disability claims reserves. Does that answer your question?

I don't know. What happened to trigger that? I guess that's my question. What assumptions changed the trigger dial and what should we expect going forward? If you can answer it.

Okay. This benefit arises from the legal quote in our group life business in Switzerland, in connection with a strengthening of reserves under US GAAP, due to the change in long-term earned rates. So in simple terms, we had to evaluate our long-term earned rate and had to correct the earned rate, and due to that the dividend to policyholders resulted in this benefit.

That's great. Thank you.

Next question please.

We now have a question from Mr. Adrian Fitz(ph), Main First Bank. Please go ahead sir.

Yes, hi. I just had 3 questions please. One, again, on the cost base, a little bit on the institutional services and CSFB. Coming back to the compensation ratio. I just noticed also that your headcount is up quite sharply, 5% which is 16,500. I'm just wondering in relation to that -- to placing that against the compensation ratio. I wonder there's any deferred costs that we will see rising sharply over the next couple of quarters there?

Could you explain where you have had capacity increases within your franchise at CSFB? That's question 1, and the second 2 questions are in Winterthur again. Looking at the Life and Pensions, I do note why some of the gross premiums are down, and if you look at it on a quarterly level, down 18%. And you say it is a Swiss thing that interest rates have risen. Is it really just a Swiss problem?

Can you elaborate a little bit why the gross premiums down that much on that scale? And also can you highlight whether there are any more deferred taxation levels within Winterthur that you could possibly write up? Thank you.

Let me just take the last question first again. The assessment of the deferred tax assets we have in the Group is, of course, done on a regular basis. This is done by Winterthur in the third quarter, and that this has led this time to the correction of our allowances against [inaudible - line problem] Sorry, can you hear me? Okay, I repeat once more.

The assessment of our deferred tax assets is done in the Group, of course on a regular basis. And Winterthur does that normally the third quarter, which has led now to this correction of the allowances we booked against deferred tax assets. Which was, and I must underline that, which was of course due to the stability of earnings, the taxable earnings, we predict in the future that will allow to use these deferred tax assets going forward.

That is the reason. So we always analyze that and we, of course, book accordingly out of the situation we can see at that time.. I would like to give the word regarding the cost base in the institutional securities to Neil. And then afterwards Hans Lienau will answer your question regarding the premiums. Neil?

Just to make sure I understood your question about the cost base, and this is with regards to institutional securities or Credit Suisse First Boston generally?

Well, it's with institutional securities. I'm on page 20 on your interim report, and I just noticed that your total number of employees have gone up quite sharply on the quarter. And I relate that again on a quarterly level on your comp ratio, and essentially I just wonder whether there's some deferred costings that we might see later?

Okay. I think we've -- Let me just go over how we look at the compensation, and we look at it very detailed. We look at it bottoms up. We pro forma just about person by person for the firm at this point. We receive market data as best we can get from consultants that have an idea where to price our people. We then take a look at what those numbers are.

We understand that the nature of compensation and how it's going to come due. And we put that all together, and we are still very happy that the 53.2% is indeed the right number for us as this point. And we don't feel that using that number will incur any extra charges down the line. And so we don't anticipate any surprises from that.

Thank you very much.

And the third question with regards to the shift in gross written premiums. Actually, there are 2 effects in here. Generally the third quarter of the year is usually the lowest quarter in the year due to holiday season. And then there's a second effect, and then there was a shift of CHF180m premium from undeposit to deposit premium business, related to our Group Life business in Switzerland. And this also explains the decrease from Q3 2004 to Q3 2003.

Excellent. Thank you very much.

Next question please.

We have a question from Mr. [Kristoff Richard], ZKB. Please go ahead sir.

Yes, good morning. I have 2 questions, one on Winterthur. Again, could you give us an update on Winterthur International? And the second one is concerning your rather caution outlook longer-term. What the implications does your negative growth outlook for the financial services industry have on your investment spending in growth initiatives, like at Credit Suisse First Boston, or also in the Wealth Management? Thank you.

Okay. Thank you for the question. Regarding the situation at XL. The data that XL has submitted so far is incomplete and inconclusive. Winterthur is not in a position to, and see no reason to update its current provisions. In the light of this, Winterthur has reverted to the formal timeline defined in the sale and purchase agreement.

This means that Winterthur has, on October 11, 2004, formally requested delivered of the final season net reserve statement from XL, which must be provided to Winterthur within the 30 business days. That is the status where we are right now.

Your second question regarding the outlook. We would talk about the financial services market and we are, as you could see from the outlook, cautious on what will happen over the following quarters going forward. Which means we have to really come to grips or continue our cost conscious and our cost reduction exercise that we are ongoing. And I will always point out that this is not a one-time exercise. This is an ongoing exercise that must go on also in the future.

And the second element we have brought in there is the gaining of market share going forward which, of course, is an obvious reaction to the expected development in the market.

We have a question from [Heinrich Weimer], Bank Sal Oppenheim. Please go ahead sir.

Yes, good morning everybody. 2 questions. First, of the number of shares, there was a restatement by 3% on the number of shares as of June 30. And therefore also for the third quarter the number of shares was lower. What's triggered this revision, restatement, of the number of shares as of June 30?

And the second question is about the tax releases perhaps by division. Can you tell us what exactly triggered? What was the news in the third quarter which triggered you to release these tax provisions now? And perhaps you can also -- I imagine that is a completely non-cash item, these releases? Perhaps you can comment on that question?

Yes, I will, I'm glad to do so. First of all, regarding your number of shares. What has been changed was diluted earnings per share, has been changed to revise the Group's application of the treasury stock method for the share awards. The effects of the revision for the second quarter 2004 was an increase in diluted earnings per share from CHF1.18 to CHF1.22. But that was the reason for that.

Second the tax releases - there's 2 categories. One is in institutional securities in Credit Suisse First Boston, where we basically could release tax provisions. Because we could favorably settled two major cases we had outstanding, which allowed us to reduce the provisions and which was higher than the outcome. Very obvious and therefore it's also a non-cash event.

And the second portion of this tax benefit came from the Winterthur Group which, as I explained before, typically goes through in the third quarter analyzing their deferred tax assets and the corresponding allowances that were booked against that. And due to the fact that we can now better see the stability of the earnings streams going forward, we came to the conclusion that we could reduce our allowances which we booked originally against these deferred tax assets.

That's an ongoing process which happens every year, typically in the third quarter, for Winterthur in the fourth and also for the whole Group.

Okay. On your answer for the number of shares. You've 30m shares but I imagine that at a share price of CHF0.42 (ph), one still has to expect these 30m shares to come into the calculation of earnings going forward? So basically the presentation which we had in the second quarter report was the more relevant for us?

It's basically accounting rules that allow -- requires us to do so when we account for the treasury stock that we hold as share awards.

Okay. So when you say that the accounting rules require you to do so, that indicates that you too would have preferred to leave it at the higher number shares, as reported in the Q2 results?

Unfortunately, my preference doesn't count in this aspect and we have to follow the rules. If you would like to have more details, please call Investor Relations. They will go into all details in that respect.

I appreciate it. Thank you.

Okay. Thank you. Next question please.

We have a question from Mr. [Christian Stark], Cheuvreux. Please go ahead sir.

Yes, good morning. I have 2 unrelated questions. The first is, you gave some indications that you had in Private Banking inflows there was some shifts from structure products into shorter-term structure products which don't count as invested assets. Could you possibly quantify how much that amount was, just to get a better understanding of what the inflows and outflows were?

Because this money actually stayed within the organization and maybe also indicate what the margin was? Whether the margin on these shorter-term products is comparable to the longer-term structure products?

And then second, unrelated question is on Winterthur. Just on the ongoing fixed investigations in the US. Will that in anyway effect one of your 3 remaining units, and therefore make it more difficult for you to sell any of those in the upcoming future?

Thank you for your question. Regarding the net new assets, I can confirm to you that it was a material amount but we don't disclose how much the amount was. The fact that we mention it shows you that it must be material. And we are not disclosing, of course, the margins on any of these transactions that are ongoing. I am sure you understand that.

Regarding Winterthur and the effects of the -- of some of the issues in the industry market -- in the industry in the US and I tell you that this should not have any impact on pending cases, or on the Company as such.

Thank you.

You're welcome. Next question please.

We have a question from Mr. [Philippe Peson], UBS, Zurich.

Hi, there. A few follow-up questions. First, with respect to this Private Banking structure product theme. Is it something which you expect to continue? That basically your ability to place these products is going to be reduced, and this could affect your invested asset definition in terms of net new money?

The second point is, your answer with respect to the 53% comp ratio and CSFB combined to the colleague's with respect to the spike in headcounts. Can we take that as a run rate that your basic guidance -- that you mean 53% for CSFB is a decent run rate going forward?

And third point is, loans and(ph) provisions, could you just touch on what you believe is a normalized level? You were, I believe, at 7 basis points of risk rated assets lowest(ph) provision charge annualized in the quarter. What would you think going forward is a reasonable level? Thank you.

Thank you for your question. On the guidance, the only thing we say is that we have now very favorable credit environment, which of course indicates that this is a very low level that we have right now. But that might ease out there.

Regarding the Private Banking and the -- You talked about a change of definition in net new assets. That definitely not what we can do because that is not a definition we have anyway. And so therefore, we -- from that perspective there is no - if I have correctly understood your question, then we don't intend to change definitions.

No, I didn't mean that you've changed the definition. I meant whether you expect this to continue in future quarters, that people might move assets out of structured products into cash type products. Which would then affect your net new money number negatively. Is that just a Q3 event or do you see any indication whether this could continue into the coming quarters?

As you're saying, as you know, all these structure and investments have a defined maturity, so that is obviously something which happens from time to time. But I would say the impact in Q3, which was much more material than on average - that is why we mentioned that. So in this sense it's somewhat volatile but, with respect to the overall level of structure and investment products, we regard this to be fairly constant going forward.

And your other question on compensation ratio, I give it back to Neil again.

And I think that part of the question was around, given that we had the increase in headcount, yet we remain the same at 53.2%. Is that something we can anticipate? Again, the thing is that the increase in headcount to us was not a surprise. When we developed the 53.2% earlier in the year, we did anticipate that we would be hiring people. It was part of our budget.

Again, we think it's good number, estimating this year from what we know in the marketplace. It'll be hard to project beyond that at this point. So I think we're happy with that number for this year.

Thanks.

Thank you. Next question please.

We have a question from Mr. Jorg Konders, West LB. Please go ahead sir.

Yes, good morning from Dusseldorf. A question here concerning the asset management and administrative fees. They collapsed quite dramatically compared to Q2, and you mentioned that there was a shift toward lower margin products. Was this -- Is this a flow out of hedge fund into money market funds or what is behind it?

Okay, let me first reiterate what I said when I was going through the slide presentation. The main reason for this downfall, so to say, in Wealth and Asset Management was, of course, in equity gains. We couldn't book anymore in Q3 compared to the excellent quarter we had in Q2. A minor effect was the other one you mentioned and, Neil, you can probably give the answer.

Yes. The outflow was more, or I should say the switch, was more from equity funds to fixed income funds, which generally are lower margins. And within equities there was a movement from the highly transactional funds to the more passive funds, which are also a little bit lower margin.

Okay.

Thank you. Next question please.

We have a question from Claudia Meyer, Bank Vontonbel. Please go ahead ma'am.

Yes, hello. I have a question regarding minority interests. I have seen that they have flopped quite considerably in the last quarters. After second quarter 2002 results, IR actually explained that this is due to an increase in the assets from private equity and other funds that were consolidate in the balance sheet. Now I don't have any more information on this amount.

Looking at marketplace, I wouldn't assume this amount has changed that considerably. So I'm quite puzzled and I would like to know what actually drives these numbers? Thank you.

Thank you for your question. You have found the reason for that fluctuation yourself. It's basically the -- what is the FIN46R consolidation rules we have under US GAAP, which forces us to consolidate private equity investment, even though we may only have 1 percentage point of ownership fully into our P&L. Which, of course, inflates revenues and is afterwards again deducted on the minority interest line. We have given the numbers if I'm not mistaken, and it was CHF500m roughly in Q2, and it was roughly CHF200m in Q3.

So, can I have one follow-up question?

Please.

So what is the reason why it has went down from first of all CHF8b in second quarter to only CHF2b in third quarter? I don't understand.

Sorry, what figures are your referring to now?

I understood that you said something of CHF5m and CHF2m?

No, I said CHF500m was the P&L effect, top line effect in the second quarter, and CHF200m top line effect in the third quarter. Which, of course, is also the -- exactly the same number effect on the minority interest line in the P&L.

Yes, but I still continue without understanding. Because I was told that this CHF500m, or now CHF200m, would be influenced by the amount of this thing for -- I am aware of this FIN46R consolidation. And I was told that the increase from first quarter was due to a considerable rise in assets that you would need to consolidate. So it went up from CHF1b to CHF5b.

And now I am just wondering why this number went down again, and I am puzzled and I can't see the number that you have reported it now for 2 quarters in your third quarter report. So I was wondering whether this portfolio was going down? From market it is being hard to assess this. So I'm wondering whether there are some influences and what is actually triggering this number?

I can assure you there is no other influences there and it's basically -- Can I ask you to contact Investor Relations with regard to the detail of the figures?

I have already done so, so I was wondering for you Renalto(ph) actually.

Okay. But I can reconfirm that this number is dependent, of course, on the results of these equity investment companies that we have to consolidate. And that fluctuates, of course, over the quarters, partly from [indiscernible] depending on what inflow they have on their funds, and how the return was. And we have -- just have to consolidate that, whatever the fluctuation is. And therefore you see that also reflected in our figures.

For the details, please, I would appreciate it if you go and talk to IR. They can give you the exact figure and definitely make sure to convince you that there is no other effects included here.

Okay, thank you.

Next question please.

There's a question from Mr. [Gideon Meyer], NZB. Please go ahead sir.

Hi, I'd like to come back on your Life and Pensions policyholders dividends payout. Can you tell us how much the restatement of the [earnings base] really made up from the switch? Or the change from Q2 to Q3? So I can calculate the run rate.

Well, generally this -- there are many factors leading into this shift but in the end -- In simple terms we have this issue in Switzerland we call the legal quote for our group life. And it's long-term earn rate has changed and we have been evaluating. This is a normal process, this is a normal course of business, that we have to evaluate long-term earn rate.

Now, if this long-term earn rate goes down by, let's say, 50 basis points, this leads to the fact that the policyholders which are normally eligible for 90% of all earnings or dividends out of our investments. The long-term earn rate drops then the policyholder in the end will be getting a lower dividend out of his investment.

So -- and we in the past have been working with a higher long-term earn rate due to the correction, by 50 basis point in this case. This leads to the correction or to the shift.

Did you do any changes in Q2 or Q1?

No, these first two quarters no changes.

Thank you.

Next question please.

We have a question from Mr. James Rossiter (ph), Standard Evening. Please go ahead sir.

Hi, [indiscernible]. I wonder if we could return back to the institutional securities and the comp ratio. You've mentioned headcount increased. I wonder if you could actually give us a number that's on this -- in CSFB if the headcount increased quarter-on-quarter? And whether you can actually be a bit more specific about cost timing measures? Are you actually going to be cutting back on staff, particularly in CSFB?

The context under, I think one of your predecessors John Mack at the beginning of the year, said that 'pushing at the edge of equities and we'll be hiring now'. Equities have fallen, I know you might say seasonally, but fallen right off. Could you give me a bit more clarity on those points, please?

Yes. I just want to say the question was around the headcount increase?

Yes. What actual number has it been and where has it come from within CSFB?

Yes, it's actually in the report here you'll see the breakdown. You want a breakdown between Wealth and Asset Management and institutional securities?

Yes.

Okay, well the headcount increase that you see from quarter-to-quarter is really primarily around institutional securities.

I'm not seeing the number, sorry, I'm on page 20 or page 18-20, there's no number in there.

I have a number on page 20 here of going from 15,801 in the second quarter to 16,519 in institutional securities.

Okay.

And if you -- if -- on the 22 you'll see the number of employees in Wealth and Asset Management went from 2,917 to 2,931, and you can see it's been pretty constant.

Okay. So, it's globally on the institutional securities. Is that -- A lot of that come in from London? It's about 700 odd isn't it?

The 700 is pretty well geographically spread across Asia, Europe and the United States.

Okay. What about the cutbacks though? You've talked about an ongoing sense of cutting back. It's that actually mean that you're going back into reverse in CSFB on this recent expansion?

Yes, again, that is wrapped up in our planning process that we're going through, as you know. But that's something we're in the process of making(ph) and we'll be talking more about that in December.

Okay. But the good news has been -- there's quite a huge jump on M&A advisory? It's still a relatively small proportion of your investment banking, about 27%. Are we going to see a return to - I don't want to keep the conversation on hold - but are we going to see a return to big bonuses, do you think, or on that part of the business?

In the investment banking side are we going to see returns to big bonuses?

Yes.

Obviously, we try to keep our bonuses together with where we think the action is on the rest of the street. But obviously, as business go up and down, bonuses will go up and down.

Okay. But you can't give more until -- What timeline are we expecting? I thought there might have been something today on the new management structure or new business restructuring. When we will hear things do you think?

We're shooting for December 7, that's our Investor Day.

And that's when you'll -- we'll see what's happening? Okay. No plans for buying a bank for quick growth in market share?

I didn't get the question.

You also said -- talked about increasing -- while also increasing market share. There are no plans, are there, for bolting on the investment banking is there?

Again, that's something that's all part of what we'll discuss on the 7th.

Okay. Thank you very much for your time.

Thank you. Next question please.

The final question is a follow-on question from Mr. Mark Fogey, Lehman Brothers. Please go ahead sir.

Thank you very much. Just 2 follow-up questions. One on the litigation position at CSFB. Where are you on the review of your litigation reserves? Are you currently reviewing those or does the expense in the third quarter pretty much reflect your current assessment of litigation liabilities?

And then secondly, just following up on some of the comments you made on XL Capital. Am I, or should we assume then that it's very likely that this matter is going to be turned over to an independent actuary. Given that you've requested the final reserve seasoning agreement from XL? Thank you very much.

Thank you. Glad to answer that question. First of all the, of course the litigation reserves are not reviewed just haphazardly. There's a continuous review we do and particularly in CSFB where the issues are outstanding. Let me just be precise. The amount that was mentioned was an increase in the reserves of litigation fees. It was not an increase in the amount of reserves because, as we constantly say and otherwise we would say otherwise, we believe that our provisions are at the level they should be.

When it comes to XL Capital, there is no route defined going forward, and we have to see on how this comes back now. As we have mentioned before, we are expecting the response from XL within the next 30 business days.

Thank you.

Thank you. Next question? No more question? So, I will finish with that. I thank you very much for your interesting question. I hope we could answer them to your satisfaction. And I'm very much looking forward to seeing you next time either on December 7 or at the next announcement. Thank you very much and have a good day.