Aspira Women's Health Inc.
Q2 2016 Earnings Call Transcript

Published: 20 Jul 2016

[Operator:]

Welcome to the Allied World Second Quarter 2016 Earnings Call. My name is Christine, and I will be the operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Sarah Doran, Senior Vice President-Strategy, Investor Relations and Treasurer. Sarah, you may begin.

[Sarah Doran:]

Thank you very much. Good morning, and welcome to Allied World's discussion of our second quarter 2016 results. Hopefully, all of you have seen our press release and financial supplement which were released last night after the market close. This call is being webcasted and the webcast replay will be available later today and for the next month. All of these materials can be found on our website at www.awac.com under the Investor section. Scott Carmilani, President and CEO; and Tom Bradley, Chief Financial Officer will deliver our prepared remarks. Also with us to assist with your questions are Marshall Grossack, Chief Actuary; and John Gauthier, our Chief Investment Officer. Before I turn it over to Scott, I'd like to note that our presentation today may include forward-looking statements within the meaning of the U.S. Federal Securities Laws. The company cautions investors that any forward-looking statement involves risks and uncertainties, many of which are outside of our control and is not a guarantee of future performance. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These factors are described in the company's filings with the SEC. We're not obligated to and do not undertake any obligation to update or revise forward-looking statements, which speak only as of the date on which they're made. Also, in our remarks and responses to questions, we may mention some non-GAAP financial measures within the meaning of U.S. Federal Securities Laws. Reconciliations are included in our earnings press release and financial supplement. And now, Scott Carmilani.

[Scott A. Carmilani:]

Thank you, Sarah, and good morning everyone. Thanks for joining our second quarter 2016 earnings conference call. I'll go through the summary performance of each of our three segments, and Tom will provide some more color on the financial results. Overall I am very pleased with the results of this quarter and what we have achieved in the first half of this year. For the quarter Allied World generated a solid combined ratio of 92.5% which included $37.8 million of favorable reserve development and also absorbed $21 million of catastrophe losses. We generated an annualized return on average tangible equity of 20.1% in the second quarter and 14.9% year-to-date. As you have seen and heard from us over the past two quarters we have been very focused on reducing our volatility and our catastrophe exposure. Our amount of losses, the PMLs have come down materially since year-end. This quarter there were a number of catastrophe events worldwide and with only $21 million of cat losses experienced from the Texas storms and Canadian wild fires, Allied World's losses were well within the expectations and we believe modest compared to reported industry losses. We were very happy to see the results of these efforts. While our top line gross premium decreased modestly this quarter in an active management of our diversified underwriting portfolio. We have still selectively grown lines where the conditions remain attractive while aggressively shrinking and allowing visit to move that is currently more challenged. We continue to seek appealing opportunities in our core lines of business but are quick to identify market shifts and issues that work to pivot accordingly. Over the last nine months we have also significantly decreased the investment portfolio. Downsizing public equities in particular and now the non-core portfolio in general accounts for 21% of the entire investment portfolio. This has directly benefited our net investment income this quarter. NII is up 30.6% compared to the prior year quarter. We have many bright spots to report this quarter and our North American business in particular is showing the benefit of our focused portfolio management. For the second quarter of 2016 the segment put up 92.3% combined ratio. While top line decreased slightly around 1.8%, we saw strong growth in our primary construction, especially environmental and program businesses offset by declines in lines that are more challenged like property and primary casualty. As you have heard from us before, the U.S. remains the strongest rate environment globally with overall rates on average about flat in that space. Similar to last quarter, the international rate environment remains more challenged than U.S. especially in London and European markets. Our global markets insurance segment gross premiums declined 7% quarter-over-quarter driven by reductions in European and large businesses both in rate and in business loss. We have begun to capitalize on organic growth and opportunities in Asia Pacific market that had modest growth in the region in the quarter two of 2% to 3%. While our focus heavily remains on getting the global markets insurance segment to profitability we did see the expense ratio in this segment decline about three points quarter-over-quarter and recognize we have more work to do. In the re-insurance segment, our top line decreased by 4% compared to the same period of last year but in large part through underlying discipline and to reduce participations. As in the past this segment continues to contribute meaningfully to our underwriting profitability and put up an 80.6% combined ratio for the quarter and almost eight point improvement from the second quarter of last year. With that I will turn it over to Tom, our CFO. Thanks Tom.

[Thomas A. Bradley:]

Thanks Scott and good morning everyone. For the second quarter of 2016, Allied World generated underwriting income of $45 million, operating income of $83 million, and net income of $153 million. Our results benefited from $130 million of investment returns, and $38 million of net favorable loss development on prior-year reserves. Our reported loss ratio for the quarter was 60.6%. This includes 6.3% of net benefit from those reserve releases. The ex-cat accident year loss ratio was 63.4%, about a three point improvement over the 66.3% recorded in the same period last year. In addition to the 21 million of cat losses mentioned by Scott this quarter includes 11 million of total losses from the Ecuador and Japan earthquakes, European floods, and Australian storms. As Scott mentioned PML's are down materially since year-end. We indicated last quarter that they would likely pickup in the second quarter as we were able to cut back on our corporate cat cover purchase, the benefit of which will appear over the next four quarters. For this quarter the company's expense ratio decreased to 31.9% from 32.4% in 2015. This improvement was largely driven by the lower acquisition ratio in the global markets insurance segment. The prior year quarter included 3.4 million of global amortization from the RSA acquisition. G&A expenses decreased by $3.6 million despite the investments we are making in our Asian platform. As we plan for a reduced top line in 2016, we took action to reduce expenses as well. That expense management will continue as we navigate through the cycle. We feel our expense profile provides us with a competitive advantage in the marketplace and we are focused on maintaining that going forward. Turning to investments, the total return on the overall portfolio was 140 basis points including $56 million of net investment income and $74 million of net realized gains. The net investment income was up 30% over the prior year quarter and 5% over the first quarter. The increase was driven by the increased allocation to core fixed income, higher returns from hedge funds and private equity, and the improved performance of Allied World financial services. The increase in net realized and mark-to-market gains was also driven by gains across fixed income, hedge funds, and private equity. Similar to last quarter, the core and non-core split of the portfolio was 81% core, 19% non-core. This compares to 72% core, 28% non-core a year-ago as we began to reduce risk in the portfolio in the fourth quarter. We continued to dynamically manage our investment portfolio but are very pleased with the current composition and performance given the environment. Regarding capital management, the previously mentioned de-risking of the investment and cat portfolios provided us with continued capital flexibility. As such we were very active with our share repurchase program this quarter taking advantage of the attractive valuation of our stock. We repurchased about $90 million or 2.5 million shares of stock during the quarter at an average price of $36.13. Through yesterday year-to-date the company has repurchased a total of 156.7 million of stock at an average of 89% of the current diluted book value per share. This includes an additional 16.7 million purchased during the third quarter to date. This also leaves us with $410 million remaining on our outstanding share repurchase authorization. Despite the significant repurchases, we ended the quarter with shareholders equity of $3.6 billion of increase of almost $50 million from last quarter. These results throw diluted book value per share to $39.70 at quarter end, a record high for Allied World and 4.1% above the first quarter. Annualized operating income on average equity was 9.3% for the quarter. Financial leverage was 18.6% which is adjusted for the 500 million of senior notes issued in October 2015 and I took operating leverage of 0.66 times. The 500 million of senior notes issued in 2006 mature on August 1st, so next quarter will be the last with additional interest expense related to the refinancing. With that I will turn the call back to Scott for closing remarks.

[Scott A. Carmilani:]

Thanks Tom and let's say I am very pleased with the efforts that the entire staff has made to control and manage costs and to reduce the expected volatility for both our investment portfolio and our underwriting portfolios. I appreciate that some of these decisions and actions that have been hard to execute but they have been crucial to us and thus they provided a capital flexibility that Tom mentioned that has enabled our improved returns this quarter in this tougher 2016 business environment. With that I am going to let it open to questions. Thank you operator.

[Operator:]

[Operator Instructions]. Our first question comes from Sarah DeWitt from JP Morgan. Please go ahead.

[Sarah DeWitt:]

Hi, good morning and congrats on a great quarter. The operating ROE in the quarter of 9% and 10% if you normalize for the interest expense, that was a big improvement versus 2015 as well as the first quarter especially given it was an active cat quarter, do you view that as a great run rate in the current environment?

[Scott A. Carmilani:]

In the current environment it is hard to say anything is a good run rate but we thank you for acknowledging the improvement and we are certainly striving to get it in that neighborhood.

[Thomas A. Bradley:]

And Sarah as you know we tend to focus on total return and total ROE but the shift in the portfolio to a more core fixed income is allocating more of those earnings onto the operating line.

[Sarah DeWitt:]

Right, of course. Okay, and then on the reserve releases, those accelerated quarter-over-quarter, can you give us some color on what drove that?

[Scott A. Carmilani:]

It is really just our normal quarterly process. I think if you look back in prior years it is certainly not an extreme amount. It is only I think $12 million more than we did in the first quarter but it is just our normal process going through line by line, year by year on a quarterly basis.

[Sarah DeWitt:]

Okay, great, thanks for the info.

[Operator:]

Thank you. Our next question comes from Jay Gelb from Barclays. Please go ahead.

[Jay Gelb:]

Thanks. I was hoping you can discuss in a little more detail the plan to improve underwriting profitability in global markets?

[Scott A. Carmilani:]

Sure, there are two or three lines of business which we are deemphasizing; aviation being one, marine hold [ph] and a couple of the territories that we operate there. As well as there is a shift going on in how we write property business in that territory which I am not inclined to talk too much detail about but we are shifting some of the business we write and how we write it and that should improve the profitability of the underwriting components of that segment. As well as I mentioned in my comments, we are working hard to reduce expenses both on a fixed basis and on a flex basis where we can. And it is a slow moving goal than it has been in North America but we are making steps and improving has begun.

[Jay Gelb:]

Do you feel you have adequate scale in that large business especially in light of the Brexit decision?

[Scott A. Carmilani:]

Well like the Brexit decision we are quite happy with the relative scale of this business. I think that is going to play out over two, three, four years. It is not an instant thing, Brexit, especially for the large market. It will be sometime before there is such a massive change or if there is even a massive change. A lot will depend on the licensing that Lloyds gets in and around the EU. But as you may know we are licensed in other European territories and in Asia directly so, that is less important to us than it might be for some. We are not wholly reliant on that and it is a component of our global markets business, not a reliance on our global business. Am I happy with the scale overall, no, I will never be happy with the scale overall. We are always striving to get better, bigger, and stronger. But this is not the environment to be pushing that total.

[Thomas A. Bradley:]

And Jay specifically what Scott is referring to is we have an Irish company which gives us the EU passport for any business that we -- that is eligible. So, we can flex from -- generally flex from the Lloyd's platform to the Irish company to access the European business.

[Jay Gelb:]

It is helpful, thank you. And then just final one on capital management, last year Allied World was -- returned 150% of capital to shareholders if you combine dividends and buybacks as a percentage of operating earnings. I mean, even if it is slightly down from that but it is still pretty significant. Is that on track with the plan in terms of returning much more in annual earnings to shareholders?

[Thomas A. Bradley:]

Our plan would be to earn more so it is not such an odd number. But I look at it more as we have the $500 million authorization from shareholders over two years. Our general goal will be to utilize that. So, I think it more as a target of return as opposed to trying to guide it to what the earnings are. One of the reasons we were able to return more than we earned last year is because we had the capital flexibility to do so and we weren’t just tied in to what we were earning in that period.

[Jay Gelb:]

That is great, thank you.

[Operator:]

Thank you. Our next question comes from Charles Sebaski from BMO Capital Markets. Please go ahead.

[Charles Sebaski:]

Good morning and congrats on a very good quarter.

[Scott A. Carmilani:]

Thank you.

[Charles Sebaski:]

Just a couple of questions, first on North America, just curious on how you guys are looking at that business on a net versus gross basis. Obviously there is underwriting improvement but the fee is increasing as well. Wonder how much that is a contributing factor to that or what the thoughts are on how you have come to how much you want to retain given the capital you have?

[Scott A. Carmilani:]

Well, I would say for now and for this year and what we have implemented this year the difference in -- the change in the different stream growth and that is more a function of the attractiveness we are seeing in the use of the reinsurance market and the fee and commissions we get. So, it is helping us to reduce cost and get a better purchase thus lowering the volatility of the portfolio which has been the goal and reduce expenses. So we have used it more this than we have in the prior year to get a better result.

[Charles Sebaski:]

Okay, and the year-over-year combined -- the accident year combined ratio improvements or loss ratio improvement, how much of that is driven on reinsurance versus how much is driven on rate or the change in the underlying book mix of business?

[Thomas A. Bradley:]

Chuck there is some favorable impact from the mix of business but the reinsurance business is a big driver. The amount of losses which we talked about both cat and non-cat in the quarter and in the first six months are a bit below what we would have anticipated for traditional losses during that period compared to a year ago where we were adding to reinsurance property reserves during the second quarter given a big -- I think we had one big event and a number of smaller events. So, I think that is probably the single biggest driver of the change in the accident year.

[Charles Sebaski:]

Okay, I just wondered on the reinsurance business just a standout result on kind of all metrics and I guess if I look at the 52 accident year ex cat loss ratio, is this -- was there some fortune in this number, is this along the lines of what you expect this to be. I know that there is some changes in cat buying and others so, any thoughts obviously and also the variability in the reinsurance line but that was just such a low number I wanted to ask about?

[Scott A. Carmilani:]

I would say the reinsurance team has been very, very disciplined in their decision making as to their participation and I mentioned that in my comments. So, when they saw volatility and/or creep they either reduced participations or walked away from business. [Indiscernible] they were very disciplined in their behavior, that helps contribute. As Tom said, lesser cat and less business also helped. And couple of the businesses like crop and others just performed better than expected for 2015 and into 2016. So, we are reaping some of those benefits.

[Charles Sebaski:]

Okay, and then just finally on reserves on the early accident year releases, in the North America and global market on casualty, if I look at the 2010 and back it seems that the first half of this year you guys have released about 10% of the existing outstanding reserves. I am just curious if that case is closed or is this freeing up of IBNR, just what you are seeing on those back years on the releases would be helpful? Thanks.

[Scott A. Carmilani:]

Yeah, I mean it is both as kind of you expect. And our history is that most of our reserve releases come from the oldest years so that 2010 and prior bucket is drilling where that is going to hit. So, occasionally there is cases been in litigation for long time that gets resolved and comes down and then the rest is just the actuaries view of the remaining liabilities in those years and the IBNR comes down gradually each quarter. Including all case years on large excess policies where losses or expected losses aren’t hitting attachments.

[Charles Sebaski:]

Thank you very much for the answers, very nice quarter. Thanks.

[Scott A. Carmilani:]

Thanks Chuck.

[Operator:]

Thank you. Our next question comes from Bob Glasspiegel from Janney. Please go ahead.

[Robert Glasspiegel:]

Good morning Allied World. Tom, you addressed the reinsurance action might have some impact on the expense ratio and I think Scott followed up with Chuck's answer and Scott also mentioned some actions in global so is there a sort of target on where the expense ratio can get to looking all -- in the current environment?

[Thomas A. Bradley:]

Yeah, I think given our current mix particularly with the addition of the Asian business, I think 31 is probably our long-term target. We are not there yet but the actions that we think we can execute on over the next year would be the right target.

[Robert Glasspiegel:]

And it is sort of a 10 to 20 basis points a quarter pace to get there… or is it going to be gradual?

[Thomas A. Bradley:]

Yeah, by gradual I mean I think it will take that long just to get there. I don’t really think about it as x amount per quarter but obviously we would like to see continued improvement but there may be some bigger steps as well.

[Robert Glasspiegel:]

I was wondering if John could give us a few sentences on what is going on in the alternative investment portfolio and where you are making progress and seeing encouraging trends?

[John J. Gauthier:]

Yeah, hey Bob we had a couple of things that we realized this quarter that were attractive. We had a couple of investments from early in 2015 that returned quite attractive returns and then actually we were able to realize them that was a decent part of the realized gains in the alternative. You have seen an uptick in Allied World Financial Services. We have continued to see draw downs in our private equity portfolio and remember a fair amount of that is more levered credit than true kind of traditional private equity. So, we are seeing the benefits in the kind of a net investment income from those draw downs and that money being put to work. So, there is still challenges out there, our hedge fund returns in general are challenged. They were most of 2015 and into 2016. As you will note we had decreased our hedge fund allocation and had a more concentrated portfolio with our affiliates over the last few years. So, we have not seen the negative aspects of that. So, we feel pretty good about where we are in the relative mix of PE to hedge funds within the Allied alternatives bucket.

[Robert Glasspiegel:]

Any of the affiliates and good opportunities that was raising money in a tough environment?

[John J. Gauthier:]

We have seen our kind of traditional managers have done pretty well in raising assets. One of them obviously has a distressed component that is available to limited partners and they are seeing increased interest there. And obviously our real estate and our kind of debt affiliates managing those asset classes have seen good flow. So, knock on wood it has been a good first six months for those managers.

[Robert Glasspiegel:]

Thank you.

[Operator:]

Thank you. Our next question comes from Amit Kumar from Macquarie. Please go ahead.

[Amit Kumar:]

Thanks and good morning, just a few quick questions, first of all congrats on the reserve piece of the equation. Marshall, can you just talk about some of the trends we saw in med mal [ph] and hedge care liability, we did not see any noise, maybe just expand on that a bit?

[Marshall J. Grossack:]

Yes, first of all remember healthcare liability is now included in our -- the professional liability includes the managed care DN&P [ph] is now part of professional liability and given that disclosure there you can see it doesn’t really have a material impact or anything that is noticeable. But…

[Thomas A. Bradley:]

I mean I will just -- obviously we took some action at the end of 2015 and I would say it was well measured action. I think it was right now within after two quarters in it was decent. So we are pleased about that.

[Amit Kumar:]

Okay, fair enough. The second question is -- this goes by the first question on the discussion on ROE, if you look at this quarters ROE versus I guess street estimates in terms of where they are, if you were to ramp up just ahead of 9% ROE I think that probably implies a 30% to 50% upside for the current street estimates. Is that -- are we missing something in that thought process or is that a fair comment?

[Thomas A. Bradley:]

Yeah, I mean you can do that math Amit. It is high, we don’t manage it just say on the estimate but we are just trying to deliver the best results we can.

[Amit Kumar:]

Okay, the third and final question on capital management and I know Jay asked this question, as your stock sort of closes the gap for book value and exceeds it, does the thought process on buybacks change at that point?

[Thomas A. Bradley:]

Yeah, in general our thought is value sensitive and price sensitive so we have bought back stock in the past that is over the book value, in a kind of declining rate. But we certainly are price sensitive to that and that is part of the reason you have seen the increase in activity in the first six months this year.

[Amit Kumar:]

Got it, that is all I have for now. Congrats on the quarter.

[Thomas A. Bradley:]

Thanks Amit.

[Operator:]

Thank you. Our next question comes from Al Copersino from Columbia Management. Please go ahead.

[Al Copersino:]

Alright, thank you. Quick question, I am fairly new to covering the company so I apologize if I am the only one who asked this question, but I was pleasantly surprised that given the cat activity around the world that the global markets segment had essentially zero cat losses. Now you have had some cat losses in the past, it is not obviously a focus of yours but could you talk about that, have you essentially eliminated the cat exposure there by way of reinsurance purchasing, what's happened there with the cat exposure in global markets?

[Scott A. Carmilani:]

Well, I would say we haven’t eliminated it. It is still there. We still have -- we have a smaller property both in global market than we had. We were sort of shy on Japanese exposure in the last underwriting season so we had virtually more exposure to that. And you can attribute it to underwriting discipline and the pricing in the market and where we picked our spots. Some of it is good fortune but we have been very fortunate that the business we have written hasn’t been subject to where the losses have occurred in the last six months.

[Al Copersino:]

Great, okay, thank you.

[Scott A. Carmilani:]

Thanks Al.

[Operator:]

Thank you. We have a follow-up Charles Sebaski from BMO Capital Markets. Please go ahead.

[Charles Sebaski:]

Good, thanks for squeezing me back in. Just had a question about the fixed income investment portfolio, about new money yields versus existing money yields. I know you have taken the duration out a little bit, I am just curious with this reallocation of capital from the de-risking, what the yield profile on that fixed portion is?

[Thomas A. Bradley:]

Yeah, that will be a continued headwind as we go into the second quarter or second half of the year. If you look at just our core fixed income and kind of market yield of that portfolio it has gone from 210 at the end of last year to about 153 to the end of the second quarter. We have eliminated a little bit of that yield drag by extending the duration but it is only a modest point. We have benefited by the fact that they haven’t had a lot of roll over in the portfolio in the first six months. So our yield has been pretty static, but that will be a challenge as we move into next year. We are offsetting that a little bit with some of the private equity related debt instruments that keep getting drawn down and provide us a much higher yield. But it is going to be challenge.

[Charles Sebaski:]

Can you give us some thoughts then on what net investment income and not the kind of the more run rate basis would be, is this 56 kind of that you have had in the quarter on a reasonable basis to think about investment income going forward?

[Scott A. Carmilani:]

I am going to ask John, a lot of the last changes we made in the portfolio were late in the third quarter so that the second quarter kind of reflects where the current portfolio is. John.

[John J. Gauthier:]

I think, couple of things, we have got the maturity of the note in target, that will be $500 million of cash going out of the portfolio. So, obviously the asset level will go down. Other than that I think the yield level will moderately decline over time. So I think you could do the math of the size of the portfolio decreasing and a yield going down over time but it will be an ongoing challenge offset by about -- you could annualize the draw downs of the private equity portfolio. Put a high single-digit yield on that and that is going to be a positive benefit if you kind of put those three components together.

[Charles Sebaski:]

Thank you very much for the color.

[Operator:]

Thank you. Our next question comes from Michael Nannizzi from Goldman Sachs. Please go ahead.

[Michael Nannizzi:]

Thanks so much. Just a couple of quick ones if I could, in reinsurance looking at the profitability there, you shifted a bit towards casualty versus property against last year, the underlying is a lot lower. Just looking at some color on what drove that and if the shift towards casualty is helping your margins there or should help your margins or if maybe this was just a result of just a lack of large loss activity or non-cat activity…?

[Scott A. Carmilani:]

It certainly reduces expected volatility as at least from a model basis and from an absolute basis because we have less cat risk in the portfolio which we feel I think is prudent in this current environment. It is less of a shift to more casualty and more of a shift to the less cat risk. And in some cases we reduced participations in some of our casualty businesses and did what we can to keep what we think are good customers.

[Michael Nannizzi:]

So did that shift from cat to casualty help drive down the underlying loss ratio I guess year-over-year or I get the volatility point, I am just saying purely on 12 point reduction in underlying loss ratio there?

[Scott A. Carmilani:]

Not so much because there has been as we have reported very low cat so that has also helped the points, so it has been win-win.

[Thomas A. Bradley:]

Mike, the change in the property is still the big driver there. With the casualty business we are going to book that at our pick and it is going to like on primary side it is going to stay out there for a while until we take it down.

[Michael Nannizzi:]

Got it, okay. And then I guess longer-term, looking ahead and looking at the three segments, how do you think about where you want to be in terms of the breakout of profitability and I am focusing just now on reinsurance as a percentage of the total but really in thinking about the three sub segments, do you want them to be roughly equal, do you expect North America overtime to be the larger contributor, and just trying to get an idea of how you see the overall business developing and how the different segments should contribute? Thanks.

[Scott A. Carmilani:]

Well, I hinted to that in my comments, North America is the biggest market. North America today has the best rate environment. So, if you would have fast forward what the world looked like right now for the next 18 months that certainly will be the driver both from the insurance versus reinsurance then from East versus West sort of components of the portfolio. But that is, I have got to put a definite caveat and button there. We are somewhat up to shift that if we see greater opportunity somewhere else. Today we are focusing on the consumer businesses in Asia and some of the specialty businesses in global market because the large account business and the very traditional business looks a lot less attractive and lot more of weight challenge. It is hard to foresee why anybody would want to be a large aviation writer in the current market we are in today. But that could change in a moment's notice usually for a bad reason.

[Michael Nannizzi:]

Got it, so it is overtime then like you would expect the reinsurance contribution to total profitability to decline overtime is that right?

[Scott A. Carmilani:]

It might be a lesser or greater proportion of where it is right now. But the reinsurance profitability I think is in a comfort area, how much more or less they write will be a function of the quality and the opportunities in the market place.

[Thomas A. Bradley:]

And Mike if you go back over five years and look at that reinsurance mix I think we pretty nicely managed it up in the harder market and now down in the softer market last two years. It does have the ability to be a little more opportunistic and I think we have taken advantages of that both ways and certainly poised to respond to any positive parts of the market over the next couple of years.

[Scott A. Carmilani:]

They have positioned themselves not to be beta [ph] in North America or global markets. So whether they move up and down $100 million swing for them up or down in any of those markets is meaningful.

[Michael Nannizzi:]

Alright, great. Thank you.

[Operator:]

Thank you. Our next question comes from Ian Gutterman from BAM Funds. Please go ahead.

[Ian Gutterman:]

Hi, thanks. Al kind of got all my questions but maybe if I just elaborate a little bit or ask you to elaborate a little bit more, I understand what you have talked about obviously reducing the P&L and things like that helping, I guess with what is surprising a little bit though is the other side done that as well and still in their preannouncements are higher than quarters for the last few years, and just so look at 16 million this quarter on reinsurance and over the past few years quarters when you have had cat have generally been higher than that. So it seems like a very strong performance, is there anything -- is there something about the change in the participation in yield that helped this quarter or something else about repositioning that was different than what we would have seen a year or two ago?

[Scott A. Carmilani:]

No, actually yields had nothing to do with any of the cats reported or otherwise for this quarter. We didn’t have any activity coming from that portfolio. So, the combination of the modeled numbers and people change how they model things. We haven’t changed it, we have been more focused on it. And we have actually reduced writings in a lot of places where the Texas storms and/or Midwestern storms might have been greater in the past, we have managed that business differently.

[Ian Gutterman:]

Got it, that makes sense. Okay, great and then the only other area that I don’t think came up, last year you had a couple of issues with trade credit in some foreign markets and I noticed one of the big three had a tough quarter, is there anything to read into that without that stuff you are already picking up on last year or is that something new that might be a concern down the road or I don’t know if you had any color on that?

[Scott A. Carmilani:]

You know as I mentioned in the last quarter we put more controls around trade credit, put more into some recoveries. We saw benefit from that and we have been re-underwriting that portfolio for the better part of six to nine months now. So, that portfolio for us is stabilizing.

[Ian Gutterman:]

Got it, so the news from one of those big three is not something that -- it wasn’t going to hit you this quarter basically so, it is sort of a non-event for you guys?

[Scott A. Carmilani:]

From what you have heard in some other markets, yes, it is a non-event. [Multiple Speakers]

[Ian Gutterman:]

Okay, great. Thanks so much.

[Operator:]

Thank you. [Operator Instructions]. At this time we have no further questions. I will now turn the call back over to Mr. Scott Carmilani. Please go ahead.

[Scott A. Carmilani:]

Thank you all for your good questions and your time and participation on the call. Enjoy the rest of your summer. Have a great day.

[Operator:]

Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect.