Aspira Women's Health Inc.
Q3 2016 Earnings Call Transcript

Published: 1 Nov 2016

[Operator:]

Welcome to the Allied World Third Quarter Earnings Call. My name is Sophia, 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 Giuseppe Montefinese, Manager, Investor Relations. Giuseppe, you may begin.

[Giuseppe Montefinese:]

Thank you very much. Good morning, and welcome to Allied World's discussion of our third 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 Web site 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 our 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 Carmilani:]

Thank you, Giuseppe, and good morning everybody. Thank you for joining our third quarter 2016 earnings conference call. I'll start by going through the performance of each of our segments, and Tom will provide more color on our financial results. Overall I must say I am pleased with the results of the quarter and where we are through September 2016. For the quarter, Allied World reported a combined ratio of 96.2% in a difficult market. Additionally we had strong investment results for the quarter which helps supplement our underwriting performance. We finished the quarter with $68.6 million of net income and increased our diluted book value per share of 1.7% compared to the second quarter. Year-to-date we generated an annualized return on tangible equity of 12.8%. Our 96.2% combined ratio for the quarter include almost $30 million of favorable prior year development. While we did not experience any new catastrophe losses by far during the quarter but met our reporting threshold, we were impacted by $30.3 million of losses in the current accident year resulting from increased frequency of loss events during the quarter. In the current accident year, the North American insurance segment incurred $21 million of current year losses from large property events including the flood in Louisiana and Inland Marine losses. In our global markets insurance segment, we incurred $9.3 million of losses in the current year from a number of global events including to navigation losses in the quarter. Turning to our top line, production decreased modestly in the quarter driven largely by strategic underwriting accidents to deemphasize lines with less favorable conditions while allocating our capital to lines which we view as more attractive. The U.S. continues to remain the strongest rate environment as we see it globally but casualty rates being flat for the quarter and property rates only down modestly 2% for the quarter. We continue to see attractive growth opportunities coming from our North American insurance segment which did grew slightly for the quarter at 1.3% led by growth in our specialty businesses like environmental, programs and excess casualty. The rate environment internationally continued to experience pressure across both Europe and Asia. The global market and insurance segment production declined by 4.5% from the prior period driven by reduction across several lines in both Europe and Asia-Pac. As we continue to write off or pivot out of certain line of business that we're seeing as lot attractive. We do see some bright spots within our international mix of business and are confident that over time this portfolio will benefit from our ongoing underwriting actions. We remain focused on bringing down that expense ratio to improve the profitability. In the Reinsurance segment our topline decreased more here 15% compared to the same period last year driven mostly by underwriting discipline and reducing participations for businesses not meeting our return hurdles. This segment has continued to perform very well and been a significant distributor to our overall underwriting profitability. Recently the industry was impacted by Hurricane Matthew. Although it is too early in the process for us to narrow down the exact dollar amount of losses incurred, we’re confident that we'll meet our Cat reporting threshold and feel comfortably will be within our quarterly capital load expectations for the fourth quarter. We expect the losses to be spread across all three of our business segments. And with that, I’m going to turn it over quickly to Tom our CFO. Tom?

[Thomas Bradley:]

Thanks Scott, and good morning everyone. For the third quarter of 2016, Allied World generated underwriting income of $21.5 million, operating income of $55.2 million and net income of $68.6 million. Our results benefited from $61.2 million of investment returns, and $29.7 million of net favorable loss development on prior-year reserves. Our reported loss ratio for the quarter was 64.4% similar to the 64.1% we reported a year ago. This quarter benefited from greater prior year reserve releases 5.1 point impact this year versus 1.3 prior. While we had no new catastrophe activity in the current quarter, we did increase our loss estimates by $4.9 million for the Texas hailstorms which occurred earlier in the year. That was a 0.8 impact on the current loss ratio. The lack of capital losses this quarter compares to last year when we experienced the Tianjin which added 5.5 points to the loss ratio. Offsetting this was an uptick in the large loss activity this quarter that Scott outlined earlier. This added 5.2 points to the loss ratio compared to a new impact a year ago. This is the main driver to our ex-Cat current loss ratio of 68.7% being 8.8 points higher than the prior year. For the quarter, the Company's expense ratio was 31.8% which despite the 10% reduction in earned premium is flat for the third quarter of 2015. We remain very focused on managing expenses to the challenging market conditions and resulting reductions in our top line production. Our total G&A expenses decreased by $1.6 million from last year despite an increase in stock comp expense resulting from the depreciation of our share price during the quarter. The larger decrease in net earned premium relative to gross written premium was due to increase of quarter share reinsurance this year which favorably impacted the acquisition cost ratio. We remain focused on risk managing our balance sheet and reducing our PMLs. Following the expected uptick in the second quarter, our PMLs in the third quarter continued with downward trend and significantly down from year end 2015. Likewise the non-core allocation our investment portfolio remains at 19%. Turning to investments. This quarter included the reduction of $500 million in this investments portfolio to repay our senior notes which matured on August 1. Despite this reduction, net investment income is up 10.7% over the prior year quarter and up 20% for the nine months. The total return on the investment portfolio was 70 basis points including $50.6 million of net investment income and $10.7 million of net realized gains. This is a significant improvement from the negative 80 basis point return in the prior-year quarter. The increase in net investment income is attributed to the increased allocation to core fixed income securities and higher returns from hedge funds and private equity. The increase in net realized and mark-to-market gains was driven by gains in equity securities, hedge funds and private equity assets, partially offset by losses and fixed income assets as a result of rising interest rates. As we said in the past few calls given the rise in interest rates, we've continued to slightly extend the duration of the fixed income portfolio to 2.9 years compared to 2.8 in the second quarter. As mentioned the core, non-core split of the portfolio remained at 81.19 this quarter and although, we continue to actively manage our investment portfolio, we feel this current allocation mix is where it needs to be in this environment. Turning to capital management. We continue to utilize our stock repurchase authorization, although it is not as much as last quarter due to the increase in our stock price. Through September 30 year-to-date, the Company repurchased almost 4.7 million common shares of Allied World stock for an aggregate cost of $166 million and an average share price of $35.61. This is 88.4% of the current diluted book value per share. This includes 717,000 common shares purchased this quarter at an aggregate cost of $26 million at an average price of $36.59. This also leaves us with just over $400 million remaining on our outstanding share repurchase authorization. We ended the quarter with shareholders' equity of $3.6 billion, an increase of about $31 million from last quarter. Our results drove diluted book value per share to $40.29 at quarter end, up 6.6% for the year and another record high for the company. Tangible book value per share was $34.67 up 7.1% for the nine months. Annualized net income of ROE of average tangible equity was 8.9% for the quarter. Finally, I'll mention that our financial leverage was 18.4% at September 30 returning to a more normalized level following the maturity of our senior notes in August. With that I'll turn the call back to Scott for closing remarks.

[Scott Carmilani:]

Thanks, Tom. Overall I have to say I'm pleased with the quarter's results and the performance of our insurance operations and the team's work in this tough environment. As well as I am happy with the contributions from the investment portfolio. This is certainly not an easy environment to operate in and I'm proud of what our teams worldwide have accomplished, managing expenses, underwriting and claims management despite the adverse market and industry conditions we’re facing. This is a true testament to the Allied World franchise and I'm excited to close out the year on a strong note. I will be excited to close out the year on a strong note. With that I'm going to open up the questions from the group. Thank you very much.

[Operator:]

[Operator Instructions] And our first question comes from Sarah DeWitt from JPMorgan.

[Sarah DeWitt:]

Hi, good morning. It looks like the operating ROE in the quarter when you exclude the large losses of around 9%. Could you just talk about your thoughts on the ability to get to a double-digit ROE in this current environments and what the levers you have to pull on?

[Scott Carmilani:]

We're certainly striving for that and of course a little bit more profitability's, little fewer losses and what we control most of the expenses. So we are doing a great job of keeping those down and continue to do so for the year. As Tom mentioned in fact that our stock price has moved it in the quarter, had a almost a negative impact on our expenses.

[Thomas Bradley:]

And I will note that our total return net income ROE for the nine months is 11%, so we like to track the total return, understanding operating return is important as well.

[Sarah DeWitt:]

Right. Good point. Thank you. And then could you talk about your appetite for M&A both in terms of a buyer or a seller particularly in light of some pretty specific press reports recently about you considering sales to a specialty insurance?

[Scott Carmilani:]

Sure, Sarah. This is an earnings call and while I appreciate the question, we like to keep to the earnings call. We are a public company and as much we're for sale indoor and acquisition models than the other public company.

[Sarah DeWitt:]

Okay, great. Thank you.

[Operator:]

Our next question comes from Amit Kumar from Macquarie.

[Amit Kumar:]

Let's try this again. Just very quickly I think you talked about the stock price movement and I'll referring as to stock price movement was partially linked to the consolidation discussion. Without specifically talking about Markel, I was wondering has your thought process evolved over 2016 and I know that we've talked about this in the past. We've recently seen the endurance deal and the discussion on bigger is better is back. I was just wondering if you could address that and talk about your strategy either as a standalone company or with someone else going into 2017?

[Scott Carmilani:]

Amit I'm sorry, last part bigger is better is what was your comment?

[Amit Kumar:]

Yes, I mean do you think that being a standalone company going into 2017 is better strategy versus emerging with someone else?

[Scott Carmilani:]

I don't think we can comment on rumors and/or strategic direction in the company, this is an earnings call as you know and we got to keep it fully [indiscernible].

[Thomas Bradley:]

We've always been a company that compete against bigger competitor in our industry and operating last three years to do. As Scott said we are public company, we also act in the best interest of the shareholders.

[Scott Carmilani:]

And you asked if our mindset has changed to this point in the year from the beginning of the year, no. Our mindset has always been open and have a very strategic doable the short term and with a key focus on the long-term value creation.

[Amit Kumar:]

Okay, that's fair. The second question I had was going back to the discussion in GMI and there was some noise in GMI in other specialty and there were some noise in professional liability in North America. Marshall, can you just talk about that a bit?

[Thomas Bradley:]

Let me start up with that Amit and then Marshall can jump in. GMI was the private development, it was mostly aviation and other specialty like trade credit. We've had some noise in that in the past, but they are both aligns at our much reduced emphasis going forward and underwriting. In North America they on the professional lines that's not attributable to any really single line of business or single big losses, but some increases in the average fix across some management liabilities, some lawyers, some miscellaneous E&O. And obviously you'll see a big reduction in professional liability prior year reserves in from the 2010 and prior. So to the same extent the reallocation up into the 2013 year. Marshall, anything to add?

[Marshall Grossack:]

Not really, I think you covered the point, so next.

[Amit Kumar:]

Just one final question and I'll re-queue. Going back to the discussion on buyback, we've talked about threshold and the stock price in the past, just based on where we are should we - how should we think about repurchases from here into 2017?

[Scott Carmilani:]

As you know we operate on algorithm M&A, a 10b5 program it is subsequent to price. We have bought back shares in the past above book value, but as you can imagine it would be at a slower pace than it - that it would be when it's dramatically lower. So we have the authorization we will use it strategically to do that, but as opposed to - and of course the stock.

[Amit Kumar:]

Got it. Okay, I'll stop here. Thanks for the answers and good luck for the future.

[Operator:]

Next question comes from Matt Carletti from JMP Securities.

[Matthew Carletti:]

Thanks, good morning. I just have a couple questions, touching back on reserves real quick. It has been a few quarters now that healthcare has remained quiet kind of across the board and I was hoping you could give us a little color there, how kind of actual been right as expected, have they come in a little better, but you’re obviously putting some caution on it and want to wait and see, what are you seeing underlying that that’s leading to thankfully things kind of holding from end the last year?

[Scott Carmilani:]

Yes, Matt as I said in the past the years in questions were really ‘12 and '13, and we had started a massively underwriting campaign in '14 and '15, we've seen approve of that in '16. The marketplace is still a little bit over aggressive in over results on terms and conditions they’re offering and pricing isn’t gotten that much better. But I would definitely say it’s performing within our expectations. We have a new team in there. They're doing a great job. They're seeking out opportunities, they're managing through that massive consolidation industry, both in the provider side and the seller side and they do have a very good job. The reality is it's just not a lot of rate out there and there’s a lot of competitors. So it’s not been massively growing, but I think we’re right in line with where we expect to be right now.

[Thomas Bradley:]

Yes, and then on reserves side, it’s obviously a lot of underline activity across all the accident years and we’re following it. But we remain comfortable with the reserve position, good line of business and we’ll continue to monitor it. Given the pain we went through a year-ago or in the fourth quarter. We're obviously not going to declare that we're going to start taking reserve down there at any kind in the future and may never, but we feel very comfortable with what's book today.

[Scott Carmilani:]

Yes, the good news is going forward, we're very confident that that industry in our product set and our people are poised to do good things in that marketplace and I do think it's going to be important part of the marketplace with the aging of the population and the ultimate fix of health care whatever that turns out to be. Your guess is who you wouldn’t mind. We would be well positioned to be interested in that market.

[Matthew Carletti:]

Great, really appreciate the color on that one. And one quick on the other one, if I could. On Global Markets Insurance just kind of can you update us on kind of how the RFA integrations going in and specifically as we look at that expense ratio how should we think about the expense ratio where trends over sort of next 12 to 18 months?

[Scott Carmilani:]

Yes, it’s almost finished being built, being the system. As here we are in November 1, of course always cost a little bit more and take little bit lower then you think when you get into the IT project. First quarter of next year, we should be mostly operational for all of our new - for all of our products over there. The teams they built, the team has been operating and doing a great job. They are making money a lot of the specialty businesses and that will make money in 2017. I’m confident of that. There are still a little overhang from some of the stuff that RFA had underwritten in the past and that we took on. We've done as much remedial action as we can and fortunately or unfortunately do to deal some carried through with some of the older business that in fact it matures, and that’s causing some hangovers. But all-in we retooled the global property market management team and their strategy. We retooled the professional liability book. We’re growing in healthcare. We’re growing in Indonesia. We’re growing in Singapore and Hong Kong, and we’re optimistic about what we could do in the age of packed space in the future.

[Matthew Carletti:]

Okay, great. And then as I think about that that is - as that growth comes on board and then obviously there will be investment in the systems, there is this kind of complete at that point that that's more or less just kind of operating leverage that helps expense ratio come down or is there from an accounting standpoint in terms of the investment in the systems as - investment set as well.

[Scott Carmilani:]

Yes, it's a good clarification question. It’s definitely economies of scale and we get that thing more efficient. But there's no secret to anybody and anybody who’s familiar with Lloyd that’s getting more expensive from a regulatory standpoint, from an operating standpoint. So as the rate of deteriorated, we are at the cusp of coming to scale there too, so we’ve got to minimize expenses in Europe, as well because that’s just the weak market.

[Thomas Bradley:]

Yes, as you know Lloyd has a growth pipeline for us for several years, but that the current headwinds are a lot tougher. So that’s not helping in our goal to rationalize expense ratio and get the scale.

[Scott Carmilani:]

The fact that we maintain a lot of underwriting discipline, maybe a juice to expense a little bit too high in that space, but the losses we avoided in the Chinese melees of storms this summer and we have then said taken place in the aviation market another that bigger companies would feel bigger losses individually. We’ve avoided a lot of what would be a lot worse this year.

[Matthew Carletti:]

Yes that's right. I think anybody taken today. Thanks for the answers and best of luck.

[Operator:]

Next question comes from Charles Sebaski from BMO Capital Markets.

[Charles Sebaski:]

Good morning, thanks. First question, I guess just a follow-up on that global markets and the attainment of scale. I guess I’m a little challenge to understand to right size that business from the underwriting loss, you need scale, but the business is contracting. So what's the time horizon to expect that to achieve scale and/or underwriting profitability?

[Scott Carmilani:]

Yes, let's be more specific. Where we’re contracting is very specific lined and we’re trying to grow in others. But we’re just not growing that fast enough on a quarter-by-quarter basis. But over time, we will more than we place. We’re contracting in aviation and marine or some parts of the marine book, other parts of marine book are growing. We’ve contracted in the general property market and gone through a more specialized technical price property offering around the construction business. We've constructed from what they call construction, E&C business, which is a big RCA account, and I think also we downsize our aviation right. We’re growing in healthcare, professional liability, primary, specialty businesses like casualty and retail property and wholesale property and we’re growing on a binder business book. So it's just the opposite that’s not immediate but the compounding effect will fully realize, but it’s just takes some time.

[Charles Sebaski:]

So it's I mean - obviously there’s the expense component on the scale, but there is also a book change than on underlying loss basis. So as the book is more seen here, is the change in book from aviation and marine to binding us for and some others. Is there a higher run rate accident year core loss ratio, so if I'm thinking about 2017 and how this business matures, what’s the expectation because there’s just a lot of moving pieces underneath? That's hard for us on the outside to understand how that's going to play out not for this quarter, but for 2017?

[Scott Carmilani:]

Yes, of course the question is what it will be of the letter volatile book, meaning a less large single individual losses and more predictable loss. Now actuarially will we reducing last picture dramatically instantaneously, no we’ll sort of slowly ease into that portfolio as we feel comfortable with it and may not be immediate in the early 2017. It's got to prove itself out.

[Charles Sebaski:]

Okay. Then I guess on the following up on the comments regarding large losses and sort of the large losses that you guys had this quarter. And obviously you're making changes to global markets just add, I guess I’m wondering is the $30 million of large losses in the quarter, you say that there's - it’s a non-cap quarter, but these are particularly large losses, Louisiana flood, which seems like a Cat event. But it’s falling within or underneath your Cat hurdles? Is that expected, I mean is this kind of noise if we call it something that we should be able to expect as normal obviously aviation is coming down, but large property. I guess is there changes to the underline attachment point of property or other lines of business that might cause more volatility in the underlying core results, because this…?

[Scott Carmilani:]

Just the opposite, many other markets in the quarters as they’ve reported or going to report had Cat activity in the quarter. There were Cat in the quarter. The fact that they are not for us is a testament that we’ve been reducing our modeled maximum loss opportunity or PMLs our Probable Maximum Loss Liability and our exposure to a lot of these types of events. So while we had loses they’ve just haven’t hit in that $10 million plus threshold, they are left in that. So I would think that most people will be happy that we’ve had losses but have they haven’t reached the Cat threshold and that level of volatility. Any time there is an event we’re going to have losses if we’re in the market.

[Scott Carmilani:]

And probably I’ll add. The reason we kind of pointed that out in the comments here today and in the MD&A in the 10-Q was compared to last year, last year third quarter was a quarter that had very little of these kind of other larger losses in the period. We had the big Tianjin Cat but other type of activity was very low. So we wanted to point out as you were comparing the two years what some of the drivers were and frankly even in the prior quarters this year we haven't had a lot of that. So it was really just to get some transparency on what’s underneath the loss ratio this quarter.

[Thomas Bradley:]

Tianjin was 30 million as well as last quarter there was three loses in China this quarter and were virtually nothing to us. So had we had the same portfolio we had a year and a half, two years ago that number would have been demonstrably higher than zero.

[Charles Sebaski:]

Okay. And I guess just finally on the current book I guess I am curious what you guys are writing the business at, what’s the implied underwriting ROE on what business is being priced at and how the book is. Just curious, I don’t know if that’s the way you guys think of it but on a kind of current accident year and what the new business is, what’s the writing or underlying profitability of business today?

[Scott Carmilani:]

We don’t give forward guidance for what we’re going to do next year but of course we look at that.

[Thomas Bradley:]

We use our internal economic capital model to try and maximize the ROE particularly in terms of allocating capital and emphasis on different lines of business but we don’t disclose a tax and year target based on that.

[Charles Sebaski:]

Okay. Thank you very much for the answers.

[Operator:]

The next question comes from Ian Gutterman from Balyasny.

[Ian Gutterman:]

Hi, thanks. I guess just one last follow-up on the global segment there. The only thing I noticed Tom on just the dollar I get the scale thing right, that’s makes sense. It's just on the dollars of expenses of G&A, in Q1 it was 29 million, last quarter it was 31, this quarter it's 32. So it seems like it going up and I thought there were at least some costs here to take. I would have thought the G&A dollar number could have come down some even maybe if the ratio doesn't.

[Thomas Bradley:]

Yes, there has been a lot of activity, there has also been as Scott mentioned lot of spend this year on particularly on these new systems. So there is - also impacted by the non-cash charge on the stock comp that I mentioned which goes across all of our segments that we take a specific charge for that. So kind of some things going different ways but that’s part of it.

[Scott Carmilani:]

G&A was out of stock comp charges I would virtually say it’s probably off not at all might be down.

[Thomas Bradley:]

The total G&A is down and the stock comp was between $3 million and $4 million.

[Ian Gutterman:]

3 and 4 for the company or for global?

[Thomas Bradley:]

For the company.

[Ian Gutterman:]

For the company, got it okay. And that was one of my follow ups. Can you give us a sense for Q4 as given the stock went up in October and if it stays at these levels I assume it’s probably higher than $3 million to $4 million for Q4 or do you have a sense of that?

[Scott Carmilani:]

Q3 had a pretty significant percentage increase. I'd be happy if the stock up went that same percentage again this quarter but I don't think we’re looking at something at that extent.

[Ian Gutterman:]

Got it, okay. And then the other thing I noticed was it looked you seeded more business in both global and North America insurance this quarter and then I guess it's a little bit year-to-date but it seemed like you even picked up some in the quarter. Was that a conscious trend or is this where everyone else came up?

[Scott Carmilani:]

A little of both. A conscious trend where we see attractive environment to alter our growth with net underwriting and take advantage of some of the conditions in the marketplace, as well as get capacity and use some of the capacity to assess to.

[Thomas Bradley:]

And as I mentioned doing that on a quote share basis does have some nice seeding commissions which we’ve been able to take advantage of as well.

[Ian Gutterman:]

Exactly, okay. And then just lastly I don't think you said in the press release did you buy any stock in October?

[Thomas Bradley:]

We didn’t say in the press release.

[Ian Gutterman:]

What are you saying now?

[Scott Carmilani:]

We didn’t say in the press release, nothing else to say on it.

[Ian Gutterman:]

Okay. Thank you very much.

[Operator:]

Our next question comes from Bob Glasspiegel from Janney.

[Robert Glasspiegel:]

Good morning. Can you decompose the large losses with the big items were again?

[Thomas Bradley:]

In GMI it was aviation and trade credit and in North America - I am sorry.

[Robert Glasspiegel:]

The dollar amount, I am sorry.

[Thomas Bradley:]

We didn’t breakdown between - that was roughly $9 million.

[Scott Carmilani:]

It’s all too small to bother.

[Robert Glasspiegel:]

Okay. And then in North America again approximately 21 million on some Louisiana floods and some other large losses in property and then marine.

[Scott Carmilani:]

There were a couple of big fires.

[Robert Glasspiegel:]

Right, but some of that current year development?

[Scott Carmilani:]

Most of it was current year development except for the trade credits.

[Robert Glasspiegel:]

Got it. Scott you’ve done an amazing as a portfolio manager growing the company when - in aggregate when the company - when the environment was very favorable to grow. And I think you are to be commended to contracting the top line this year as the environment is less favorable and there is some tricky areas. I know you think you're growing some areas and tricking others in response to Taro's but in aggregate your gross is contracting, your net is contracting more which is something you could be commended with for. But with that said you're growth guy by nature. What sort of temperament do you have to sit back and contract the company in the next couple of years if the environment is stays the same way it is today?

[Scott Carmilani:]

Thank you for that question. Look we're a growth oriented company and underwriters like to win and all things remaining equal. But we have to be disciplined ones. So we’re growing the capability of the company and our client base where in businesses areas, where we think it makes sense and where we think the future will prove to be better partnership from an insurance and reinsurance perspective. What's that done in the near term is because of that discipline and because of the opportunity, said it looks, that he said the top line is down slightly but if you look at the actual number of client that number is probably considerably higher and would like growth but there are lot smaller clients, less volatile clients. So there is a lot less of the Fortune 500 clients and a lot more middle market say as you go specialty clients. Until the rate environment changes and when these or I should say, when these rate environment changes and when the opportunity sets it will be exponential jumpstart to that not a like for like.

[Robert Glasspiegel:]

So you'd be okay contracting the company over the next two or three years if the environment stayed the way it was today?

[Scott Carmilani:]

I would have to be. I wouldn’t like it but we’d have to be. I hope it doesn’t last two or three years.

[Robert Glasspiegel:]

I am with you there. Good luck Scott.

[Operator:]

And we have no further questions at this time.

[Thomas Bradley:]

I want to get back Ian's question I may have been more gibed and clear. As you know in past quarters when we purchased shares kind of in the month after quarter we’ve indicated in the press release and/or the scribble. The fact that's on the press release indicates we didn’t have anything material to talk about regarding purchasing shares since the quarter end. So I hope that helps.

[Scott Carmilani:]

Thanks Tom and thanks everyone. Hope you enjoy the rest of your fall. Have a great day.

[Operator:]

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