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Montpelier Re Holdings Ltd. (NYSE:MRH)

Q4 2013 Earnings Call

February 7, 2014 8:00 AM ET

Executives

Jonathan Kim - General Counsel

Chris Harris - President and CEO

Mike Paquette - EVP and CFO

Chris Schaper - President, Montpelier Re

Jason Pratt - CIO

Analyst

Amit Kumar - Macquarie Capital

Josh Shankar - Deutsche Bank

Ryan Byrnes - Janney Capital

Dan Farrell - Sterne Agee

Ian Gutterman - BAM

Brett Shirreffs - KBW

Alex Lopez - Portales Partners

Operator

Greetings, ladies and gentlemen, and welcome to the Montpelier Group's Fourth Quarter and 2013 Year-end Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Mr. Jonathan Kim, General Counsel and Secretary of Montpelier Re. Thank you, Mr. Kim, you may begin.

Jonathan Kim

Thank you. Good morning and welcome to Montpelier’s fourth quarter and 2013 year-end earnings conference call and webcast. A press release setting out our results including a detailed financial supplement have been posted to the Company’s website at www.montpelierre.bm. This call is being webcast live and will be available for replay through February 21.

Our speakers this morning are Chris Harris, our President and CEO; and Mike Paquette, our Chief Financial Officer. Also with us are Chris Schaper, President of Montpelier Re Bermuda; Richard Chattock, Chief Underwriting Office of our Lloyd Syndicate; and Jason Pratt, our Chief Investment Officer. Chris Harris will give his commentary on the quarter and then Mike will present an overview of our financial results. We will then be pleased to take your questions.

Please note that during our discussions this morning, we may make forward-looking statements. Any such statements are based on the Company’s current plans, estimates and expectations. Actual results could differ materially from those projected in any forward-looking statements as a result of certain risk factors disclosed previously and from time-to-time in Montpelier’s filings with the U.S. Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

I would now like to turn the proceedings over to Chris Harris. Chris?

Chris Harris

Good morning, ladies and gentlemen. Thank you for joining us. The fourth quarter of 2013 marked a strong end to a successful year for Montpelier. Our focus remains on growing book value per share plus dividends and we achieved solid growth of more than 14% based on this measure for the full-year. All of our operating segments delivered strong profitability producing an overall operating ROE of 19% for the year and a combined ratio of 56%, while continuing to strengthen our relationships with key business partners.

By segment, combined ratios were 25% for Bermuda, 91% for Montpelier at Lloyds and 34% for collateralized reinsurance. The launch of Blue Capital Reinsurance holdings on the New York Stock Exchange in November further expanded our presence in the collateralized reinsurance market. Capital under management now exceeds $600 million, enabling us to provide a broader product mix and increased line sizes for select clients. I’m also pleased that Dan Brookman joined us in January in the role of Head of Capital Markets adding additional management strength to the team.

Turning to our fourth quarter results, the loss ratio was 2%, reflecting the absence of any significant, short or catastrophe losses and favorable prior year development. Excluding prior year releases, the loss ratio was 30%. In addition to the lack of any significant events, the run rate benefited by four points due to reductions in case reserves on claims which occurred earlier in the year.

Prior year loss-reserves developed favorably by $42 million during the quarter. The three largest contributors where; first a $21 million reduction in Natural Catastrophe Reserves which was spread across a number of specific events, second a $6 million reduction from Bermuda Specialty Lines with the majority arising from medical malpractice, and lastly $5 million from larger non-catastrophe clients that was settled for less than previously held reserves.

Turning to 2014 and January renewal season, we saw increased competition at one-one, particularly within the property treaty class due to relatively light industry catastrophe losses in 2013. Our internal renewal price index for the month was minus 7%, split as follows, Property Treaty -11%; Other Specialty Treaty minus 4%; and Individual Risk minus 1%. January gross written premiums increased 3% to 5% versus the prior year, while net premiums were flat due to increased sessions.

Our underwriting teams executed well, continuing our focus on offering excellent client service and expanding our product mix. We grew our international catastrophe exposures in a few select areas, most notably European events as well as in Canada where we saw a new opportunities following the 2013 loss events. Within the U.S. we deployed less capital for peak U.S. hurricane zones but increased our exposures in other regions. Within Montpelier at Lloyd's growth was driven by property writings in the individual risk segment.

Page 6 of the financial supplement provides updated natural catastrophe exposure information as of January 1st. U.S. hurricane represents our peak exposure with 100 and 250 benchmark model loss estimate of $375 million or 24% of shareholders equity. This is a decrease from $396 million at the beginning of the 2013 U.S. wind season. The 100 and 250 estimates for European wind and U.S. earthquake increased to $312 million and $286 million respectively.

Given current market conditions, we expect 2014 to be a challenging one but we’re positioned to perform well with our strong balance sheet and specialist underwriting approach. At current risk exposure levels, we retained significant capital flexibility and we have repurchased 35 million of shares thus far this year.

With that, I will hand over to Mike to provide more details on the financials.

Mike Paquette

Thank you, Chris. We ended the quarter with a fully converted book value per share of $29.42, an increase of 5.3% after taking into account our common dividend. Our operating income for the quarter was $90 million or a $1.78 per common share and our net income was $73 million or a $1.44 per common share, each expressed after preferred share dividends.

Our net income includes $2 million of realized and unrealized investment gains, $11 million of net foreign exchange losses and an $8 million one-time expense relating to the initial public offering of Blue Capital Reinsurance Holdings. For the full year our fully converted book value per share increased by 14.3% after taking into account our common dividend.

Net premiums written and earned in the quarter were largely consistent with those of a year ago, when adjusting for reinstatement premiums recorded from windstorm Sandy. We incurred no significant catastrophe losses during the quarter. The loss ratio of the quarter was just 2%, which includes $42 million of favorable prior year loss reserve movements. The combined ratio was 39% for the quarter.

Our recurring operating expenses were $19 million unchanged from those of a year ago. Our incentive compensation expenses were $15 million in the quarter up from $9 million a year ago. The increase in compensation expense reflects the strong fourth quarter contribution towards our overall 2013 result.

Our total investment return for the quarter was 50 basis points and our net investment income was $14 million. At quarter end our fixed maturities at an average duration of 2.2 years inclusive of derivative and short positions and an average credit quality of AA minus. Our equity and alternative investments comprised 7% and 5% of our ending shareholders equity respectively. The non-controlling interest shown on our financial statements reflects the third party capital deployed within our growing collateralized reinsurance operations, as well as the earnings thereon.

During the fourth quarter, we repurchased $23 million in common shares at an average cost per share of $27.57. During the first quarter, we have repurchased $35 million in common shares thus far at an average cost per share of $28.07. Our current shareholders equity is $1.6 billion and our total capital is $2 billion. We believe our strong balance sheet positions us well for 2014 and beyond.

I will now turn the discussion back to the operator.

Question-and-Answer Session

Operator

[Operator Instruction] Our first question is from Amit Kumar at Macquarie Capital. Please proceed with your question.

Amit Kumar -- Macquarie Capital

Thanks and good morning and congrats on a very strong quarter. I guess two quick questions. First of all just, going back to your opening comments regarding riding more in Europe and Canada as well as U.S. EQ, can you sort of talk about the relative profitability versus U.S. hurricane? I guess, what I’m trying to understand is that the business shifts. What is the impact on the margin going forward?

Chris Harris

You said you had two questions. You want to go and give me the second one as well or?

Amit Kumar -- Macquarie Capital

The second question I guess is also related to that point. You talked about increased competition, and I was wondering if you could expand on that? Is it more traditional guys or some piece taken away by the third-party guys, which probably were competing with you and Blue Capital?

Chris Harris

I’ll turn the first question over to Chris Schaper to let him comment on where we saw some opportunities at one-one and then I’ll follow up on the second one.

Chris Schaper

It’s Chris Schaper. So yes, for the portfolio, certainly as you mentioned we saw some opportunities in Canada, we saw some other opportunities in Europe. Within the U.S. rate reductions were a bit more significant there than what we were seeing in some of these other areas. When we see rate increases coming through as a result of events, and by the way those are events that we actually performed very, very well on, and so we were seeing opportunities on accounts that were either new to us or were enhancements to existing layers. Anyway in terms of the profitability that we we’re seeing, because of that -- some of those rate changes that were coming through in the U.S. and because of some of the increase in pricing we were seeing in some of these other territories, the profitability is actually the better in some of those. The other issue I think you need to keep in mind is that on a broad portfolio you’re measuring out areas where you have a bit less exposure versus areas that have more exposure and so those areas that you can and enhance the portfolio with where you have less exposure, actually have more profitability embedded in them than those that where you have more abundance of exposure. Again so for Canada and for the non-U.S. areas we were able to see a bit more profitability in those accounts.

Chris Harris

I think you have some small timing anomalies in purchase of reinsurance as well which drove up those numbers a little bit. I think in terms of competition, I wouldn’t say we didn’t see dramatic changes in the landscape. In terms of the competitors, they were pretty similar. It’s just in general the market was relatively aggressive. We thought the deals got done pretty early in the season for the most part and we saw the price decreases, particularly in the reinsurance segment.

Amit Kumar -- Macquarie Capital

That’s helpful. And I guess just going back to the events [ph] you’re on, rate signing -- increased rates and new business, was this business coming from some of the larger guys? I’m just trying to understand what led to this being presented to you?

Chris Schaper

These are - within Europe these are preferential clients; clients that we’ve been with for a period of time and so as a result of being a firm that’s been in the market for the time that we have been, we were able to see and attain preferential positioning on accounts. Within Canada those accounts were essentially, as I mentioned, some we were on, some were new opportunities. We’ve seen them previously but had chosen not to participate. We saw some rate increases take place. We’re able to get on. Again that has a lot to do with us, Montpelier being a legacy firm within the market. And so you know the types of accounts that we’re looking at though continued to be regionally oriented firms. And that’s really kind of our focus.

Chris Harris

Yes I think, Amit, that is one thing I would say, that for the January renewal season, one characteristic is that business flows very strong across the organization. I think it’s really a function of, we have the Montpelier at Lloyds is really carefully established at this point. So I think we really see the flow of opportunities that we see now versus three years ago, as just that much higher. As we continue to expand both our rated paper and collateralized paper, I think being able -- the combination -- being able to offer a combination of products there, we’ve just found that’s been very complimentary so that we have seen increased deal flow from existing clients in many cases. So I just think it’s been a combination of all of those factors.

Operator

Our next question comes from Josh Shankar at Deutsche bank.

Josh Shankar - Deutsche Bank

In looking at the 2014 portfolio, what areas do you think; at this point you’re framing also thinking about six - one as the most radically underpriced. In what areas of geography are you thinking that the adequacy has not changed much for your kind of paper versus non-traditional paper?

Chris Harris

Sorry Josh, you cut out a little bit on the first part of that question. I picked you up about a third of the way through. So if you could just --

Josh Shankar - Deutsche Bank

I'm just looking for geographies that have radically changed in terms of pricing versus geographies that have not changed much, and if you could split out differently between non-traditional paper and the type of reinsurance that you write?

Chris Harris

Okay thanks Josh, I’d like Chris handle that one as well but I assume you are focused on property catastrophe with that question?

Josh Shankar - Deutsche Bank

Globally, and I’m thinking about it also where your six - one renewals now and where you might be at six - one, because obviously you deployed aggregate having a view on where six - one is going to be?

Chris Schaper

Hey Josh, this is Chris Schaper. Okay, so I’m going to break this down a little bit, perhaps differently from a geographic point of view in terms of the types of business. What we are seeing in terms of business that is very significantly, I would just say, reduced in pricing. Our exposures that are associated with I would governmental enterprises as well as kind of larger national oriented accounts. In those areas those premium numbers in terms of rate reduction went down quite substantially. We look at that over the course of the past year, year and a half, they have certainly been hit.

The regional oriented accounts we have found have been better relative to any kind of rate movements. They are also, when you think about the losses that actually do come in, you think about the change in rates that have taken place, it’s been more the regional firms that have actually increased their pricing as a result of events. So, we are seeing that type of enterprise actually being better priced than the others. When you think about that geographically we see that in pretty much every zone as being the case.

Chris Harris

Yes, and I would say as well from kind of a geographic standpoint, at current pricing levels we still tend to favor the more developed regions. So, I would say our portfolio tends to be more over way U.S., Europe, Japan. We just think in general the quality of the data we get, kind of the awareness of the parallels that are out there and the overall pricing levels we think are stronger there than some of the other more emerging markets, Latin America, some of the Asian territories outside of Japan, we don’t have as large a commitments in those regions.

Josh Shankar - Deutsche Bank

And what do you think the differential in pricing or differential in rating agency attitude is towards traditional paper versus paper that has no automatic reinstatement?

Chris Harris

Sorry, can you -- again, I had a little bit trouble hearing you there. I didn’t hear, you said something about the rating agency?

Josh Shankar - Deutsche Bank

Just you’re pricing and rating agency view on paper that has automatic reinstatements in it versus the new non-traditional stuff that doesn’t automatically reinstate.

Chris Harris

I think that’s a very specific question, I mean it depends by client and by rating agency. I think certainly when you look, rating agencies have various stress tests, some are single event, some allow for multiple events. Obviously when you get in the multiple events, having a reinstatement is more important. That can play a part for some of the Lloyd Syndicates as well who buy protection for RDSS. So, I don’t know, we found it in the marketplace, again just the ability to be able to offer rated paper or collateralized one shot paper. It just gives you more flexibility because we don’t try to tell clients what to buy. We want to hear what they want to buy and then we are willing to offer a product that we think make sense for them.

And I think one of the trends we’ve certainly seen over the last couple of years is that their property catastrophe market is becoming more specialized. I mean you are having buyers look for different types of products and again we think that plays into our strengths as an organization, the ability to source risk, price risk and manage risk in a variety of forms. I think we are well situated to handle that.

Operator

The next question comes from Ryan Byrnes with Janney Capital.

Ryan Byrnes - Janney Capital

Just wanted to touch on your strategy to seed more business. I am guessing it’s the pop-cat business. Just wanted to figure out why that strategy is?

Chris Harris

If you look over time at our session percentages, they can and do change. I mean I would say we didn’t have a big strategic shift at one - one in that on the property cat side. For January we seeded slightly more. I think the other area where you’ll see increase sessions are on the individual risk business. There the gross premium grew a little bit more but we saw some opportunities where in the past we may have purchased proportional reinsurance. We thought some of the excess or loss reinsurance made a little bit more sense, was a little bit more efficient from a PML release standpoint.

So we purchased some more there. But I would say we don’t into the year necessarily with the strategy that we are going to buy x amount of reinsurance. We like to think of ourselves as being opportunistic and if we see some opportunities in the market that we think make sense, that help us enhance the overall risk return characteristics of our portfolio, we will take advantage of it but we don’t have a set strategy going in that we are going to buy program at X Silver [ph] Y or spend x percent of our income on outward reinsurance.

Ryan Byrnes - Janney Capital

And then this for Jason but the net investment income was kind of down a good amount sequentially. Were there only timers there or is that some sort of run rate we should be thinking about? Maybe if you could talk about new money yields versus kind of the average book or what’s falling off right now?

Chris Harris

Thanks Ryan, I’ll look across the table there to Mike or Jason. But why don’t I start Ryan and then we’ll talk to Jason about the new money yield. But really two things going on with the net investment income for the quarter. One is we’re building collateralized reinsurance amounts in that portfolio and they are largely invested in cash and short term investments which provide little yield. So even though our ending investment balance looks to be consistent or even slightly larger, when you take out those assets, our average fully invested balance is actually coming down and that’s showing some softness in the net investment income line.

And then also during this quarter we made a portfolio transition whereby a modest portion of the portfolio was invested and geared more on achieving a total return as opposed to simply generating NII. And I would like to further add that for the fourth quarter we had an investment return of 50 basis points which we were pretty pleased with. So with that said, I will give it to Jason for new money yields.

Jason Pratt

Yes, I think over the last couple of quarters it’s been a little bit more difficult to gauge because you’ve seen in 10 year move around so much. So if you just use that as a reference point that can kind of explain where that instability can come from even with a short duration portfolio. So I think obviously we’re off maybe 30 to 40 basis points on the 10 year from where we started the year and where we were kind of in the course of the fourth quarter.

Operator

The next question comes from Dan Farrell at Sterne Agee.

Dan Farrell - Sterne Agee

A couple of questions. Just thinking about your capital levels I think in the past you have talked about wanting to maintain total equity at least of 1.5 billion level. You are obviously above that. How do you think about the additional level above that and I guess first of all is that 1.5 still sort of the target that you would think about the minimum of maintaining and then the amount above is do you want to maintain a buffer or do you view all of that as excess and then how does that play into your sort of capital management thought process going forward?

Chris Harris

There is a lot of different angles we can talk about there, but I guess I always like to say we’re continuing to think about capital management the same way we always do. I mean it’s really -- we look a risk reward framework of how we can grow our book value per share best over time and I think if you take a step back and look at 2013 as a data point, we obviously had a strong return this year and effectively if you look at the net income to common shareholders we effectively returned all of that through the combination of share repurchases and common share dividends. So we effectively bought back all of the earnings in the year, in what turned out to be a very strong year for earnings. So I think that’s a good data point. As we look ahead to 2014, we’re starting the year with a very similar capital level to last year. And I think we certainly think we have the capital flexibility and the scope to continue to buy shares back. And you saw that in the first month of the year. We were -- we continue to be active in terms of repurchasing our stock.

Dan Farrell - Sterne Agee

Okay. And then just on the Blue Capital platforms, do you have the average rate online of the business that was written in January on those platforms?

Chris Harris

No, I mean that’s not something that we have necessarily disclosed for individual segments of the portfolio and again I mean there are a number of different funds and a number different kind of partnerships in there. So each one is a little bit different.

Operator

Our next question comes from Ian Gutterman at BAM.

Ian Gutterman - BAM

I guess first to clarify couple of points. I think you said there were some releases from the current accident year that helped the loss ratio. Can you quantify that for us?

Chris Harris

I said, again referring to the run-rate loss ratio for the fourth quarter, it was 30%. I said that benefited by about four points due to -- we had a couple of specific claims from earlier in the year that actually closed out during this quarter. So it was about a four point benefit.

Ian Gutterman - BAM

Was that just in cat or was it just under property specialty too?

Chris Harris

They were not cat losses. They were outside of the cat bucket.

Ian Gutterman - BAM

That’s what I was wondering. And then when you gave the RPI I don’t think I heard you say what it was for cat? You said property treaty, the specialty and individual risk.

Chris Harris

Given the premium volumes at one - one, we simply lumped our property cat, property specialty together but they’re very similar and it was minus 11% for the property treaty pocket.

Ian Gutterman - BAM

Got it. Okay. And then my other question is -- I asked you this quarter, you said to ask it again now. So, can you just talk sort of again big picture what the strategy is of having the two -- not necessarily having two side car [ph] vehicles or ILS [ph] vehicles, whatever you want to call them. But why two public vehicles? It’s a different strategy than others have taken.

Chris Harris

Okay. Thanks Ian. I mean in terms of -- and I’ll tie it back to some of my earlier comments. I think one of the things we’ve seen is that the property catastrophe business is becoming more complex and we think it will continue to become more specialized over time and that in order to benefit in that space you’re going to need to have the widest skill set possible and be able to offer the widest product mix and the most number of options for your clients and I think that’s something that we’ve always been focused on and if you look back, we were certainly one of the early pioneers in some of the capital partnership businesses and we’ve worked on a number of different ones over the last decade and I think that’s --we think that’s very important right, that these are after thought businesses for Montpelier. They are integrated into our underwriting philosophy, they’re integrated into our risk analytics framework and we think it is important that it all works together, and I think a couple of things that I think our partners appreciate in terms of having conversations with them, one is that again, we don’t operate as an MGA. We have significant investments in any of these businesses. So, I’d like to say, we don’t just have skin in the game, we’ve got our whole body in the game.

So, I mean that is very important to us. And then secondly, we’ve shown the flexibility over time to -- our number issue is can we deploy the capital profitably for ourselves and for our clients and if we can find those opportunities then we’ll continue to look to deploy capital. But idea specifically turning to why make that a public vehicle, one of the factors that we like about that is that there is more of permanent to that capital and that’s certainly again based on feedback we’ve had from our clients in terms of being a preferred partner, they like the idea that there is a consistency in that capital base over time and it’s not going to be a deal where you have someone to mint money for six months and they change their mind and move on to kind of the next hot opportunity.

So, I mean we felt it was worth it given we have a long term strategy to be a player in the property catastrophe business and the fact we heard consistently from our clients that they liked the idea of the capital base being more consistent from year-to-year. It was really the combination of those two factors that led us to go down that path.

Ian Gutterman - BAM

That makes a lot of sense. And maybe the only follow up I’d ask is there a cost for having that permanents meaning, the fees of being a -- cost of being a public company and such compared to I assume the cost of, forgive me for mentioning competitors but at DaVinci or an AlphaCat where you don’t have that public company are probably less. So I assume that is some kind of financial trade off in that. Is that fair? I don’t know how material it is but…

Chris Harris

That’s fair, I mean yes, certainly no free launch. I guess I would say the cost of anything might come in the sense of - as opposed to the private facilities, it is public. So our filings are out there over time, our competitors can see more lot we’re doing. So there is maybe a cost of us having to be more transparent but I think that’s something that we feel like it’s important to both us and our partners over time and we’re willing to accept that. And then certainly we do have other facilities that our private as well. It’s not just the public vehicles that we run.

Operator

Our next question comes from Brett Shirreffs at KBW.

Brett Shirreffs - KBW

I was wondering if you could just expand on the reserve development a little bit more and its picks up in the last couple of quarters and I was just wondering if you could revisit your philosophy there, if it was -- I realize the fourth quarter number might have been more heavily influenced by the cat development. But I was wondering if you could just kind of revisit your philosophy there on what you think about it going forward?

Chris Harris

Okay, thanks Brett. I mean I guess I’ll repeat some of the comments from my script. If you look at the fourth quarter specifically, from a high level, half of that was driven by specific natural cat reserve releases and those they said were spread across a number of events. It really would have been -- Sandy, Japan and the Thai floods would have been the top three on the list there. And I know we’re gotten a few questions about New Zealand but we didn’t see any change in the New Zealand quake numbers for the quarter.

I think as you move to some of the other buckets, again for some of the larger non-catastrophe claims we just saw specific takedowns. We had some older claims close this year. And if you look year-over-year, the segment where we saw probably the biggest change in terms of reserve development was the property and individual risk bucket. And again I think that was -- we talked about some of the drivers there where we’re just settled some older claims. And I think initially, given that Sandy occurred so close to the end of last year, we anticipated we might pick up some more claims in that bucket given the potential complexities associated with that loss. But they just didn’t ultimately develop. So we saw some takedowns from that within that bucket this year as well.

Otherwise, I would say we haven’t had any fundamental change in our reserving philosophy or our reserving approach other than again normally the run rate in the fourth quarter you see some true up where that’s really the first time you look at your loss picks for some of the more attritional classes would be in the fourth quarter of the year. And again I would just say maybe if you want to go back and take a longer look at our track record over a period of time. I think you can go back and kind of do that comparison yourself but we don’t think there’ve been any dramatic changes.

Brett Shirreffs - KBW

Okay, thanks. And then just one quick numbers question. I was wondering if you could provide the fee income or management and performance fee income from your managed vehicles of the public and private, maybe even if you strip out some of the offering costs you incurred this year.

Chris Harris

Okay, yes, it’s a difficult number because it doesn’t really show up in any one particular place. But for 2013 that number would have been a little bit over 15 million.

Brett Shirreffs - KBW

Okay, and that’s net of your operating cost or not included?

Chris Harris

No, that would have been gross of operating cost.

Brett Shirreffs - KBW

Okay, so much higher if you strip that out?

Chris Harris

No, it would be lower if you strip that out.

Operator

[Operator Instructions] And our next question comes from Alex Lopez of Portales Partners.

Alex Lopez - Portales Partners

I just have I guess one question for now. Can you kind of discuss your results in your Lloyds business and can you just talk about the opportunities or your outlook for 2014 in that business?

Chris Harris

Okay, yes, thanks Alex. Yes, as I said early on in the comments we really had a strong year across all of the operating platforms and Montpelier at Lloyds was no exception. We finished the year with a combined ratio of 91% and if you look back a year, it was 88% or 89% for last year. So we’ve had a couple of solid profitable years there. And certainly we’re pleased with the development of that platform.

We’ve made the decision and I would consider it a patience decision five-six years ago to build from scratch as opposed to buying. And I think that brings you -- we think that brings a lot of advantages in terms of consistency, of underwriting approach, consistency of philosophy, ability to leverage the same underwriting systems, the same operating philosophy and we really feel like we’re starting to see the benefits of that now when you look at the last couple of years. Lloyds now represents 35% of the overall premium volume. It’s producing profitable results with very little catastrophe exposure and we think it has very good growth prospects going forward for some of the non-catastrophe classes and I think particularly if you look at something like 2014 as an example, we look at some of the competitive conditions that we see within reinsurance. We actually think the growth prospects are probably higher for the Lloyds platform in 2014 than they are for some of our other businesses.

Operator

There are no further questions at this time and I’d like to turn the conference back to Mr. Kim for closing remarks.

Jonathan Kim

Thank you. That concludes our proceedings this morning. Once again I would like to thank you all very much for your participation and I invite you to join us again at our first quarter 2014 earnings call.

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