Maiden Hldgs' (MHLD) CEO Arturo Raschbaum on Q4 2015 Results - Earnings Call Transcript

| About: Maiden Hldgs (MHLD)

Maiden Hldgs Ltd (NASDAQ:MHLD)

Q4 2015 Earnings Conference Call

February 23, 2016, 08:30 AM ET


Noah Fields - Vice President, Investor Relations

Arturo Raschbaum - President and Chief Executive Officer

Karen Schmitt - Chief Financial Officer

Patrick Haveron - President, Maiden Reinsurance Ltd.


Randy Binner - FBR Capital Markets

Ken Billingsley - Compass Point

Matt Carletti - JMP Securities


Good day, ladies and gentlemen, and welcome to the Maiden Holdings Limited fourth quarter 2015 earnings conference call. [Operator Instructions] I would now like to introduce your host for today's conference call Mr. Noah Fields. You may begin, sir.

Noah Fields

Good morning, and thank you for joining us today for Maiden's fourth quarter and yearend 2015 earnings conference call. Presenting on the call today, we have Art Raschbaum, Maiden's Chief Executive Officer; along with Karen Schmitt, our Chief Financial Officer. Also in attendance today is Pat Haveron, President of Maiden Reinsurance Limited.

Before we begin, I would like to note that the information presented here today contains projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on current expectations and future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from these expectations. We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company's Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

Some of our discussions about the company's performance today will include reference to both non-GAAP financial measures and information that reconciles those measures to GAAP, as well as certain operating metrics, and may be found in our filings with the SEC and in our news release located on Maiden's Investor Relations website. Please also note that unless otherwise stated, all references to common share data in today's discussion are on a diluted share basis and comparative comments will refer to Maiden's results in the fourth quarter of 2015 relative to the corresponding period in 2014.

Finally, certain reclassifications have been made for 2014 to conform to 2015 presentation and have no impact on net income and total equity previously reported.

I will now turn the call over to Art.

Arturo Raschbaum

Good morning, and welcome to our fourth quarter 2015 earnings call. On this morning's call, I'll be providing an overview of the full year; while our Chief Financial Officer, Karen Schmitt, will focus on the results of the fourth quarter.

For the full year, Maiden continued to enjoy solid growth, profitable underwriting results, enhanced expense efficiencies and double-digit operating returns on equity. Importantly, we continue to benefit from our strategic AmTrust relationship, while expanding active clients in United States, implementing our Solvency II triggered capital solutions business in Europe and positioning our unique European International Insurance Services business for expansion. We're confident that we've effectively laid the groundwork for growth in 2016 and beyond.

From a capital management perspective, we took the opportunity to access the capital markets in the fourth quarter of 2015. The 7.125% coupon preferred share issuance raised nearly $160 million, and it provides us with a level of enhanced capital flexibility with relatively modest incremental cost consistent with our commitment to respond to capital needs in the most shareholder-friendly manner possible. Also consistent with that objective to further enhance capital flexibility, we enter into a strategic quota share, which has been renewed for 2016.

Maiden generated an operating return on common equity of 12% for the year compared to 13.6% in 2014. Book value at yearend 2015 was $11.77 per share, down from $12.69 per share at the end of 2014, and it reflects the impact of unrealized losses in our investment portfolio, as interest rates rose in the latter part of the year and corporate spreads widened.

Our basic diluted operating earnings per common share were $1.39 versus $1.53, largely reflecting the impact of commercial auto adverse development in our U.S. diversified segment throughout the year. While adverse development moderated in the fourth quarter, we also increased our book loss ratios and we'll continue to do so across our underwriting portfolio in 2016 in view of the competitive environment and growing loss cost volatility. Notwithstanding that point, we do expect our overall combined ratio in this segment to improve.

Maiden continued to enjoy premium growth in 2015, but the pace moderated, influenced by a combination of revenue challenges in our Diversified segment and a reduced growth rate for the AmTrust segment, as the impact of the Tower acquisition moderated throughout the year. As Karen will explain, we also completed a one-time commutation of certain elements of the business ceded under the AmTrust contract in the fourth quarter, which also influenced our growth rate for the year.

Overall for 2015, gross premiums written totaled $2.7 billion, an increase of 6% compared to last year. Gross premiums written in the Diversified Reinsurance segment totaled $777 million in 2015, a decrease of 13.5% from the prior year. Excluding the effect of fronted business discontinued in 2014, gross written premiums declined by 9%.

As discussed in prior quarters, this year the Diversified segment premiums also declined in 2015, as a result of the loss of a large U.S. client in the first quarter of the year. However, absent these impacts and specific to the U.S. book, gross written premiums would have been up 9.1% for the year versus down 9.7%.

Premium volumes were also impacted in the U.S. by underwriting actions taken to restore profitability. Maintaining underwriting discipline is core to our success at Maiden. And as we've said many times in the past, we will not sacrifice profitability for growth.

We previously stated that we view each client relationship as an opportunity to organically build our portfolio by growing with our clients. And we've had a number of examples of initially relatively modest premium relationships that have grown by multiples overtime. For that reason, growth in active U.S. client count can be a leading indicator of future growth.

In 2015, despite the decision to not renew a number of underperforming accounts, our net active treaty customer relationship counts have grown by 5%. Importantly, we continue to maintain high-renewal retention levels. We continue to stress the expansion of our highest margin lines of business and we're actively developing new products and services for our clients and prospects. Differentiation remains a key to our success and we're not resting on past accomplishments.

Internationally, we saw a decrease in premiums from the impact of a strong U.S. dollar in Maiden's IIS business as well as the tapering off of run-off premiums from past discontinued programs. Maiden IIS develops branded consumer insurance products for auto manufactures and retailers, primarily in Europe.

Despite the revenue headwinds in 2015, our strategic partnership with Allianz Global AutoMotive, developing payment protection insurance and guaranteed asset protection insurance opportunities is gaining traction, along with other OEM opportunities, and we expect the benefits of these efforts in 2016.

In 2015, we added two new customer auto insurance OEM partnerships, Nissan and Volvo, with opportunities for growth. And as you may recall, this highly differentiated business model is quite unique within the reinsurance sector, and we're committed to its profitable, sustainable growth. And finally, we've commented in the past several quarters of our efforts to offer capital solutions to help European insurers respond to the increased regulatory capital requirements that are resulting from the implementation of Solvency II.

Our efforts were rewarded with a significant number of yearend opportunities, which translated into four new client relationships. We believe several of these new clients have the potential to grow with time. In addition, for a number of these relationships, we have the potential to provide sub-debt to our majority-owned subsidiary, Insurance Regulatory Capital or IRC.

For the AmTrust Reinsurance segment, gross written premiums increased by 17% to $1.9 billion, reflecting the continued impact of the Tower Group acquisition in the first three quarters of the year, while experiencing organic growth throughout the year as well. Absent the fourth quarter commutation, full year 2015 gross premiums written for the AmTrust Reinsurance segment increased 21% to approximately $2 billion. Absent major acquisitions, we believe that AmTrust growth will return to more historical pre-Tower acquisition levels.

Turning now to the combined ratio. For the year ended December 31, 2015, the total combined ratio was 99.3% compared with 98% in 2014. The Diversified Reinsurance segment produced a combined ratio of 103.3% in 2015 compared to 98.3% in the prior year.

As I've mentioned, the biggest challenge faced in the Diversified segment was from the U.S. commercial auto line of business, which experienced prior-year adverse development throughout the year, but to a much lesser extent in the fourth quarter of 2015. While adverse commercial auto losses have impacted many companies throughout the industry, we believe we've identified these trends relatively early.

Importantly, in identifying the development, in many instances it's enabled our under register response by either negotiating improved terms and conditions or exiting the adverse accounts. The balance of the portfolio performed within expectation. In fact, you may recall, that several years ago we were impacted by poor non-cap property results. Today, this segment is solidly profitable with new underwriting and pricing standards now in place.

We also experienced higher than targeted result from our German personal auto portfolio in our IIS business. Actions have been underway to strengthen performance, and we're confident that underwriting profitability will be restored. The AmTrust Reinsurance segment produced a combined ratio of 95.3% in the yearend December 31, 2015, compared to 95.4% in 2014.

We continue to be encouraged by our investment results and we've seen net income grow 12% in 2015 to $131 million. We expect continued growth in our invested assets, reflecting the expansion of our low-volatility underwriting portfolio. Despite the current interest rate environment, we expect to increase investment income and enhance our return on equity, while maintaining our disciplined investment philosophy.

I'd like to now turn the call over to our Chief Financial Officer, Karen Schmitt, to review the fourth quarter results in greater detail. Karen?

Karen Schmitt

Thank you, Art, and good morning. As Noah said earlier, unless otherwise stated, all references to common share data are on a diluted share basis and comparative comments will refer to Maiden's result in the fourth quarter of 2015 relative to the corresponding period in 2014.

Maiden reported fourth quarter 2015 net operating earnings of $26 million or $0.34 per share compared with $35 million or $0.44 per share. Net income attributable to common shareholders was $25 million or $0.32 per share compared with $28 million or $0.36 per share.

Gross premiums written decreased 13% to $526 million from $602 million. Gross premiums written in the Diversified segment totaled $146 million, a decrease of 14%. Within the Diversified Reinsurance segment premiums continue to be negatively impacted by the loss of a large U.S. client that was acquired in early 2015.

In the AmTrust Reinsurance segment, gross premiums written fell by 12% to $380 million compared to the fourth quarter of 2014, reflecting AmTrust's agreement with Maiden to commute liabilities related to certain classes and lines of business. This resulted in a reduction in premium ceded to Maiden in the fourth quarter of 2015. Absent the commutation, premium ceded from AmTrust in the quarter ended December 31 would have been approximately $446 million for a growth rate of 3%.

This growth rate from AmTrust is slower than in past quarters, as the full effect of the Tower acquisition is now included in the prior year comparison. The commuted reserve value of $107 million represents full and final settlement of all liabilities related to this business. There was no impact in underwriting income from the transaction. Written and earned premiums in the fourth quarter were lower by $65 million and $24 million, respectively, as a result of the commutation.

Looking now at the combined ratio. In the fourth quarter we reported 99.9% combined ratio compared with 98.6%. The Diversified Reinsurance segment combined ratio was 103.9% in the fourth quarter, up from 99.2%. The increase in the Diversified Reinsurance combined ratio is due to higher booking rate in our U.S. underwriting portfolio, a smaller amount of adverse development in U.S. commercial auto than in prior quarters and an elevated loss ratio in the IIS auto portfolio, specifically from personal auto in Germany.

The AmTrust Reinsurance segment reported combined ratio of 95.8% in the fourth quarter compared to 94.9%, due to business mix as well as a higher booking rate for select portions of this segment. In addition, we had some non-operating prior-period adverse loss reserve development, which mostly related to the NGHC run-off business, and totaled $4.5 million for the fourth quarter of 2015. Absent this non-operating item, Maiden's combined ratio would have been 99.1% in the fourth quarter. The annualized operating ROE for Q4 2015 was 11.8%.

Net premiums earned of $584 million decreased 4%. In the Diversified Reinsurance segment, net premiums earned decreased 20% to $174 million. The AmTrust Reinsurance segment net earned premiums were up 5% to $410 million. Net earned premium comparisons in 2015 are impacted by our corporate retrocessional program, which was first purchased in 2015. The loss ratio for the quarter was 67.8%, higher than the 64.8% reported in the fourth quarter last year.

The commission and other acquisition expense was 29.4%, lower than 31.0% last year. The lower commission ratio was due to a smaller percentage of quota share business in Q4 of 2015 in the Diversified segment versus the same quarter last year. In addition, the commission ratio for AmTrust is 0.4% higher, due to less premium being ceded via the hospital liability contract, which has lower acquisition costs. The G&A expense ratio was 2.7% compared to 2.8% for the quarter.

In the fourth quarter, net investment income was $35 million, an increase of 10%. The average yield on the fixed income portfolio, excluding cash, is 3.46%, a small increase from 3.44% at the end of the third quarter. The new money yield on fixed maturities in the fourth quarter was 3.35% with an average duration of 5.95 years. Including cash, the average duration is 4.68 years versus an average duration of liabilities of 4.35 years. Investable assets grew to $4.63 billion compared to $4.5 billion at the end of September.

Operating cash flow was $109 million during the quarter and $634 million year-to-date. Cash and cash equivalents were $333 million as of December 31, 2015, compared to $433 million at the end of the prior quarter. During the fourth quarter, we actively invested $359 million in high-grade fixed income securities.

Turning now to capital management. We remain comfortable with our current financial position and have a series of opportunities in the next 12 to 18 months to potentially lower our cost of capital and optimize our capital position. As a reminder, in November we issued $165 million of Series C Perpetual Preferred share with a coupon of 7.125%. We plan to use this capital to fund the continued growth of the business.

In addition, we have the ability to refinance $107.5 million of 8.25% senior notes that are callable in June of 2016. And the mandatory conversion of our $165 million 7.25% convertible preferred shares will occur in September of 2016, increasing our capacity to issue debt or hybrid securities. The combination of these events will provide us with significant capital flexibility and the potential to further reduce our cost of capital and improve our returns.

I will now turn the call over to Art for some additional comments.

Arturo Raschbaum

Thank you, Karen. As we've said in past quarters, while competition in our market segment is not as intense, as it is more severity-oriented segments, we are experiencing increased levels of competition, even on our lower volatility sector. We expect this competition to continue to intensify, given the continued growth of industry capital. And for this reason we're keenly focused on enhancing our differentiation by delivering unique solutions to our target market, while maintaining underwriting discipline.

Despite the challenges of an increasingly competitive reinsurance market and volatile interest rate environment, looking into 2016 we see a number of reasons for optimism. In the U.S., we're working diligently to improve our underwriting margins and define growth prospects in our higher margin businesses.

In our European International Insurance Service business, our PPI partnership with Allianz is beginning to generate opportunities, which we expect to pick up as 2016 progresses. And Maiden's Solvency II capital solutions business, which offers both reinsurance and subordinated debt to small and mid-size insurers, had a successful January renewal period, which we expect to build upon during the year.

In fact, we expect to extend beyond Europe in the Latin America and other Solvency II implementing geographic areas. We also see capital solutions opportunities in the U.S. While we expect AmTrust growth to moderate, we're very confident in their ability to remain disciplined and focus on the best growth opportunities.

As Karen mentioned, we have excellent optionality for capital management in 2016, and we'll optimize our balance sheet depending on our potential growth opportunities and capital needs. Importantly, the relative stability of our underwriting allows us to offer shareholders a quarterly dividend of $0.14 per common share, which based on the current share price has an annualized yield of over 4%.

While there are headwinds present in the market, it is a testament to our low volatility model, that operating returns remain solid at 12% for the year. We're committed to enhancing underwriting performance, profitably expanding our underwriting portfolio and strengthening operating returns.

So this concludes our prepared remarks. Operator, could you please open the lines for Q&A?

Question-and-Answer Session


[Operator Instructions] Our first question comes from Randy Binner with FBR Capital Markets.

Randy Binner

I just wanted to ask a question about, what I'd call the x in your loss ratio in the Diversified Reinsurance segment. I don't believe that we get a specific breakout of kind of what was prior development? It sounds like there were some in commercial auto, and maybe a little bit in the German book. But the real question is, kind of, what is the x in your loss pick in the fourth quarter versus, say, the first quarter, meaning how much has that loss picking increased? And is it reasonable to think it would remain at that level as we look to 2016?

Karen Schmitt

Randy, well, when we look at it, we're really looking at underwriting year as opposed to exiting it. But when we look at prior-year development for the quarter in Diversified, we added $11.5 million or 2 points to the diversified loss ratio -- I'm sorry, to the overall loss ratio. In Diversified, it was $7 million, which was 4 points. And then our NGHC added another $4.5 million, so we have $11.5 million total for the quarter of prior-year development.

Randy Binner

So it was 4% in the fourth quarter for just -- I'm really kind of focused on Di Re. So then that would mean -- so is your x in your loss pick really that much higher than or was it mostly the PYD that elevated the combined ratio for the fourth quarter?

Karen Schmitt

If you look at Diversified without prior-year development, it would have been 99.9, which is clearly higher than our priced and our expected loss ratio, so the difference between that and where we were pricing the business would be the higher loss pick.

Randy Binner

That's about 3 percentage points higher than what you target, because I think you've talked about targeting more like 96, is that right?

Karen Schmitt

I think our target has been closer to 97 in recent year. So yes, it's a couple of points.

Arturo Raschbaum

Randy, it is a function too of business mix, obviously for writing more casualty business versus property. But I think as we look at kind of the effects on our own portfolio from commercial auto in 2015, and we look at the primary pricing environment as well, we believe that there is a growing level of uncertainty and volatility, so that really is what's driving our higher booking rate. And I think that's prudent given all the uncertainty.

Randy Binner

And then on the AFSI commutation, I think the kind of communication that you all gave would imply that the annualized, this is like a -- is it about $100 million or $150 million book of business or kind of rough numbers like 5% to 7% of that overall relationship, is that an accurate way of characterizing the commutation with the AmTrust?

Karen Schmitt

Yes, on a run rate, it's about 5%. It was just a little bit over $100 million on an annual basis. But during the quarter, we returned the unearned premium which actually -- so the written premium change during the quarter was about $65 million. The earned premium change for the quarter was $24 million.

Randy Binner

So the $100 million is your run rate estimate of net earned premium?

Karen Schmitt

Yes. Over the course of the year.

Randy Binner

And then, I'll just do one more and drop back, and this is on Nat Gen. Where is that run-off? Can you characterize where you are in that runoff process? In general that would be a shorter tail book of business, but obviously these exposures have a longer tail. Any color you can give there would be helpful?

Karen Schmitt

It's a relatively short tail book of business. I mean they've had a few elements of the portfolio that are a little bit longer. But remember, its $1 billion of premium, it's been running off now for a couple of years. We expect that we will get to the end of it within the next 12 months, I would expect. And it has been running a little bit adverse to where we had expected it to run, but we've been taking a look at it, auditing it and we'll continue to manage that run-off.

Randy Binner

So you are saying 12 months from now that the run-off? I guess relative to maybe where it started, can you -- what inning we're in or some, kind of, characterization of how far through you are in that process?

Arturo Raschbaum

Our general view is that we have a very modest level of development left. And I think, well, it don't hold us to an exact 12 months, I wouldn't see it extending much beyond the next 12 months in terms of the final run-off on it.


Our next question comes from Ken Billingsley with Compass Point.

Ken Billingsley

I would like to kind of follow-up on Randy regarding the commutation, and I may have missed it if you did specify this. What lines and what is it that you were writing before that you no longer wish to write?

Arturo Raschbaum

That's a good way to put it. I think, first of all, as you know there are several segments that we've not agreed to take going forward and those have been excluded from the contract. We go through, as you know, a fairly ongoing process of audits where we'll kind of evaluate the business and understand what's going on from an underwriting perspective.

And in the normal course of the business, and some of this relating to acquisitions, there have been some lines of business that have been added that are kind of incidental to that business. And what we could really focused on in 2015 was identifying all of those and then sitting down with AmTrust and talking about potentially resolving these areas that are sort of out of our underwriting focus.

We're not saying that they're necessarily are profitable, but one of the focuses we've always had across our business is underwriting things that we understand. I think that AmTrust has a good team, and I think we certainly believe these will be profitable businesses. From our perspective, we felt the best way to settle this, and I think, obviously AmTrust agreed was to commute those balances in the fourth quarter and that so we did.

The lines of business are chiefly kind of more specialty lines in Europe, some of the professional liability lines, some E&S, and I think [ph] Surety is another segment that was part of that as well. And we see this is as sort of not a recurring item, we will always look at the business and see whether there are areas that no longer kind of conform to our underwriting focus.

And to provide them the most efficient reinsurance solution, it's important that we kind of maintain the same level of consistency and stability in the portfolio, and as we've always found them to be they were very amendable to work with us and come up with the solution that work for both of us.

Ken Billingsley

And I know you're saying some of these lines are ones that were not in your wheelhouse, but especially in Europe, were any of these lines that you guys potentially might actually bump up against each other from a competitive standpoint?

Arturo Raschbaum

No, we would not.

Ken Billingsley

On the commercial auto loss, I mean, this was three quarters, I know you've been talking about repricing and reunderwriting that business, but would it be safe to assume that we might have another quarter of this before it starts to improve? And I would imagine you're trying to kind of clean house at the end of the year, but these things kind of tend to drag on for annually. Is there a chance so we could see a little bit more deficiency going in the early part of '16 or what makes you think that you kind of captured it at all?

Karen Schmitt

I mean, I guess, there's always a chance. The one thing I will tell you is that our worst reserve review was the first quarter, which was booked in second quarter. Second quarter reserve review booked in third quarter was probably half the level of development. And then this latest reserve review was half of that level of development. So it's getting progressively smaller, which we're certainly happy to see.

I think the higher initial booking rates will help a little bit, but we can't rule out that something else won't come up. We're going to continue to look at it every quarter. And the reunderwriting is certainly is expected to help, but there really can't be any guarantees.

Arturo Raschbaum

So remember, Ken, the way we reacted, when we saw the development initially was we sort of extended a much more aggressive and active case reserve evaluation, where we did on-site visits with every client that's had exposure to commercial auto. We looked at the individual reserves not just the ones that have been reported, but those that might be under our retention, because most of this is excess. And that cost us to increase our expected case reserve. And then from there we applied incurred, but not reported reserves.

So we believe, we responded effectively to it. And I believe that based on what we're seeing in terms of new claims that are coming in relative to development, it's certainly moving down. So we're certainly confident that we reacted effectively and have done what we needed to do. I think if anything follows next year, it just could be more latency that we haven't identified before, but we do believe we've addressed this effectively.

Ken Billingsley

And I'd like to move to the expense ratio, if I could. I believe someone said, there's a business mix shift, is that the major driver what's pushing acquisition cost lower?

Karen Schmitt

Yes. In Diversified, in particular, because of the loss of large account, which was a large quota share, that actually has a favorable impact on the expense ratio for that piece.

Ken Billingsley

Just two other quick questions. One, looking on the balance sheet, additional paid in capital is lower from the third quarter or fourth quarter. Anything driving that regarding these outstanding capital structure that maybe pushing that down?

Karen Schmitt

Yes, I don't have the third quarter piece. I'm going to have to get back to you on that one.

Ken Billingsley

And then the last question, and I don't know if there is a shift in investment philosophy, but I just wanted to clarify, are you going to be doing anything different with your investments portfolio in 2016 going forward?

Arturo Raschbaum

No. I think, quite honestly, I think that 2015 pretty much validates our strategy of maintaining a low-risk, high-quality bond portfolio. I know that many in the industry have taken kind of more alternative investment strategies. But I think we've always said that a part of our low volatility model is to ensure that we have effectively reduced risk both in the underwriting and the investment side, and to deviate from that strategy would require incremental capital. We just don't think this support the returns, and the volatility support any incremental additional capital for more volatile investments.

Ken Billingsley

And I would imagine that most companies would love to have a 12% tangible equity, while studying themselves up for the next year, so look forward to 2016.

Arturo Raschbaum

Obviously, we certainly liked to have seen a better underwriting result and we're committed to improve it, but I guess that's a -- we would have certainly liked to see a stronger return, but we're committed to strengthen it.


Our next question comes from Matt Carletti with JMP Securities.

Matt Carletti

I see Randy and Ken covered most of my question. I had one and it related to, Art, something you mentioned in the opening comments. You mentioned, particularly, the Solvency II capital solutions for new clients. Would those all be at January 1 or were any of those in Q4 and it's kind of just hard to see the numbers because of the lost client with the headwind?

Arturo Raschbaum

Actually, they're all January 1. Just to give you a little more background about what we saw, we saw kind of tremendous volume of quoting opportunities more than we anticipated, but we were very selective, and I think some of the ones that we passed on, we may look again at next year.

But yes, we have four relationships. Among those relationships, there are a couple of that that have the ability to upsides within the terms of contract. In addition to that, a couple of them also have expressed an interest in also pursuing sub debt, so we found a very receptive market and it continues. I think we have a fairly good pipeline of first quarter, second quarter opportunities that we're evaluating.

Matt Carletti

And do these have kind of a typical size to them, or are they fairly chunky, or are they maybe across the board in terms of size, these four new clients?

Arturo Raschbaum

We estimate probably about $20 million from these four clients, as sort of the initial [multiple speakers]. And there is some that are higher than lower, but I think it's a pretty balanced portfolio. As I mentioned some of them have within the terms of the contract the ability to upside because these are for capital solutions, so the optionality to grow a quote share. And for the most part, the majority of them are quota share arrangements.

Matt Carletti

And then, is this sort of product, typically a January 1 product given the -- I imagine these companies are trying to set their capital up for the year or do you expect to see ongoing kind of throughout the year opportunities or is it more of kind of wait for the next cycle in the next January 1?

Arturo Raschbaum

No, they're not January 1 oriented. In fact, at least one of these programs was not in existence before, so it was really a function of us interacting with the client, and obviously the broker who sponsored the client, and really kind of understanding what their capital needs were and then sort of structuring something that would make sense for them, so from our perspective that was definitely important.

I think one of the things that happens is that the solvency capital ratio, there is a requirement for enhanced transparency, so these companies will publish their solvency capital ratio. And as that process takes place, one of things that we've seen in a number of the opportunities, both the ones we wrote in and haven't written is that, as that transparency comes into play, companies are as concerned about the relative position they are versus their competitors versus where they were before.

None of these companies were in a absolute solvency meltdown. They met Solvency II required capital standards, but they were, for the most part, prudently managed companies that wanted to make sure that they had the same level of solvency margin that they had pre-Solvency II.

And I think that's kind of the nature of a lot of the opportunities we're seeing coming forward. So we do think there is an opportunity really over the 12 months. A big part of it is getting in front of those prospective customers and really talking about capital rather than just pure reinsurance structure.


And I'm not showing any further questions at this time. I would like to turn the call back over to Noah.

End of Q&A

Noah Fields

Well, thanks everyone for joining us today. And we look forward to speaking with you in the future. Have a great day.


Ladies and gentlemen, so that concludes today's presentation. You may now disconnect and have a wonderful day.

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