Aspen Insurance Holdings Limited (AHL) CEO Christopher O'Kane on Q2 2018 Results - Earnings Call Transcript

Aspen Insurance Holdings Limited (NYSE:AHL) Q2 2018 Earnings Conference Call August 2, 2018 8:00 AM ET

Executives

Mark Jones - SVP, IR

Christopher O'Kane - Group CEO

Scott Kirk - Group CFO

Analysts

Amit Kumar - The Buckingham Research Group

Brian Robert Meredith - UBS Investment Bank

Operator

Good day, and welcome to the Aspen Insurance Holdings Limited Second Quarter 2018 Earnings Conference call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mark Jones, Investor Relations. Please go ahead.

Mark Jones

Thanks, Andrew, and good morning, everyone. On today's call, we have Chris O'Kane, Chief Executive Officer; and Scott Kirk, Chief Financial Officer.

Last night, we issued our press release announcing Aspen's financial results for the second quarter of 2018. This press release, as well as corresponding supplementary financial information, can be found on our website at www.aspen.co. Today's presentation contains, and Aspen may make from time to time, written or oral forward-looking statements within the meaning under and pursuant to the safe harbor provisions of U.S. federal securities laws. All forward-looking statements have a number of assumptions concerning future events that are subject to a number of uncertainties and other factors.

For more detailed descriptions of these uncertainties and other factors, please see the Risk Factors section in Aspen's annual report on Form 10-K filed with the SEC and posted on our website.

Today's presentation also contains non-GAAP financial measures, which we believe are meaningful in evaluating Aspen's performance. For a detailed disclosure on non-GAAP financials, please refer to the supplementary financial data and our earnings release posted on our website.

With that, I'll now turn the call over to Chris O'Kane.

Christopher O'Kane

Thank you, Mark. Good morning, everyone. There is a tremendous amount of work being undertaken at Aspen to enhance both our financial and our operational performance. This was reflected in our operating earnings of $0.80 per diluted ordinary share and our annualized operating ROE of 8.4% in the second quarter. We have a very good business with significant upside potential and we are actively and aggressively executing our plan to deliver improved results. I want to spend a few minutes on that before Scott discusses those results.

We have continued the successful repositioning of Aspen Insurance. We had a second successful record quarter in terms of top line, delivering more than $0.5 billion of premium. With continued support from our distribution partners and clients, the insurance team continued to find good opportunities as reflected in the 8% increase in gross written premium recorded in the quarter.

The lines we have targeted for growth are performing very well. They grew by 15% in the second quarter, primarily reflecting good underlying performance from Accident and Health, from Excess Casualty and Crisis Management, environmental, as well as professional and related lines. Overall, the targeted growth lines, which account for almost half of our total insurance premiums, generated an accident year ex cat loss ratio of 55%, in line with the five-year trailing average for these same lines.

There are some other lines, chiefly pieces of our U.S. property and onshore energy books, where we are now seeing the impact of remedial actions that have been taken. The downstream energy book, helped also by improved market conditions, reported an accident year ex-cat loss ratio in the low 20s this quarter.

In U.S. property, we continued to non-renew parts of the book we don't want and re-underwrite business that we do want to keep. With the changes we have made, the U.S property is on the way to becoming a very attractive line of business again.

We also made substantial reductions to our PMLs in this area. The business that we have renewed so far this year has an average rate increase of 10%. The current book is subject to a 61% quota share. And so as the book improves further, we anticipate returning more of it starting in 2019.

Another important and successful part of our operation is the business we write on the Lloyd's platform. Approximately $480 million or just over 1/4 of our insurance segment premium, is written at Lloyd's. This part of our business has five-year average loss ratio of 62%, the same as in the second quarter. This is good but we need it to be better.

So how are we going to do this? While most of the Lloyd's business performed very well and we will continue to focus on grow these lines, there are some other areas that disappointed, specifically international, professional indemnity and Marine Hull. Therefore, we will no longer underwrite these books on the Lloyd's platform. Of course, there are many other lines that are extremely valuable, for example, cyber, transactional liability, financial institutions, Management Liability and many of the broader marine lines that will be unaffected by this decision. In fact, we will be allocating more capital to these areas.

As I said already, in professional and related lines in the U.S. and internationally, we see a great future is building on a very attractive foundation. As an example, in our U.S. professional liability book under Bruce Eisler, we have a terrific record with a 5-year annual growth rate of approximately 14% and a combined ratio in the low 80s. Under Bruce's leadership over entire global financial professional lives, we continue to see an excellent pipeline of opportunities.

Furthermore, we will continue to grow our Marine lines in the U.S. and in international markets under the very able direction of Don Harrell. On the other hand, we will discontinue writing aviation insurance at Lloyd's.

Turning to Aspen Re where we continued a strong record of success. The businesses built achieving combined ratio of 89.2% in the quarter and 89.6% in the first half of the year. We remain very disciplined in a pricing environment where rates were positive but narrowing in the first half of the year and flat on average at the July renewals. The reinsurance team are concentrating on better priced business and improving the average effective rate on the continuing book.

An example of this discipline exists within the Specialty insurance part where we have reduced exposures to areas such as engineering and trade credit, where the underlying primary business is not unattractive but ceding commissions are just too high. We continue to see favorable prior year development across both insurance and reinsurance primarily in our short-term lines. In particular, we saw releases from three hurricane events in 2017, underscoring our prudent reserving approach.

Turning out to our balance sheet. We continue to strengthen our capital foundation. We took action to reduce both our debt leverage and our PML exposure. And mid-June, we've redeemed $125 million of our senior notes which provides an element of capital flexibility in any future adverse catastrophe season. Importantly, it also reduces our debt leverage ratios from a rating agency perspective. As you will have seen, S&P recently reaffirmed our single-A financial strength rating.

Our actions to strengthen the business have reduced susceptibility to cat losses. As you will recall, the second half of 2017, we sustained losses net of reinsurance of approximately $400 million from three hurricane events, two wildfires and the Mexican earthquake.

Given the repositioning of our portfolio and our changed reinsurance buying, we believe that if the same exact events were to occur again this year, both our gross and net losses would be lower. We estimate net losses would be approximately $270 million, which is a reduction of 33%. Naturally, we would expect similar levels of reduction to most events that can be anticipated as our gross and net exposures are now much lower.

Another indicator of how we have lowered our cat exposure is the reduction relative to total shareholder equity from a 1 in 100 and a 1 in 250-year cat event. In July 2017, our largest wind exposure was Florida in the Southeast which stood at 9.6% for 1 in 200 -- 1 in 100 and 14.5% for 1 in 250. Today, the comparable figures are 7.1% and 9.7%.

I'll now turn the call over to Scott who will take you through our financial results in more detail.

Scott Kirk

Thank you, Chris, and good morning, everybody. In the second quarter of 2018, we continued to make good progress against the financial goals we set ourselves in 2018. We reported a second consecutive quarter of underwriting profit in both segments, continued to improve our expense ratios and reduced our debt leverage. We've produced annualized operating ROE of 8.4% and a combined ratio of 95.7%. Book value per diluted share was $38.21, with the entire decline attributable to $44 million of unrealized losses from the investment portfolio.

Through the first six months of 2018, our combined ratio was 95.6% and we achieved an annualized operating ROE of 8.8%. Gross written premiums for the group were $854 million, an increase of 4% compared with the second quarter of 2017, with growth coming from the insurance segment.

Net written premiums were $486 million, a decrease of 16% compared to the second quarter of 2017. For Aspen Insurance, this is primarily reflected in our increased use of quota share reinsurance.

At Aspen Re, we no longer cede business by Silverton and now account for this business in the same way as any other third-party reinsurance. This change reduced net written premiums by close to $15 million in the second quarter of 2018. And are expected to have a similar impact in the third and fourth quarters of this year. The loss ratio for the group was 59.7%, down from 61.6%, with the improvement coming from insurance. Net cat losses were $18 million in the quarter or 4 percentage points, principally from weather-related events in the U.S. and the U.K.

Total group prior year net reserve releases were $43 million or 8 percentage points, primarily from short-tail lines. We recorded $32 million of favorable loss reserve development in the quarter at Aspen Re. $20 million of which comes from reductions in our HIM estimates while Aspen Insurance accounted for the remaining $11 million.

Our accident year ex cat loss ratio was 64.4% compared with 63.6% in the second quarter of 2017. As I mentioned earlier, we changed our treatment of business previously ceded by Silverton. And as a result of this change, ceded earned premiums decreased $15 million in the second quarter. And due to a benign cat quarter, there were minimal associated recoveries. Now adjusting for this change, our accident year ex cat loss ratio was in fact 62.3%.

Turning now to our expenses, which continued to move in the right direction. Our total expense ratio declined 210 basis points to 36% compared to the second quarter of 2017 and was down 240 basis points in the first half of 2018. We recorded decreases in both the acquisitions and the G&A expenses. Acquisition expenses benefited from higher levels of ceding commissions and our G&A expenses reflected our continued focus on running the business as efficiently as possible. We are well on track to achieve our targeted savings of $30 million this year from our Operational Effectiveness and Efficiency Program.

Turning now to our segments, and I'll firstly deal with reinsurance. Gross written premiums were $326 million, a decrease of 3% compared with the second quarter of 2017. This was largely due to lower premium coming from our specialty subsegment where we've written less business in areas such as engineering. The remainder of the three subsegments saw some modest growth in the quarter.

Our Reinsurance business recorded underwriting income of $31 million and a combined ratio of 89.2% in the second quarter. We recorded net cat losses of $10 million or 3.5 percentage points on the loss ratio.

The accident year ex-cat net loss ratio was 65.2% compared with 64.2% in the second quarter last year. Now that change that I referred to earlier with Silverton, increased that loss ratio by 3.5 points in the quarter. On a like-for-like basis, the accident year ex cat net loss ratio was 61.6%. And there's also an impact from [indiscernible] premiums as they continue to increase as a percentage of the overall reinsurance premiums. The impact on the ex-cat loss ratio is a little less than two percentage points in the quarter. That said, the second quarter also included approximately five percentage points of large losses mainly from a dam collapse and a fire-related loss.

I'll turn now to insurance. Gross written premiums were $528 million, an increase of 8% compared to the second quarter last year. Growth came across all three subsegments, particularly our targeted growth lines. We continue to see further impact on our insurance book this quarter from the reinsurance changes that we've implemented.

Net written premiums were $219 million, a 25% decrease from $293 million in the second quarter of 2017. This resulted in a net gross written premium ratio of 42% in the quarter compared with 60% in the second quarter of 2017. The net loss ratio in the Insurance segment was 62.2%, down from 66.9% in the second quarter last year. We had approximately $8 million or 4 percentage points of net cat losses from weather-related events.

Looking at the accident year ex cat loss ratio, I wanted to first focus on the gross loss ratio, which was 59.2% in the second quarter. This is down from 65.7% in the first quarter and also an improvement from the 63.1% in the second quarter of 2017. This improvement in the ratio is driven mainly by our U.S. property book which reported a better quarter following the underwriting actions that David Cohen and the insurance team have been implementing.

Our insurance business remains heavily reinsured as part of our strategy to reduce volatility and PML exposures. And on a net basis, the accident year ex-cat loss ratio was 63.5% for the quarter. The flip side of this change of course is the ceding commissions we received. The acquisition ratio improved to 10% this quarter compared with 14.8% in the second quarter of 2017.

The improving loss ratio and expense ratio resulted in a combined ratio for Aspen Insurance of 97% and this compares with 104.4% in the second quarter of 2017.

I'll now move on to Investments where we generated net investment income of $50 million, an increase of 6% compared with second quarter of 2017. That's driven predominantly by higher new money yields. The total return on the aggregate investment portfolio was flat in the quarter, reflecting mark-to-market changes in the fixed income portfolio driven by rising interest rates. The fixed income book yield was 2.63%, up from 2.56% at the end of 2017. The duration of the fixed income portfolio remains around 3.9 years.

Before I finish, I wanted to provide an update on the ongoing work to enhance the debt and capital structure of the group. During the second quarter, as Chris noted, we took the opportunity to redeem $125 million of our most expensive debt, the 6% coupon 2020 senior notes. The total cost of this redemption was $134 million, including a make-whole payment of $8.6 million which was recorded as a charge in the quarter. As a result of the partial redemption, our debt-to-capital ratio decreased to 13.1% and we expect interest savings of approximately $19 million as a result of this saving -- of this redemption.

And with that, I'll now turn the call back to Chris.

Christopher O'Kane

Thanks, Scott. So our financial results reflect actions that we have taken and continue to take to build on the strength of the Aspen franchise and position the company well for the future. Our board, our leadership team and our employees right across the company remain enthusiastically and energetically committed to delivering strong results and creating shareholder value.

Before we go on to Q&A, I want to reiterate what I said on our last call. Our Board is very open minded and all options remain on the table in terms of preserving and creating shareholder value. Those statements have always been true and are still true and very much in the forefront of our minds. If and when a material change occurs, we will tell you. However, we won't comment further on these matters today. Thank you for participating in the call this morning.

With that, we're happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Amit Kumar of Buckingham Research. Please go ahead.

Amit Kumar

Thanks and good morning.

Christopher O'Kane

Good morning, Amit.

Amit Kumar

Just going back to your concluding remarks, I wanted to ask something differently. The insurance book is now down meaningfully. You gave us a lot of color in how the book looks different, how the cat losses would be different. To I guess flip the question, do you think that the Board of Director foresee the possibility where a standalone Aspen could continue to exist, or has that ship sailed?

Christopher O'Kane

I think what I said towards the end of the call, Amit, probably something similar to what I said three months ago, is the Board is open-minded. It should be open-minded. And what we are evaluating is what is the best course of action for our shareholders in creating and preserving value. And whether, that particular course is ranging from a sale to a continued [indiscernible] of many. Our option really is an open question. We are still looking at that. We -- it won't take forever. We'll -- should relatively soon. But when we do, if it's change of course we'll let you know. But I can't rule in or rule out any possibility.

Amit Kumar

You just said it won't take forever. It will be relatively soon. How should we define relatively soon?

Christopher O'Kane

I think that's purposely vague set of words, Amit. I'm not going to help you with any further words.

Amit Kumar

Moving on, you moved to Bermuda. Apart from I guess the tax reasons, first of all, what are you doing differently out of Bermuda? And do you -- is that stay sort of -- is there like a timeframe where you plan to be there? Or is that open-ended?

Christopher O'Kane

I don't think any non-Bermudian gets open-ended right to stay in Bermuda. I think you get a maximum of 5-year work permit which the work that I have, that's fairly standard. And if you like Bermuda and Bermuda likes you, you may have an option to extend it again. But we haven't really defined a time.

From my point of view, there's a couple of reasons why it makes sense in Bermuda, it's the headquarters of the company. It's geographically very conveniently situated, both to get back and forth to London and to New York and to the rest of our U.S. operations. As you know it's our U.S. operations have great growth and promise but also where we had some issues. So I found this what is better position there and then there's some personal reasons that enter in too, where from a family point of view, Bermuda works very well.

Amit Kumar

And last question, and I will requeue after this, I know you talked about the reserves. Can you just talk about I guess the UEPR remaining on the book which had developed adversely previously? Thanks.

Christopher O'Kane

I think Scott can answer that one.

Scott Kirk

Yes, hi Amit. Scott here. I think the peak of the book that you're referencing was the primary habitational component of our U.S. property book. I think we said at the end of last quarter that we were down in the sort of single digit type numbers in terms of that runoff. At the end of this quarter, it's negligible in terms of the impact. I think the great thing that I'm seeing and hopefully you'll pick up on too is that real improvement in that gross ex cat loss ratio at a sub -60 number. So I think the signs are there and the indications are there that David and the team are implementing the right actions.

Amit Kumar

Okay, this is helpful. I'll stop here, and requeue. Thank you.

Operator

The next question comes from Brian Meredith of UBS. Please go ahead.

Brian Meredith

Yes, thanks. A couple here for you. First one, Chris, I'm just curious, given the strategic process that's going on right now, including the departures of some people. Can you kind of talk about just general, the franchise right now? Are things stable? Can you stabilize things? Any lines of business that you are particularly concerned about with some departures?

Christopher O'Kane

That's a good question, Brian. And difficult -- I'll try to be succinct but there's a lot of shades here just to give you the full picture here. We finished last year by announcing an effective and efficiency program, as you know, as you recall. And that called for some streamlining. So that's a polite word for saying, well you've got too many senior people doing similar jobs, maybe you could take some of them out, have a longer span of control and take that in terms of headcount, and we did some of that.

So some good people left. But also, we had areas like each underwriting team had a sort of mini operational hub within it and that's not efficient. So we tend to be building bigger hubs and creating those. And then also outsourcing, which is now well underway. We are working, as I think we said in the last call, with Genpact.

This does reduce jobs and it's the ones that you target to reduce. And then there's the ones where people say well you might have moved my job on so I'm going to move myself. So we have had some of that. Mostly we identified the people that we regarded as valuable. We talk to them. We maybe put some retention payments around them and I think we limited that damage to the extent it could be limited.

Now there's another set of factors that's, given that some of the news feed that we had in the last few months, competitors, I don't blame them at all for this. They see some very quality people, they see some great underwriters, they see some great actuaries and so on and they start giving them a call. Whereas a year ago they probably would have said, no, I'm happy at Aspen.. They now will hear, I'm very happy at Aspen but I'm going to listen to you. And we've had a few of those.

There isn't a single situation where I think we lack the underwriting abilities to be a serious and effective player in what we do. But in areas like property treaty or offshore energy, we've seen some good people go and I'm very sorry to see them go. I think they remain friends of Aspen. I would like to think some of them remain friends of mine.

We have always thought a lot about succession planning. We do have strength in that. So mostly what we do is promote within. In one or two situations we're hiring underwriters to replace to serve our customers [ph]. I think that if you look at an increase in attrition rates here amongst key people, it's up a little bit year-on-year. And if you sort of laser focus within that, you're down to a handful. I mean, five or six people, you think, gosh, I really wish they were still here. So I can't say there's nothing that makes me uncomfortable. But it's not very much.

In terms of can we relate to our clients and brokers, the answer is yes. As of this morning, I can tell you that every single reinsurance client that we started this year with is still a reinsurance client. And on the insurance side, we have a growth rate actually better than we had for a couple of years. I mean, that -- we reduced our growth rate two years ago because we wanted to reposition the book in insurance. That's done. We've now got a lot of good people doing good work and doing a lot more business. So I think if you look at the hard numbers, it looks pretty good. And overall, give us kind of an A+ but maybe not an A++.

Brian Meredith

Excellent. And then another just quick one here, in some of the comments you mentioned getting out of aviation at Lloyd's, some of the other things. What's the kind of premium associated with some of the lines of business that you're exiting now that we should think of them?

Christopher O'Kane

Across the three of them, maybe it's about $120 million thereabouts. So not especially capital-intensive lines of business. But there will be a free-up of capital associated with that as well.

Brian Meredith

And that's towards the -- that's the insurance, and the insurance area?

Christopher O'Kane

They're all insurance. There are really three things where -- in Marine Hull, because a good – we got couple of things going against, Marine Hull, highly commoditized business. We happen to have a very, very good team, they're on the Lloyd's platform, that is the most expensive platform we have and the cost is not within our control. And the way the brokers behave, they're very, very commoditized.

I think it's just very, very tough even though our loss ratios aren't -- they're not great but they're not lacking in respectability. But combine them with a kind of, I think, a strategic downwind and a high expense base it didn't make sense to us. That was Marine Hull at Lloyd's.

Aviation, we've got a great track record there. But I think the world has moved on and we just don't think Aviation as a place where we want to put our capital in the future. And finally, professional liability is a terrific line for us, led in the U.S. by Bruce Eisler, who's done fantastic things with his six, seven years with the company. But in Lloyd's, it just wasn't working, Bruce has said, just -- we can put more capital elsewhere and get a real return. So that's just not -- considerably successfully in that area.

Brian Meredith

Great. And then just quickly, Scott, investment income. You may have mentioned it but it was up pretty significantly in the quarter sequentially, the book yields also. Is that just simply from higher invest yields or was there anything other unusual going on?

Scott Kirk

Yes, Brian, a good spot, $50 million, it is up about $3 million or $4 million on what the average run rate that we've seen. A couple of things going on there. New money yields are up. They're around the 3% mark, which I think is a good indication as to how it will look go forward. The one piece that is in there though, there was some trailing dividend income. You'll notice in our print-up it was about $700,000 to a $1million or so. So I think you've got to think about that removing that element of it go forward.

Brian Meredith

Got you. Got you. But the fixed income stuff is kind of a good run rate, the $49.7 million?

Scott Kirk

Yes, I think it's a fair run rate. I mean of course it's always going to be determined by cash flows in and out and the like. But I don't think it's a bad thought on the way forward.

Brian Meredith

Great, I'll stop there and let the others on.

Scott Kirk

Thanks Brian.

Operator

[Operator Instructions] The next question comes from Ian Lapui [ph] of Morris Capital. Please go ahead.

Unidentified Analyst

Good morning everyone. Two questions. The first, there was another increase in reinsurance receivables or recoverables. Can you give any color on the counterparties and whether there's been any sort of new counterparties or any change from what you've disclosed in your last 10-Q? And then the other is could you just give some color on the FX losses during the quarter? Thank you.

Scott Kirk

Yes, sure, Ian. It's Scott Kirk here. I'll take both of those. The increase in the ceded recoverables is of course related to the increased quota share arrangements that we have in place, we placed those with very high-quality counterparts, the distribution of which will have not changed in any significant way from the numbers that we would've released in the K. So that's part 1.

Foreign exchange, that's a subject close to my heart. So a lot of challenges in terms of the geography and the accounting rules that surround FX. There are in fact two pieces that we need to look at. We economically hedge our balance sheet and our exposure to sterling, euro, Canadian, all these where we have branches around the world. Unfortunately, we don't achieve hedge accounting, which is quite a high bar. And that tends to flow through our P&L.

You'll have noticed there in the quarter that we had about a $41 million loss sitting there. The other side of this though is translation. And there's about $35 million of gain coming through other comprehensive income. So the net impact of this in the quarter is actually quite small. But it's just geography. And you know the dollar has gone through a period of sort of strengthening, weakening and strengthening again over the first six months of the year. So that's what caused the deviation.

What I would say though, on a year-to-date basis, so through the first six months, the net of those two pieces is in fact a small gain of about $3 million.

Unidentified Analyst

Okay, thank you. That's very helpful.

Scott Kirk

Great, thanks Ian.

Operator

And we have a follow-up from Amit Kumar of Buckingham Research. Please go ahead.

Amit Kumar

Thank you. Just a few cleanup questions. Number 1, going back to the discussion on leverage and I think you mentioned a number -- are you sort of all set there? Or are there more actions on the leverage front?

Scott Kirk

Amit, it's Scott here. Yes, we redeemed $125 million of the 2020 notes. Feel very comfortable with where we are in terms of our leveraging position as it stands.

Amit Kumar

Got it. The second question I wanted to go back to Brian's question on employee departures. And if I look at the K, I think you had 1,300 employees as of 2017. And I think the departures are obviously a very small percentage of that. Can you just talk about, I don't know, any update to that number or maybe just broadly talk about how we should think about the employee count here versus year end?

Christopher O'Kane

So I'm not quite sure -- could you say again what the date of that headcount figure you said...

Amit Kumar

I think the 10-K had 1,300, if I have the right exhibit in front of me. So I just wondering if you could just talk about [multiple speakers].

Christopher O'Kane

Prior to that, we had been 200 to 300 higher. When we owned AgriLogic, we had 250 to 300 people doing that. So we don't own that business now that we have an equity interest board on managing it. So you're up with the reduction there. We are probably sitting at a very similar number of employees to the one that you quoted.

I don't actually have it at my fingertips. But clearly in most cases when people leave in an unplanned way, you got to replace them and given the cost conscious environment, I personally sign off on every new employee and I got to tell you, I'm a bit busier than I would like to be in that regard. I would say maybe a week goes by but never two weeks go by that there isn't sort of 10, 15 people.

We vet those, if they're finance guys it might be Scott; if it's operations, David Schick; underwriting, it could be David Cohen or it could be our reinsurance guys, and we make sense that -- we see ourselves it makes sense to replace them. So I think at that point of view headcount is stable.

Then you've got the effectiveness, efficiency which is a gradual program of making ourselves more efficient and getting more done with fewer people in the organization and outsourcing more functions. The outsourcing will have an impact on the numbers of workforce. That hasn't really begun to bite yet. I mean, we are just at the beginning really over the last few weeks. So I think going forward, we -- you would find a meaningful reduction of that 1,300. We're talking though this time last -- next year, something in excess of 10%, in the range 10% to 20% would not be inconceivable.

Amit Kumar

Got it. And personally I hope you're busy signing off on bigger things versus moonlighting as HR. The final question...

Christopher O'Kane

I assure you I do. It's not a full-time job.

Scott Kirk

It's useful little control to have in there.

Amit Kumar

No, I totally agree that. Final question then I'll stop here. On the HIM development, if you could just spend a bit more time talking about the issues we have seen at some other companies. Maybe just talk about your experience on bank card loss and may be the LAE side and even the ALB crisis issue. Just, may be just give us some more color as to what you're seeing on that.

Christopher O'Kane

I'm very happy to do that and maybe I'll give you what underlies our experience. And if you need some numbers, I'll turn to Scott. But the way this thing, all three of them, but I think it's particularly Irma, the way it's run off is not a surprise. And the reason is it's not a surprise is a long time ago we said when we do reinsurance at a place like Florida, we need a client.

A client is an insurance company. Insurance company has capital. A decent amount of capital. It has an IT system. It has operations. It doesn't just have the CEO and the CFO, because it has claims. It has claims adjusters. It does all the things it needs to do, to be done, to run the business wisely. And that's why when we look for a client in Florida we are likely to choose a national writer, it may even be even a commercial industrial writer with full disclosures, because we think they do the job well.

And when you turn to the undercapitalized companies, they tend to be, maybe they don't have any claims adjusters or it's a skeleton crew and when something happens they're out there looking for adjusters and they're paying more money for not the highest quality adjusters. So they're not looking after their policyholders very well.

So a unit exposure to one of these guys is going to give you more loss, than units of exposure to a big properly run insurance company. And that is fundamentally how for years now we've positioned our book, Christian Dun Levy [ph] first-class underwriter run cat-light growth out of Bermuda now and that's what he's doing.

So I don't want to say we have no exposure to the lightly capitalized guys in Dade and Broward but we just don't really see that as a core part of our book, which means we are not exposed so much today to Dade and Broward, that means we are not exposed to the LAE problem and the same underwriter problems that others maybe have. That's why I think our reserves -- or one reason our reserves have proved to be modestly redundant so far.

Amit Kumar

And how much was the -- I know we've heard some very high LAE numbers as a percent. I don't know if Scott has that number or any other color on that.

Scott Kirk

Yes, Amit. The number -- the amount of release that we've seen from those HIM-related losses during the quarter was about $20 million. So I think that's testament to the prudent reserving approach that we took in the first place. That brings out sort of net numbers down to those three events to under $300 million, around the $280 million, $285 million mark. So use that as a percentage of capital I think is probably the most useful part.

Amit Kumar

Got it, okay. That is all I have, I'll stop here. Thank you for the answers.

Operator

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Chris O'Kane for any closing remarks.

Christopher O'Kane

We thank you all for your time and attention this morning. Thanks for listening to the call. I wish you a very good day. Goodbye.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.