Chubb Ltd Q1 FY2021 Earnings Call

Please standby, we are about to begin. Good day, and welcome to the Chubb Limited First Quarter 2021 Earnings Call. Today’s call is being recorded. For opening remarks and introductions, I’d like to turn the call over to Ms. Karen Beyer, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Welcome everyone to our March 31, 2021 first quarter earnings conference call. Our report today will contain forward-looking statements, including statements relating to company performance, pricing and business mix, growth opportunities and economic and market conditions, which are subject to risks and uncertainties, and actual results may differ materially. Please see our recent SEC filings, earnings release and financial supplement, which are available on our website at investors.chubb.com for more information on factors that could affect these matters. We will also refer today to non-GAAP financial measures, reconciliations of which to the most direct comparable GAAP measures and related details are provided in our earnings press release and financial supplement. Now, I’d like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer, and then we’ll take your questions. Also with us to assist with your questions today are several members of our management team. And now, it’s my pleasure to turn the call over to Evan.

Good morning. We had a really good start to the year, highlighted by excellent premium revenue growth globally, powered by our commercial businesses, double-digit commercial P&C rate increases and expanding underwriting margins, leading the record ex-cat underwriting results and simply world class margins. It was an active quarter for natural catastrophes due primarily to the winter storm losses in Texas. Though even with that, we produced a really good calendar year combined ratio, which speaks to our improved risk adjusted underwriting returns. The public P&C combined ratio was 91.8% and included catastrophe losses of 9.1 percentage points, compared with 3.3% last year. The current accident year combined ratio without catastrophes was 85.2%, compared to 87.5% prior year. The 2.3 percentage point improvement was made up of 0.1 point in the loss ratio with the balance related to the expense ratio. Adjusted net investment income in the quarter was $930 million, up about 1.5%. That excludes private equity gains, which most other companies include. On that basis, investment income grew 50%. In sum, core operating income in the quarter of $2.52 per share was down $40 million from prior year to $1.1 billion, while net income of $2.3 billion was up significantly over prior year’s $252 million. Phil will have more to say about the expense ratio, catastrophe, prior period development, investment income and book value. Turning to growth and the rate environment, P&C premiums were up 9.7% globally, with commercial premiums up 15.6% and consumer lines down 2.5%. Foreign exchange had a positive impact on growth of 1.6 points. The consumer lines result included negative growth in global A&H, flat revenue in international personal lines and about 2.5% underlying growth in North America personal lines. We continue to experience a very strong commercial P&C pricing environment globally and based on what we see today, I’m confident these conditions will endure. Chubb was built over years to capitalize on these conditions. In North America, commercial P&C premiums grew almost 15%, new business was up 21.7% and renewal retentions remain strong at 95% on a premium basis. In North America major accounts and specialty business, net premiums written grew about 17.5% or about 15% excluding year-over-year impact of large structured transactions. Our middle market and small commercial business grew over 11%. Overall rate increases in North America commercial were up by 14.5%, while loss costs are trending up about 5.5%. That varies up or down depending upon line of business. Let me give you a better sense of the rate environment. In major accounts, risk management related primary casualty rates were up almost 8%, general casualty rates were up 34.5% and varied by category of casualty, property rates were up nearly 20% and financial lines rates were up almost 21%. In our E&S wholesale business, property was up 15.5%, casualty and financial lines rates were up 25%. In our middle market business, rates for property were up 16%, casualty was up 12% excluding comp, with comp up 1% and financial lines rates were up 18.5%. In our international general insurance operations, commercial premiums grew over 20% on a published basis or 15% in constant dollars. International retail commercial grew about 17.5% and our London wholesale business grew 38.5%. Retail commercial growth varied by region with premiums up over 26.5% in Asia-Pac, 22.5% in Europe, with equally strong growth in both the U.K. and on the Continent. Our Latin America commercial lines business returned to growth in the quarter with premiums up 4.7%. Internationally, like in the U.S., in those markets where we grew, we continued to achieve improved rate to exposure across our commercial portfolio. In overseas general insurance, rates were up about 14.5%, with a loss cost trend of 3%, though that varies by class of business and country. Rates were up 14% in our international retail business and 20% in our London wholesale business. Keep in mind, these outstanding commercial insurance growth rates in the U.S. and overseas were achieved in spite of the headwinds we face from negative exposure growth due to reduced business activity. On the other hand, consumer lines growth globally in the quarter continued to be impacted by the pandemic’s effects on consumer-related activities. During the quarter, there were signs of recovery beginning. Breaking consumer down between A&H and personal lines, our international personal lines business produced modest growth of 1.2% on a published basis, fundamentally flat in constant dollars. Our international A&H business shrank 3.7%. Travel globally, both business and consumer related, remains depressed and that hits A&H hard. While our direct marketing and group employee benefits A&H business is beginning to pick up modestly. If we exclude the travel business, our international A&H business grew almost 2% on a published basis. We expect growth to continue to improve as the year goes along, though predicting the continued impact of the pandemic in Asia, Latin America and Europe is difficult. Net premiums in our North America high net worth personal lines business were up about 2.5% excluding reinsurance reinstatements, auto renewal credits in California and wildfire exposure related cancellations. As I have said before, this outstanding franchise is about customers who choose Chubb for the service and richness of coverage and are willing to pay for them. These client segments, which are at the heart of what we do, grew 8% in the quarter. Overall portfolio retention remains strong in high net worth at over 94%. We achieved positive pricing, which includes rate and exposure of 11% in our homeowners portfolio. Looking ahead, we have been and are taking continued action to shape this portfolio. To that point, we’re taking ongoing action to reduce our wildfire exposure in parts of California as a consequence of our inability to achieve adequate rate and terms for the coverage. This will have an impact for the remainder of the year of about $15 million or about a 1.25% impact on our growth rate. Lastly, in our Asia-focused international life insurance business, net premiums plus deposits were up over 18.5% in the quarter. In sum, as I have said, the past few quarters reflect a hardening market. We’re in a hardening market for commercial P&C in most of the world. The rate environment in my judgment is a rational and necessary response to years of industry underpricing and a more uncertain risk environment today, driven by climate change, litigation, environmental and cyber-related exposures. Given our years of data and analytics capabilities and underwriting know-how, we know what rate we need in order to achieve an adequate risk adjusted rate of return from underwriting and that is the objective. And it is a relentless focus, though we’re never perfect. Some lines are there. Others have a way to go. Virtually all of our commercial P&C lines of business continued to achieve rates that exceed loss cost and so margin continued to improve. As you can see, we’re off to an outstanding start to the year. My colleagues and I are confident in our ability to grow our business and continue to expand margins. And as I said, I expect as the year progresses, our sizable consumer business will return to growth. Our organization is focused, it’s mission driven, the quality of Chubb service and consistency is a widely recognized differentiator. They are the wellhead of our reputation. We are leaning in to the current favorable underwriting conditions and capitalizing wherever we can get paid adequately to assume risk and volatility. We are growing exposure. Our people are energized and focused, and we have all of the capabilities in place to grow our company profitably, while increasing shareholder value. In light of recent events concerning the Hartford and for the sake of absolute clarity, I want to reiterate once again, our enduring views concerning M&A and capital management. We look at lots of deals every year, different sizes, small to large, different geographies and product areas, and we pull the trigger infrequently. We have lots of optionality. We have made 17 acquisitions over the past 15 years and have an excellent track record of advancing the company’s capabilities, while creating shareholder value. Our approach is steady and consistent. We are extremely patient, disciplined and the money is not burning a hole in our pocket. If we believe a transaction will advance our strategy and further what we are building organically and is good for shareholders, we won’t hesitate to pull the trigger. As regards surplus capital, we’re again very consistent. We hold capital for risk and growth, both organic and non-organic. Beyond that, we return surplus capital to shareholders. We are highly confident about our future and our wealth-creating prospects and we approached the Hartford from that position of strength. This was another opportunity to create additional value and would not distract us from capitalizing on an organic growth opportunity. With that said, the purpose of today’s call is to discuss our first quarter financials and our company’s business. I’ll now turn the call over to Phil and then we’re going to come back and take your questions.

Thank you, Evan. Our financial position remains exceptionally strong. Our balance sheet includes a $121 billion AA-rated portfolio of cash and investment assets. We have over $74 billion in capital, stemming from our superior operating and investing performance. Our operating cash flow remains very strong and was $2.1 billion for the quarter. Among the capital-related actions in the quarter, we returned $871 million to shareholders, including $352 million in dividends and $519 million in share repurchases. Adjusted pretax investment income for the quarter of $930 million was higher than our estimated range and benefited from increased corporate bond call activities. There are a number of factors that impact the variability in investment income. We expect our quarterly run rate to be approximately $900 million. Our annualized core operating ROE and core operating return on tangible equity were 8.2% and 12.8%, respectively, for the quarter. Separately, as Evan mentioned, we continued to present the fair value mark on our private equity funds outside of core operating income as realized gains and losses instead of net investment income, as other companies do. The gain from the fair value mark this quarter would have added 3.1 percentage points to core operating ROE. Book and tangible book value per share decreased by 0.4% and 0.6%, respectively, for the quarter due to unrealized losses of $1.9 billion after-tax in our investment portfolio from rising interest rates. This loss was tempered by adjusted realized gains of $1.2 billion after-tax, mainly from the mark-to-market gains in private and public equities, and in our variable annuity reinsurance portfolio. At March 31, our investment portfolio remains in an unrealized gains position of $2.8 billion after-tax. Our pretax P&C net catastrophe losses for the quarter were $700 million from severe weather-related events globally, including $657 million of losses from the storms in the U.S. We had favorable prior period developments in the quarter of $192 million pretax or $156 million after-tax. The favorable development is approximately 20% in long-tail lines, principally from accident years 2017 and prior, and 80% in short-tail lines. There was no change to the previously reported aggregate P&C COVID-19 losses, the majority of which remain as incurred but not reported. For the quarter, our net loss reserves increased $1.1 billion and our paid-to-incurred ratio was 77%. The P&C administrative expense ratio of 8.6% in the quarter improved by 70 basis points over the prior year, about half related to one-time items that we don’t expect to repeat. Our core operating effective tax rate was 15.5% for the quarter, which is within our expected range of 15% to 17% for the year. I’ll turn the call back over to Karen.

Thank you, Phil. At this time, we are happy to take your questions.

Thank you. We’ll go first to Michael Phillips with Morgan Stanley.

Thanks. Good morning and congrats on the nice quarter and Evan appreciate the time here. I guess I want to focus first on you sound still very bullish on commercial lines and exposure growth you want to push for. You said, last quarter commercial lines will lag this quarter, you’re confident that conditions will continue on? I guess, with your numbers that you gave on pricing and loss trends, there’s still quite a bit of a gap there, a little bit narrower than what you said prior. But I guess two-part question is, how adequate are current rates across the board? It’s hard to imagine they’re not. And then, I guess, you didn’t say you want to push for exposure growth still, so is commercial lines still the place to push given what might be a narrowing gap between rate and loss trend?

It’s funny how people think about rate right now, and this obsession with our rate increases decelerating or accelerating, where is it, and nothing is more important than trying to achieve a risk adjusted return, which translates to a combined ratio that is at least adequate to return a good risk adjusted return. So let’s call that 15% or it depends on the line of business. And as you approach that, as you achieve it, do you need to keep increasing rates? So you ask yourself that question. And you need rates to remain at least at loss cost. We’re achieving that. We have more and more of our portfolio and it’s proprietary, so I will not go into what percentages of the portfolio are at a proper risk adjusted return in terms of combined ratios on a policy year and accident year basis. We measure both. And with that, in total, look at the overall level of rate increase and look at the margin between the rate and exposure and loss cost. Now let me go a step further for you because of this obsession about this. When I look at the third quarter and fourth quarter last year, and I measure the first quarter against it right now, and I’m taking the time on this question because I know all of your colleagues have this question on their mind. When I look at the level of rate increase this quarter measured against prior, property in North America in aggregate got rate increases in the mid-teens, which is about 2 to 3 points lower than it was in the average of the third quarter and fourth quarter last year. Property has been getting rate on, rate on. When I look at primary casualty, the rates are up. They’re higher than they were on average. When I look at excess and umbrella, the rate of increase is flat with the average of the prior quarters. When I look at financial lines, the rate of increase is flat with prior quarters. When I look at marine, it’s up. When I look at aviation, it’s flat to down. When I do this internationally, kind of the same trend: property down 2 to 3 points from prior quarters, primary casualty is flat, excess and umbrella flat, financial lines up, marine up and aviation down a little bit. So, I think that gives you as much color as I can give you and to answer the question from every angle that I know is on everyone’s mind. The conditions are excellent. Thank you very much for the question, Mike.

Okay. No. Thanks. Yeah. Thank you. That’s helpful. Conditions are excellent. So that leads to another question, frankly not asking about any specific line, but I am curious to hear what you can say about capital deployment. You said you’re not burning a hole in your pocket and you’re patient. If M&A is off the table for now, how should we think about where to go from here for another capital deployment round of authorization versus more organic growth or just kind of what can we expect—and how might that capital be used in the near term?

Well, you can imagine Michael, steady as she goes. We have clear minds and we are at rest. We have a buyback authorization from $1.5 billion to $2.5 billion, and we will actively resume that. We had to take a pause during the recent episode with Hartford and beyond that, steady as she goes. We’ve got capital for risk and opportunity and we are patient people.

Okay. Thank you very much. I appreciate it. Congrats.

Thank you very much.

We’ll go next to Greg Peters with Raymond James.

Good morning. I don’t want this to count as a question, but I believe, Phil, this is going to be your last earnings call, if I’m correct. Well, congratulations on your retirement.

Thank you very much. By the way, number 78.

He is going over the wall, right?

Well, that’s…

So, one of the areas that you spent time in previous calls talking about is the expense ratio, because it showed improvement last year, in part because of some COVID-related temporary savings and things like that. It still seems like it’s on a general pathway of improvement. I was wondering if you can give us an updated view. When we look at other companies, most try to map out between a 40-basis-point to 70-basis-point operational improvement in the expense ratio year in and year out. I’m wondering if you can just give us an updated view on your expense ratio?

Look at our expense ratio in absolute terms versus others, our operating expense ratio in North America is in the single digits and continuing to head marginally lower and it will through efficiencies, which I have talked about numerous times: technology in all forms, analytics, robotics, straight through processing, etc. We are on track to continue to drive efficiencies in operations. And the same overseas, the difference there is you’re across 50-some countries and so by its nature you have a different expense structure and it continues to improve. So we’re growing our commercial P&C business at a rate far in excess of the growth in operating expense, which is marginal. So we’re leveraging against that. Both exposure and policy count are up. But you also have the added benefit, which drives the ratio down, of simply price increases that feed in there also. It runs a lower acquisition cost than the consumer lines business, but it runs a higher loss ratio. That’s just axiomatic and true, but that business will continue to operate in the range that it’s in that you see right now, up or down a couple of tenths of a percent in my mind as we look forward. The consumer businesses will come back. And as they come back, they have higher acquisition cost, so the internal expense ratio will go down because you will have more volume returning against it. But the acquisition ratio, which will remain steady within the line, will become a greater mix of our total and so that’ll go the other way. It’s just natural. But that consumer business runs a lower loss ratio and margins are excellent as you know. Maybe that gives you the color you’re looking for.

Indeed. Thanks. And my follow-up question: you said in your prepared remarks that loss cost trend is running around just about 5 points across the book. During your comments you talked about robust rate actions across certain lines like general casualty and financial lines. Should I think about loss cost trend in those lines as running higher because of the rate you’re able to achieve, or is that just an industry loss cost trend that you’re getting rate on?

Let me answer it this way. The marketplace in terms of rate is striving for two things. You have those who have a hole to fill because they have a deficiency in lines of business and then they also need rate for adequacy today. If you have operated at adequacy along the way, you don’t have that first part where you need to fill a hole. You’re achieving better than adequate and not benefiting from filling holes. You will see we’re in an active loss cost period when you remove the transient impact of COVID. We play things conservatively. But we are receiving rate that ensures the portfolio will achieve adequacy in terms of risk adjusted rate of return across the book and if we have more than that, well, that’ll just speak for itself over time.

Got it. Thanks for the answers.

We’ll go next to David Motemaden with Evercore ISI.

Hi. Thanks. Good morning. Evan I just wanted to follow up a little bit on the loss cost trend in North America commercial. It sounds like that ticked up a bit to 5.5%. It’s obviously a minor detail, given the amount of rate that you’re getting and continuing to earn above trend. But wondering if you could just talk about what you’re seeing that’s driving that increase? I know there’s a lot of moving pieces and mix and everything else, but just sort of wondering if maybe you can elaborate on what was driving the increase in the loss trend?

Yeah. And my goodness, you’re looking at about a 0.5 point change, so let’s keep it in perspective. You have a couple of things. In the short-tail lines, you have non-modeled catastrophe loss that is on an accelerated trend. Everyone sees it. That finds its way into your expected loss cost if you’re prudent. Secondly, on the casualty side, given the litigation environment across different lines of business, the loss cost environment there is not benign and we have watched it and talked about it extensively. We study our trends across each class and reflect over a period of time in how we view loss cost and we react very quickly to bad news and very slowly to goodness. So it’s those two that conspire between short and long tail.

Got it. That’s helpful. Was there anything in the quarter, or as some of the courts started to reopen, was there anything specific on the litigation environment that you saw during the quarter or is it just more a reflection?

No, David, no news in a quarter. We just study and look at years past and trend forward. When you think about these things, you don’t react to news of this or that in any given quarter. They’re based on a more stable period of time and a much bigger data set.

Yes. Got it. That makes sense. Thanks for that. And then I wanted to switch gears a little bit to the international life business. Another good quarter, strong sales there, up 14% constant currency. I was hoping maybe you could dive into the different regions between Asia and Latin America and what’s driving success there in each region? And maybe stepping back a bit and talk about the opportunity here and if you think M&A is a lever you’re evaluating to increase scale in any of these markets?

Great question. The business is overwhelmingly Asia. Latin America is predominantly Chile and our partnership with Banco de Chile. Chile is a great market, but it has suffered from COVID and lockdowns and has some headwind in terms of growth related to that, but it’s coming back and will continue to do well, with distribution both branch and direct marketing-related. It’s more credit-related type products and short-term than long-term, though there is a mix of both. In Asia the growth is coming predominantly right now from Vietnam, Thailand, Hong Kong, Taiwan doing well, and our business in Korea getting better, but it’s small. What’s not consolidated in those numbers but we add as a line item because we don’t have over 50% yet is the increase in Guantai, a guaranty partnership, which is doing well. We are on our path and it’s a sensitive moment, so I won’t talk about it much, but I’m confident we’ll finish what we need to do to consolidate Guantai. That life business is growing well. The organic growth in those markets is agency-based businesses for the most part, with some direct marketing particularly in Thailand and bank distribution in Taiwan. If you look at Vietnam, Thailand, Hong Kong, China, those are predominantly agency businesses where the agency force is growing. These are long-term products. Guarantees are extremely low, like in the 1% to 2% range, and there’s a healthy mix of savings and protection products. We built that business from the ground up predominantly and it’s now a few billion dollars and I see great growth potential. As regards M&A, as I said earlier, we have lots of optionality across product lines, geographies and customer segments, including the life insurance business. If we find the right thing and it is accretive to our strategy and good for shareholders, we wouldn’t hesitate for a minute.

We’ll go next to Elyse Greenspan with Wells Fargo.

Hi. Thanks. Good morning. My first question is tying together some of the comments we’ve heard throughout the call, in terms of market conditions. Evan still seems pretty positive there. As we think about the rest of this year, the economy continues to improve, so exposure growth should pick up. As we think about your commercial businesses both within the U.S. and internationally, given the dynamics of some stabilization to slight deceleration in pricing, should we think about premium growth within commercial being stable relative to Q1, and perhaps even improving as the economic recovery picks up from here?

I don’t see anything on the horizon that tells me we’re going to really decelerate in the commercial area. It varies by business as we look at it, but we’re feeling very good about it.

Okay. That’s helpful. Then my second question: you mentioned social inflation in your annual letter and throughout the call. There are obviously issues the industry has been dealing with for many decades. I was hoping to get an update and for you to elaborate on what you mentioned in your annual report as you think about some of the looming industry issues today?

It’s not a new issue to us. We’ve been on top of it for a while: the reviver statutes. They produce lots of notices, and then they start to ripen and you get claims. You’re able to match those up against coverages that were in force at the time and as they do, we recognize any liability we have against those and that is baked into our published loss ratios that you see. The reviver statutes have been open for a period of time and in most jurisdictions the reported notices of circumstances have decelerated tremendously from when they first opened up. There are some states that continue to consider opening reviver statutes and so this is an event the industry deals with over time; these things evolve. I might add, we’re very sympathetic to those harmed, and it breaks your heart where you see the circumstances of children abused by adults and where that is real. On the other side, the trial bar is a money-making machine and combined with new technologies like social media and litigation funding, they see opportunities. There is also suspect and specious behavior involved. Our job is to tease out what’s real and defend against anything we suspect is driven by opportunistic motives.

That’s helpful. Thanks for the color, Evan, and I also just want to extend my congrats to Phil on his upcoming retirement.

Thanks, Elyse.

We’ll go next to Yaron Kinar with Goldman Sachs.

Good morning, everybody. I’m a bit obsessive in my nature, so I hope you can indulge another question on rates. I think we are seeing more lines achieving rate adequacy, you noted we’re in a third year of rate increases in excess of trends and interest rates have increased. So why wouldn’t Chubb specifically or the industry more broadly be willing to give up more rate for volume as we look at the year?

It doesn’t make any sense to me at this point. Look at combined ratios of most insurers and the loss environment. I think the industry overall is not in a place where it has achieved adequate risk adjusted returns when you consider the factors I talked about. I can’t speak for the entire industry, but Chubb is growing exposure, we’re achieving rate and we are growing a lot of business because it’s at prices that we think are adequate to produce an adequate risk adjusted return. Our new business was up over 20% and our renewal retentions are high. We’re growing market share because the pricing is right. Pricing and adequacy is where you start.

No, that’s very helpful. And clearly you guys are growing off a really large base to begin with. I guess switching gears a little bit: we’ve heard some talk about potential tax reform. I realize this is early, but can you share your views on corporate tax reform, potential impact on Chubb, and Chubb’s positioning?

I don’t know enough. We have both the corporate tax rate that could go up—there are headlines suggesting 21% going to 25% or 28%—and then you have issues like GILTI and BEAT. Then you’ve got the notion of a minimum global tax rate multilateral agreement with the OECD. All of these plates are spinning. The green book isn’t out yet, which would give us more detail on what’s in any proposal. It has to run the gauntlet in Congress after that, and we’ll see. I can’t speculate at this point; we’ll have a better sense when more detail is available.

We’ll go next to Brian Meredith with UBS.

Yes. Thanks. A couple of quick ones. First, if I look at the rate activity you’ve been generating the last several quarters in North America commercial and 5.5% loss cost inflation, you do the math and you get a lot more on the line loss ratio improvement in your booking right now. Is that because of your conservatism with respect to potential social inflation trends or is there something else we’re missing?

Brian, we have always operated the company conservatively and I’m not going to elaborate further than that. I will say this: we produced over 2 points of margin improvement—an accident year combined ratio of 85.2%. World class.

No doubt. I completely agree. The second one, sticking with North American commercial, net written premium growth was really attractive in the quarter, gross written premium growth also increased. Are you seeing any benefits from lower ceded premium or any change in reinsurance strategy as we head into 2021?

Not a change of strategy. It varies by line of business internally and in some lines we have increased our net appetite and we have a better spread of risk.

We’ll go next to Ryan Tunis with Autonomous Research.

Hey. Thanks. Good morning. My question was on the statement you put out last week. You said our engagement with the Hartford came from the Hartford on the terms of our last proposal. Is that a general comment about your desire to do friendly M&A or are you trying to say something about that being your last proposal?

Look, the chapter with the Hartford is closed. We have moved along and beyond that I’m not going to engage and talk about past events.

Understood. That’s right. And then in terms of thinking about M&A now, it’s been five years since Chubb did a big deal. Back then a big gating item was not wanting to dilute tangible book value per share. I’m trying to understand as you think about M&A targets, has any of your thinking evolved in terms of what’s most important financially—earnings accretion, or accretion into tangible book value per share?

With all due respect, the comment about tangible book in isolation is not a good way to think about deals. Many deals are dilutive to tangible immediately and then return value over time. Every deal has its own signature and you can’t simplify it to one metric. EPS accretion using a lot of cash can provide immediate lift—that’s easy—but that’s not the only measure of wealth creation. We focus on long-term value for shareholders and how a deal advances our strategy. Thank you for the question.

Thanks for that.

We’ll take our last question from Meyer Shields, KBW.

Thanks. Two quick ones. One, Evan, should we infer anything significant about reinsurance pricing from the fact that ceded written premiums were down year-over-year?

No.

Okay. Second question: I was hoping you could comment on non-travel accident and health pricing.

Non-travel accident and health—remember we don’t do a lot of core health insurance; it’s supplemental health and accident business. It’s fundamentally stable and actually up a few points. Rates have been moving up particularly in the corporate travel area, the commercial business, and in our direct marketing business it’s very steady.

Okay. That’s perfect. Thank you.

You’re welcome.

And at this time, there are no further questions.

Thanks, everyone, for your time and attention this morning, and we look forward to speaking with you again next quarter. Have a great day.

This does conclude today’s conference. We thank you for your participation.