Good day, ladies and gentlemen, and welcome to the Q3 2023 Arch Capital Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. Before the company gets started with this update, management wants to first remind everyone that certain statements in today's press release and discussed on this call may constitute forward-looking statements under the federal securities laws. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed by the company with the SEC from time to time. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company intends the forward-looking statements in the call to be subject to the safe harbor created thereby. Management also will make reference to certain non-GAAP measures of financial performance. The reconciliations to GAAP for each non-GAAP financial measure can be found in the company's current report on Form 8-K, furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website and on the SEC's website. I would now like to introduce your hosts for today's conference, Mr. Marc Grandisson and Mr. François Morin. Sirs, you may begin. Thank you, Gigi. Good morning, and thank you for joining our third quarter earnings call. I hope everybody is safe and well. Yesterday, we reported another excellent quarter, highlighted by strong performances from each of our three operating segments that resulted in an annualized operating return of 25% and a 4% increase in book value per share. Overall, our teams capitalized on good underwriting conditions and relatively light catastrophe losses to produce an outstanding $721 million of underwriting income in the quarter. Our property casualty teams continued to lean into favorable market conditions to write $3 billion of net premium, up 26% from one year ago. Mortgage insurance once again delivered impressive, high-quality underwriting earnings that we redeployed into our P&C segments, where opportunities abound. Broadly, we continue to achieve rate increases above loss trend in most sectors of the P&C market. Although rate increases are slowing in some lines, they are re-accelerating in others, which is a good reminder that there is not a single insurance cycle, but many. As always, Arch is well-positioned to navigate across these many cycles by reallocating capital to the segments with the best risk-adjusted returns. One of our core differentiating principles is that our underwriters are aligned with our shareholders through our unique compensation structure. Our underwriting teams are always seeking to maximize opportunities as long as they meet our shareholders' targets. As we near the end of 2023 and look ahead to 2024, I believe that although the dynamics may shift, this hard market will continue to support profitable growth. Let's take a moment to recap the current state of the market and where we are likely headed. I see it as a play in three acts. The first act, the current hard market, started in primary liability insurance in 2019, and then had the unique circumstance of a 2-year pause in claims activity due to a global pandemic. The second act introduced Hurricane Ian as a main character, where property reinsurers had to adjust both their pricing and risk appetite. In addition, capital got more expensive, and the industry had to respond to meet new expectations from investors. While property has been the most recent driver of this market as we move into act three, we are faced with increasing evidence that casualty rates, widely underpriced and oversold during the last tough market, need to increase. We expect this third act of the extended hard market, already one of the longest in memory, to persist until the industry's reserving issues are resolved and until casualty rates generate positive results. Arch is well positioned to capitalize on this operating environment. As new hard market underwriting opportunities arise, our incredibly nimble reinsurance group allows us to grow more quickly and significantly than in our insurance group and is therefore where we are most likely to deploy capital first. Today, market trends point to a reinsurance-driven GL hard market, and we stand ready to act. The third act has barely started, but things look very promising for Arch. Now, some color on our operating segments. Our reinsurance group has once again driven our growth with third quarter net premium written of $1.6 billion, up 45% from the same quarter in 2022, and 60% over the last twelve months. Underwriting performance in the reinsurance group was excellent, with a combined ratio of 80% for the quarter. Our expectation is that we will continue to see hard property market conditions through next year's renewal cycle, as uncertainty and loss activity remains elevated. As noted above, we expect increased opportunities in liability as well. Our insurance group also remains in growth mode in both our North American and international units. While net premium written in the insurance segment, up 16% over the last of the past 12 months, are more modest than in reinsurance, they are more broad-based because of our focus on small and medium-sized specialty accounts. Underwriting income continues to build with increased earned premium and a strong combined ratio of 90.9%. Today, there are still plenty of opportunities to grow profitably in insurance. Property and short tail lines pricing and terms and conditions remain very strong, with rate increases in excess of 15%. The E&S casualty pricing is increasing in response to overall casualty trends in the market, and our programs unit continues to achieve rate increases above trend. Professional liability rates softened in the quarter, with net premiums written down 9% from the third quarter of 2022. We share the marketplace sentiment about the D&O segment, where both IPO and M&A activity decreased, at the same time as rate pressures from competition and securities class action activity increased. However, returns in that segment are still strong. In the same vein, we maintain a positive outlook on cyber pricing on an absolute basis, despite rate decreases in the 15% range. Our outstanding mortgage group continues to deliver quality earnings for our shareholders as higher persistency of our in-force portfolio helped offset the slight decrease in NIW, which has been affected by lower mortgage originations. Although we tend to focus our comments on the U.S. primary MI market, it is worth noting that nearly forty percent of our mortgage segment underwriting profit this quarter came from non-U.S. operations, compared to just over 10% in 2017. International business represents a significant growth opportunity for the mortgage group at Arch, and our strategic decision to diversify our mortgage operations is yielding positive results that further differentiate Arch from our competitors. We are currently in a positive cycle on the investment side of our business, where increasing cash flows from growth are being invested into today's higher yield environment. New money rates are well in excess of our book yield, which should continue to boost our investment income over time and provide us with an additional ongoing tailwind. It's late October, which for baseball fans mean it's time for the World Series. Baseball is somewhat unique in that it's one of the few team sports that isn't limited to a specific length of time. You can score as many runs as possible until the other team gets three outs. To me, the current hard market feels like a baseball game. We know there's only nine innings to be played, but we have no idea how long those innings will take. We've got a great lineup. We're happy to keep hitting our singles, doubles, and occasional home runs until the inning is over. At Arch, we remain committed to being good stewards of the capital entrusted to us. We do that by following a tried and true data-driven approach that maximizes the capability of our diversified platform, diligently adheres to a cycle management philosophy, and is centered around superior risk selection and prudent reserving. All the while, our underwriters are fully aligned with our shareholders. These principles are foundational to our playbook and underscore our long-term commitment to superior value creation. As we close out 2023, we have significant momentum in all three of our businesses and a reliable and high-quality earnings engine in our mortgage group that are helping fuel our growing investment base. All the pieces are fitting together nicely, and we're well positioned for the future. Now I'll call François up from the on-deck circle, and we'll return to answer your questions shortly. François? Thank you, Marc, and good morning to all. Thanks for joining us today. To add to the baseball theme, I would also emphasize that while this long winning streak has certainly been fueled by a timely and dynamic offense, we're also very much aware that team defense has played an important role in our success. We've been working hard not to waste any offensive production with careless errors, and by executing well at the plate and on the field, we've produced exceptional third quarter results from high-quality earnings across all our platforms. The highlights of this team effort are numerous and include after-tax operating income of $2.31 per share for an annualized operating return on average common equity of 24.8%, and a book value per share of $338.62 as of September 30, up 4.3% in the quarter and 18.4% on a year-to-date basis. Similar to last quarter's results, our reinsurance segment grew net written premium by 45% over the same quarter last year, led by the property other than catastrophe line, which was 73% higher than the same quarter one year ago. As for our property catastrophe business, it's worth mentioning that the net written premium in the third quarter one year ago included approximately $34 million of reinstatement premiums, mostly as a result of Hurricane Ian. If we adjust for the impact of reinstatement premiums, our growth in net written premium for this line would have been approximately 64% year-over-year. The quarterly bottom line for the segment was excellent, with a combined ratio of 80%, 73.5% on an accident year ex- cat basis, producing an underwriting profit of $310 million. The insurance segment had another very strong quarter, with third quarter net premium written growth of 11% over the same quarter one year ago. Similar to last quarter's results, we experienced good growth in most lines of business, with the main exception being professional lines, where the market remains competitive, particularly in public Directors and Officers' liability. If we exclude professional lines, net written premium would have been 20% higher this quarter compared to the same quarter one year ago. Overall, market conditions for our insurance and reinsurance segment remain attractive, and we expect the returns on the business underwritten this year to exceed our long-term targets by a solid margin for some business units. Profitable growth during periods of favorable market conditions is one of the hallmarks of our cycle management strategy, and the current hard market is definitely giving us the opportunity to deploy meaningful capital in many areas. Our mortgage segment's batting average has consistently been a lead, a league leader, and this quarter was no different, with a 4.7% combined ratio. Net premiums earned were in line with the past few quarters across each of our lines of business. Included in our results was approximately $98 million of favorable prior- year reserve development in the quarter, net of acquisition expenses, with over 75% of that amount coming from USMI and the rest from other underwriting units. Our delinquency rate at USMI remains low based on historical averages, and close to 85% of our net reserves at USMI are from post-COVID accident periods at the end of the quarter. Across our three segments, our underwriting income reflected $152 million of favorable prior- year development on a pretax basis, or 4.7 points on the combined ratio, and was observed across all three segments, driven by short tail lines. Current accident year catastrophe losses across the group were $180 million, approximately half of which are related to U.S. severe convective storms, with the rest coming from the Lahaina wildfire, Hurricane Idalia, and other global events. Pretax net investment income was $0.71 per share, up 11% from last quarter, as our pretax investment income yield was up by approximately eighteen basis points since last quarter. Total return for our investment portfolio was a negative forty basis points on a U.S. dollar basis this quarter, as our fixed income portfolio was impacted by the increase in interest rates during the quarter, and most other asset classes had negative returns in line with broader financial market indices, such as, as the S&P 500, which was down approximately 3.7% in the quarter. Net cash flow from operating activities has been very strong so far this year, in excess of $4 billion, which has helped grow our invested asset base by approximately 20% in the last 12 months. With new money rates in our fixed income portfolio comfortably above 5%, we should see continued meaningful tailwinds in our net investment income. Turning to risk management, as of October 1, on a net basis, our peak zone natural cat PML for a single event, 1-in-250-year return level, remains basically unchanged on a dollar basis from July 1, and now stands at 10.1% of tangible shareholders' equity, well below our internal limits. Our capital base grew and got stronger during the quarter and now stands at $18 billion. Our leverage ratio, represented as debt plus preferred shares to total capital, is currently under 20%, which provides us with significant flexibility as we look to deploy capital as opportunities arise. With these introductory comments, we are now prepared to take your questions. Thank you. If you have a question at this time, please press star one, one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star one, one again. And if you are using a speakerphone, please lift the handset. Our first question comes from the line of Elyse Greenspan from Wells Fargo. Thanks, good morning. My first question was hoping to get, you know, some thoughts on the January 1 property cat renewals on the reinsurance side. So where do you think, you know, where do you think rates end up next year on a risk-adjusted basis? Well, hi, Elyse. I think it's still early. We have a lot of movement in the marketplace and capital, and people are, as you can appreciate, positioning at all the conferences. But our general consensus in the team when we talk to underwriters is that we'll still have, you know, improvement in Q1 2024. Not as big as Q1 2023, but we're still going to get, you know, slight improvement on the reinsurance side of things. What is also. I've mentioned before, this is not really fully reflecting what we believe has been the the reunderwriting and the re, you know, the reallocating of capacity by our clients. And that remains to be seen how it's going to be reflected, and it will depend on the clients, frankly. But overall, we still expect a very healthy, very robust 1/1/2024 renewal on property. And then, on your, you know, casualty comments, Marc, right? You alluded to that being, you know, the third act and really leaning in there on the reinsurance side. I was hoping you could just give us a sense of, you know, timing on how that will play out, and if that's a 2024 event, do you see the reinsurance book shifting more to casualty, or do you think it's an environment where they both, property and casualty, offer, you know, good growth opportunities for the company? That's a great question. I think the, you know, we have a big play in property, as you saw between the property cat on the reinsurance side, that is, and the property other than cat, you know, the quota shares and thing in between. So I think we're still very, very much, you know, keen on that line of the business. Liability is a bit harder to evaluate right now because I think the first order is going to have to be, you know, looking at their plans for 2024, looking at their reserve development that there are any. This is, I'm talking about our clients. So it's going to take a little bit more time for people to figure out what it is that they have and what they want to do with it going forward in 2024. So we'll have probably some of us think that we may have a renewal that's a bit more, you know, but not as stable as it once was. So I think we'll, we'll probably see the early innings, to go back to my baseball analogy, of that liability, you know, possibly at 1/1. The one beautiful thing about GL, or the one bad thing, depending on the side of the market you're in, is it's a longer-term development, you know, on the softening and on the hardening. The GL can. You know, it will take a little bit longer to get to where it needs to get to because it takes time for you to get the losses, reflect them in their reserving, and we have a good sense for where the ultimate results are from your prior- year to adjust and help inform the pricing you're going to have over there. So this is going to be a lot much more protracted third act than the second act was. That's helpful. Thanks for the color. Sure. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Jimmy Bhullar from J.P. Morgan. Hey, good morning. So first, just staying on casualty. There's been a lot of concern about reserves, and obviously casualty is a fairly broad market category, but what are your thoughts on overall industry reserves in casualty, your reserves, and then maybe any color on the lines within casualty where you think there might be inadequacies and sort of the drivers of that, or what's driven the reserve issues? That's a great question, Jimmy. I think there's, you know, as you said, it's a broad market. You know, certainly, we've seen some pressure in our own results. I think we see, so you see it both on insurance and reinsurance. On the reinsurance side, we see some of our clients, you know, recognizing adverse and, you know, the latency of some claims being reported to us, I think, is coming through. We like to think we've been proactive in addressing those issues, but you never quite know for sure until, you know, everything comes through. But, some of the subsets, definitely umbrella is an area that, that it's, you know, something that we're watching carefully. The good thing, I think, with our book is, again, we weren't big players in that space in the soft market year. So we're seeing some pain, but not to the same level we think that maybe others will. But, you know, it's a hot topic, and we're going to keep looking at it. The one thing I would add, Jimmy, to what François just mentioned, is that we're. You know, you're hearing it from the call, like it's going to be more acute, more of a pressure point on the larger accounts than the smaller accounts. I think that the limits deployed there and the uncertainty and the combination of all these years developing is a little bit more, more, probably more of a bit more of an urgency in that sector. So we expect the larger accounts, which we don't do a lot of on the insurance side, to be the first one to really feel the pressure. Okay. And then on mortgage insurance, I would have thought, and I think most investors thought that at some point you would see sort of a step down in your results. Still strong earnings, but maybe not as strong as they'd been the years following COVID because of the release of COVID-related reserves. Just wondering how we can sort of get an idea on how much of the COVID-related reserves are still on your books and could be released, versus maybe an ongoing benefit from that in the next few quarters. Well, I made the comment, you know, close to 85% of our reserves at USMI are from post-COVID years. So, so that would mean 2020 and after. But, you know, let's remember that when we were coming out of COVID, you know, we saw just a lot of changes in home prices, home price appreciation, and potential overvaluation, right? So when we were setting reserves in the last few years, 2021, 2022, even, you know, up until early 2023, that was a concern of ours. So we were somewhat, you know, as you would expect us to do, somewhat more prudent, I'd say, in setting our reserves. How that plays out when the delinquency is cured, we don't know. Could there be further, you know, favorable development? Maybe. But, I'd say for the most part, what's really been happening in the last couple of years is just a, I'd say, very much, again, a function of the housing market, which has been, you know, just it exploded and then created a different, a different set of, you know, kind of data points that we're trying to analyze, and that's how we based our what we based our reserves on. So hopefully that gives you a bit of color on the question here. I'll just add one thing, Jimmy, on the industry. The industry is extremely disciplined. And again, very nice thing to see around us. So from an ongoing perspective, putting the reserve for one second, if I can talk to our expectations. And, you know, we think that there's still risk on the horizon, but the credit quality of our portfolio, the housing supply imbalance that you, you hear from François, and then the fact that we have a lot of healthy, you know, equity into our policy, policy, policies in force is, is, you know, it looks really, really good. And when we say that, you know, our mortgage group is also doing very well, and we- that's what we mean. It's in a really good place. Thank you. Welcome. Thank you. One moment for our next question. Our next question comes from the line of Tracy Benguigui from Barclays. Hey, while you posted double-digit insurance premium growth this quarter, the pace has decelerated a bit over the last two years. It looks like peak insurance premium growth was in mid-2021, and that might be a tough benchmark, given you've grown a ton in professional liability, and you are shrinking there, as you pointed out. Could we expect insurance premium growth at double digits to be sustainable going forward, or should we see it fall to high single digits because of the professional lines headwind? I'm just wondering if it's fair to assume that you prefer deploying capital into reinsurance now, all else being equal? Yeah. In terms of return expectations, I think your instinct is right on. I think reinsurance is providing right now very, very healthy returns, and we expect this to continue into 2024 and 2025, to be honest. But the insurance group, I think it's one quarter. There are a couple of moving parts to it, some accounting, think timing and stuff here and there sometimes, but as François mentioned, the growth in the line that we like to see growth into, you know, it. I'm very pleased to see because this is where I would expect the team to grow into, but the market conditions are great there. And I would expect, you know, even some of those non-professional lines to actually maybe carry the day a bit more going forward. I wouldn't be surprised that we could, you know, go back above 10% next quarter into 2024. So I don't, I don't see one quarter as a trend, to be honest. All right. Very helpful. You slightly shortened the duration of your asset portfolio in September to 2.97 years from 3.03 years in June. It feels like you're taking durational asset mismatch because the MI liabilities are much longer durated. Given the shape of the yield curve is beginning to show signs of steepening, I mean, it's a tad bit less inverted. Going forward, would you consider lengthening your asset duration, or you feel comfortable with this sub-3-year duration level? You know, good point. I think the duration is probably the lowest it's been in a long, long time, and that's just, you know, our, our investment professionals here, again, you know, make the decisions, and there's obviously a little bit of tactics that's involved in kind of, you know, where they want to play at a certain point in time. But, you know, for right, for sure, absolutely. If interest rates, we think, the longer the curve end up being a bit more attractive, I mean, we'd certainly consider extending the duration a little bit. And, you know, we got a bit of room there anyway to match with our, you know, the, the liabilities to make sure that we're not mismatched there. So that's certainly something that, you know, we'll look at in the coming months and quarters, y es. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Yaron Kinar from Jefferies. Thank you. Good morning. I guess first question, sounds like you are pretty constructive looking into 2024. Can you maybe talk about kind of your prioritization of capital and maybe give us a way to think about maybe potential available capital you have to deploy into the insurance and reinsurance markets? Well, yes, we are constructive on 1/1. I think we Marc and I both said, I think it's a really good market. In totality, there's some pockets that are certainly better than others. You know, we think that the internal capital generation we've been able to generate in the last few quarters gives us the ability to really grow and take advantage of the opportunities that we think have a good chance of being there. You know, again, we don't make the market, we participate in the market. So if the market is as positive as we think it can be, then we'll be happy to step in and take a bigger share of it. But, I think, you know, the fact that we've got capital flexibility is, has always been one of the, and, you know, has one of the, maybe one of the most important things in our strategy all along is we want to make sure that we have, you know, plenty of capital to deploy when the market's right, and so far, we've been able to do that. So, Yaron, if I look at the high level, the way we think about it is different, perhaps than even our underwriting units, meaning that they'd already, you know, they would already know how much capital is allocated to them at the beginning of the period. I want to remind everyone that people who write the business, our underwriting team writes the business, and then we, after that, you know, charge them with the capital they've been using. And based on the planning and all the expectations that they have, our message to the group has been, there is no capital constraint or issue of concerns that pertains to you guys. Just if you see the market being at better and even get better than we saw, feel free to deploy more capital if you wish to do so. So there's definitely this all, you know, all hands on deck, go forward if we can and write the business. That's one thing that's really nice, and we'll then attribute the capital up that we have written the business. That's what we do every year. On the property cat side, which is probably a more interesting one for this work to you, you know, we're about 80-85% allocated to the reinsurance group in terms of our PNL that François mentioned. And I think it's because, you know, the returns are there, you know, are a little bit more favorable on the reinsurance side. Then we have that discussion at a group level. That's one exception. When we have an acute or a specific area of the capital, we'll sit down with the insurance group and reinsurance group, with Nicolas, Nicolas facilitating the whole discussion, and we'll sort of decide roughly, you know, broadly, where we want to allocate capital. I appreciate that, and certainly I think the capital availability and the appetite to deploy is a very important part of the Arch story. And I guess from that perspective, is there anything you can offer us in terms of an attempt to quantify the available capacity, or is that something that we'll just have to watch and see? Yeah, I mean, we certainly have some capital, you know, we have plenty people, plenty of capital available. We just don't know what the market will look like at 1/1, so that's where I'd say, you know, you're right, probably have to wait to see a little bit, see how 1/1s play out, and then we'll have the ability to, you know, to do something with the excess capital if any. Okay. And then my other question, just on public D&O and cyber, where we're clearly seeing a little bit of pressure and competitive pressure there. Do you still view rates as adequate there, and are they clearing the loss cost trends? Yes, our returns expectation on both these lines, cyber and D&O, are still very, very healthy. Thank you. Yes. Thank you. One moment for our next question. Our next question comes from the line of Joshua Shanker from Bank of America. Yeah, thank you for taking my question. You know, with the higher retentions, this quarter in terms of premium ceded, can you go maybe line by line or dig in a little bit about which lines of business you're retaining more? And is that a signal that you've gotten to the point where you have enough information that you love the profitability more and want to keep it yourself? Or if you're looking at your capital and saying, "You know what? We have the capital to deploy, so let's eat a bigger slice of the pie." How did that all come together? I think you answered the question beautifully. I mean, by asking the question, you gave the answer. I think all the things you said are true. You know, I'll get to the lines in a second, but to your point, it's exactly right. You know, we're going through this hard market, and we still value reinsurance. You cannot go without reinsurance. You still need it for various reasons, you know, limits management, risk management, and also information, right? Reinsurers are providing us, on the insurance side, with valuable information about what the market is and the state of the market, so we don't want to be an outlier out there. So it's always good to have this as an additional value proposition from the reinsurance companies. In terms of what we decided to do after three years, you're quite right. You know, we have been building, as François mentioned, a significant amount of capital through our mortgage earnings. So that's certainly something that was helpful and available to deploy in other areas, and that also helps being able to maintain and retain more net. I think if you at a high level, I think that the patterns of buying, we're buying a fair amount less on the liability lines, specifically those that went through the first act and really had a lot of good uplift. So we definitely saw that happening on the property. Even though the property is very hard, as we all know, since last year, this is a much more volatile line of business, so we still maintain our excess of loss on the cat side and still buy a quota share, a significant quota share on that business as well. So overall, it's meant to be the balancing act between providing relief or volatility protection to some extent and information. But you're quite right, having more capital definitely helped us take more net on our balance sheet. Switching gears a little bit, when you have a 25% ROE quarter, you're making a lot of money, and you have a large team that has contributed to that result, I assume they'd like to be paid for their good work. How should we think? We've not seen a quarter like this in a long time, in a year like this. How should we think about the pattern and the cost of discretionary comp, where it hits the P&L, and how it should compare with prior- years? Great question. Sorry. You know, we just again, in terms of timing, right, our incentive compensation decisions are made in the first quarter. You know, will be made in February of next year. But no question that throughout the year, we accrue expected bonuses based on what we think that performance might look like, and there's effectively a true-up that takes place in the first quarter when the final amounts are determined. You know, something we're keeping an eye on, so I don't know if there'll be an early adjustment in the fourth quarter or not. Something we'll be looking at carefully so that we don't get a, you know, distort too much the first quarter next year. Obviously, the board has final, you know, say in how much money will be available to pay our troops. So that's, you know, it's a little bit of, you know, we don't want to front run it. We want to be reasonable and not, you know, introduce too much volatility in the numbers on the OpEx side. But that's certainly something that we'll take a look at in the fourth quarter to make sure we're not missing anything there. Thank you very much, and congratulations. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Alex Scott from Goldman Sachs. Hi, good morning. Yeah. The first one I have for you is on the attritional loss ratio in the reinsurance segment. I was just interested if you could give us a little more color around, you know, just what's driving this year, you know, favorable performance year- over- year. And if there's anything nuanced we should be thinking about, or if it's just, you know, the pricing environment being as strong as it is? Yeah, I, yeah, two quick things there. One is, and we've said it before, and it goes both ways, we, we think of reinsurance as a line of business or a segment that we, you know, we think is better analyzed on a trailing twelve months basis. We think looking at it quarterly, you know, there'll be some good and there'll be some bad. And it, we, we've said in, in past quarters where we have elevated attritional claim activity, we said, "You know, don't, don't panic. Don't, you know, don't overthink it," and the same way here, I think. So we would certainly encourage everybody here to, to look at it on a trailing twelve months basis, to have a better view of the long-term kind of prospects of, of the segment. The other thing I'd say is also, obviously, we've grown a bit more in property than relative to the other lines. So, by nature, right, our ex-cat combined ratio should probably come down, and it has, as a result of, again, the growth, the significant growth we've had both in property cat and property other than cat. Got it. Very helpful. I wanted to ask a follow-up on the comments you made on casualty reinsurance. You know, I'm just interested in what is changing that's causing more of this commentary to sort of bubble to the surface? I mean, you know, we've heard it from some of the European reinsurers as well. Is it truly just that they're you know, starting to see reserves develop in a poor way for some companies? Or, you know, is there something that's changed about the social inflation environment? I mean, what do you think is the underlying driver or drivers? Yeah, I think the industry is, there's a couple of things going on at the same time, and they unfortunately don't go in the right direction for both our—for all our, for our industry, if you have, between casualty. First, we had a, and I mentioned in my comment, we had a bit of a slowdown in activity, including court activity, settlement activity. And we also have, as you, as we all know, you know, there's a lot of litigation funding. There's a bit more aggressiveness coming from the plaintiff bar, and that's certainly something that you could describe to be social inflation, but that's not really something new. But there was sort of a lull in this market. There was sort of a, sort of a respite, if you will, between 2020, 2021 to really middle of this year, early of this year. So I think right now you have sort of a refresh and re-updating all the information about the lawsuits and where we are and what could happen, with the demands being updated and, you know, and made more current. At the same time, we have priced that business as an industry in 2015-2019, with inflation at 2%. Now, inflation is north of 5, 6, 7, depending on where you look at. So at the same time as courts reopen, claims are being adjudicated, reanalyzed, you have to account for a higher inflation number. And that is a classic case of, you know, having a couple of things going against you. Nothing that the industry did on its own. It's just the economy and the environment and the riskiness of the environment. So I think that we're facing, all collectively as an industry, that phenomenon. And what I like about the industry's capability is, it's reacting, and that's what you hear, and that's something that we should be very, very happy for, collectively as an industry. The other call that you heard this quarter recognized it. And once you recognize an issue and a problem, people are very good and very adept at addressing it, and I think that's what's going on. So I think you have a couple of combinations coming in very, very short order, because of the surrounding environment. I think this is what largely drives what's going on right now. Thanks for all the detail. Sure. Thank you. One moment for our next question. Our next question comes from the line of Michael Zaremski from BMO Capital Markets. Hey, morning. Morning. Switching gears to the good morning to the investment portfolio. So the net realized losses were somewhat outsized again this quarter. I know they run below the line, but any color, are you actually crystallizing to take advantage of you know the higher rates, or is there noise in there from unrealized stuff or maybe the LPT transactions in the past? Yeah, I mean, it's mostly around kind of crystallizing some losses. I think, you know, it's a process we go through, you know, for each security on the fixed income side, where, you know, we make the determination, is it appropriate to sell some of those and redeploy the proceeds at higher yields? And our investment team does that. So yes, there are going to be some realized losses coming through the fixed income. Obviously, the equity portfolio, which is not huge, but still there's, you know, FVO securities, like fair value option securities, including equities that are, you know, effectively mark to market, and that comes through the realized gains and losses line in the income- in the bottom income statement. So those are the two big items. There's a little bit of other stuff going on that, you know, is a little bit in the weeds, so I wouldn't want to go there, but that's directionally, hopefully, that, you know, that's just normal course of action. Okay. And lastly, on— it's my understanding Bermuda put out, there's a second comment letter, maybe different, they call it something else, but, on the, the potential tax, changes that will take place. You know, any way you could offer us some color on, you know, what's— how things are going to play out, base case, over the coming year or two? Or, you know, does the step up—i f everything goes as planned, does the step up in tax rate happen in 2024, or is it a 2025 event, or both? Yeah. It's, again, very early, so too early, unfortunately, to give clear kind of views on what, you know, we think could happen or because they're still developing the, you know, the laws, and we expect more progress on that before the end of the year. But at a high level, it doesn't start. It wouldn't start, if it goes through, until 2025, so there's no impact for 2024. And we will be evaluating the, you know, they kind of made public some target tax rate that they will, you know, try to get to. But again, more to come. I think we'll do our best to keep you apprised of how we think about it, probably on the next call. But, until we have more finality, more clarity on where it's going to land, I think it's a bit premature to give you too much, too many details here. Okay. Thank you. Thanks. Yep. Thank you. One moment for our next question. Our next question comes from the line of Meyer Shields from Keefe, Bruyette & Woods. Sorry. Great, thank you so much. First question on, I guess, casualty reinsurance. This year, like January 2023, we saw not only significant increases in property cat, but we saw changes in program structures with higher attachment points. Is there anything analogous to that that we should see on the casualty re side in 2024, or is it just going to be a rate story? Probably more of a rate story. The buying pattern on GL is mostly on a quota share. There's a lot of quota share being purchased in that segment. That's also certainly something we prefer to, you know, focus our capacity on. And those of you who followed us for years, know this is where we prefer to focus our capacity. On the excess of loss, Meyer, you know, people don't really buy a whole lot. People don't put out, let's say, like $60 million, $80 million, $100 million limits. So we don't have a similar kind of risk. You know, the risk vertical is not as big. And in terms of event, you know, like a cat portfolio, you could see where things are accumulating, can generate, you know, hundreds and hundreds of millions of dollars of exposure. In the liability side, it's not the same. You don't really have necessarily a one or two, you know, event that could really impact, you know, such a wide area of your GL. So I think we'll see a lot more forward insurance or more on a quota share basis and some of the excess of loss here and there. It's not very similar to—i t's not at all similar to the property market. Okay, that's very helpful. Yeah. Second question, and hopefully I can ask this in a way that makes sense. When we talk about reserve problems from older accident years ultimately driving casualty rate increases to accelerate, is that so the industry can overearn in 2024 and backfill, or is it because the recalculated older years' losses mean that current rates are actually not as adequate as we thought? I think it's the latter, Meyer. I mean, it's a bit of the former, to be honest with you, when people will have to recognize those losses if they have them. I do believe, as we talk about, Meyer, you know that as well as we do, you're an actuary yourself, the reserving process feeds into your pricing process. And clearly, if we have a reserving that's a bit higher than you would expect it, it will help inform your loss ratio. Historically, you have to put the trend on them, do the on-level analysis that helps get you to the price increase that you're looking at. So the past, as it's developing, will have, you know, will inevitably lead you to having to charge more. The reason we don't do a whole lot of large GL, for that matter, is precisely because of your second point, which was it's been historically a little bit wanting in on the rate level, on the rate level side. Okay. That's, you know, worrisome about recent years for the industry, but that's very helpful. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Bob Huang from Morgan Stanley. Hi. Thank you. Congratulations on the quarter. Just a quick question on your insurance segment's loss ratio. Year-on-year loss ratio improved for about 30 basis points. But just given just the, the strong E&S pricing environment, shouldn't we expect a little bit better improvement in loss ratio? Is there anything in the loss trends that probably differed from how you thought about your loss picks in the past? Just, just see if there are any comments around that? M aybe— I mean, I think the answer is really around, like, us being prudent in setting initial loss picks. We don't want to get into the game of being overly optimistic. There's still a lot of risk out there. There's still a lot of uncertainty when we price a business, whether, again, we've just been talking about casualty loss trends in particular. That's an area that we're watching carefully. So we, we'd rather, you know, and that's been our model for many, many years, is, you know, take a realistic and a bit more conservative, you know, initial loss pick on the, you know, at, when we book the business and then react to the data when it comes in. So, we're hopeful there could be good news down the road, but for the time being, we're very happy with our loss picks. Okay, thank you for that. My, my second question is a follow-up on the reinsurance core combined ratio. Obviously, it was very strong, and I think you mentioned that a lot of it is due to business mix shift, right? Shifting towards property, and then because of that, and then you naturally have an improving combined loss ratio there. Just curious, if we were to think about going forward, the run rate combined ratio for your core reinsurance segment, based on the comments so far, is it fair to sort of assume that it's going to be closer to what you printed over the last two quarters and probably better than the prior quarters? Is that a fair way to think about it, just from a modeling perspective? Again, you know, I mentioned, like, the thinking around trailing twelve months, which, you know, is where I would start. To help you kind of with assumptions, I would— you know, if you're going to— we think about it in totality around the combined ratio, but if you're breaking down the loss and the expense ratio, yeah, maybe there's a— given the growth, maybe there's, you know, potentially the latest quarter of OpEx is probably more sustainable, given we've been able to generate that premium, that growth with, you know, the same level of resources. But on the loss ratio side, I think it's just, you know, I would be careful not to over— I mean, give too much weight to the latest quarter. Okay, thank you, and congrats again on the quarter. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Brian Meredith from UBS. Thanks. A couple questions here. First, just on the MI segment. I know there's clearly some market pressures, but, you know, NIW definitely down year-over-year, and it looks like, just looking at some of the stats, you all have been losing some market share, in the MI segment. Is that intentional? Are you any concerns about, you know, the outlook here, on the MI as far as, you know, delinquencies, or is it more related to perhaps just better use of capital elsewhere? It's more the latter than the former. I would actually say—tell you, Brian, that the market is better this year than it was even last year. So, one would argue that we might change the way we interpret the market over the next 12-24 months. But certainly, at heart, you know, we have been saying that to you historically, and it hasn't changed last quarter, which, in terms of relative returns based on the three segments, on the underwriting segments, that, you know, MI is the third one, but a very strong one, I would say, at this point in time. But again, it's more of a reflection of the relative opportunity between the units than anything else. And the market, Brian, I'll tell you, the market is very, very disciplined. We're very impressed by the industry or the MI industry. It's good, good to hear. And then I guess my second question, Marc, is I think about, you know, if this next leg is coming through the third act on the casualty, you know, reinsurance side, you know, I guess that probably comes through a lot on the ceding commission side. You know, if you get, you know, you get better ceding commissions, should we continue to see kind of the acquisition kind of expense ratios on the reinsurance side kind of moving down here, you know, as we head through 2024, you know, given what's going on with the casualty reinsurance market, particularly since you play quota share? Well, the, yeah, I think the ceding commissions, you know, are about start with a 3 right now. We'll see where that ends up. You know, there might be a slight change, or we'll see how. It's also going to be dependent on how the underlying market is improving as a reinsurance player. But I think, you know, what's our acquisition cost right now in reinsurance? It's mid, well, low 20s. So I think if you have more of a portfolio, even if the, let's argue it's a 30% ceding commission, so you might see actually the acquisition going up a little bit. But again, as François mentioned, or should I all the time talk about when we have these questions about expense ratio and loss ratio, but not as much as the return and whether the combined ratio lends ourselves to return and whether it comes from losses or expenses, we have already losing sleep here. So I think this is— That's a fair point. Right. Yeah. Yeah. Yeah, yeah. I know, I was going to say that, that I guess maybe the right way to think about it is that as you're leaning more into the GL, the underlying combined ratios may actually move up some here— Yes. To look because you're going to have a different, you know, return profile. Exactly right, Brian. You're right. Good. Thank you. Thank you. Welcome. Thank you. One moment for our next question. Our next question comes from the line of Scott Heleniak from RBC Capital Markets. Yeah, good morning. Just on the MI unit, wondering if you could expand on the growth opportunity internationally that you referenced in your commentary. I know Australia is a big market for you, but w here else are you focused outside of the U.S., or is it mostly just Australia that you were, you're referring to? Great question. I think in the non-U.S. base, there's also the CRT, which is granted, you know, exposed to the USMI, the excess of loss program that the GSEs have developed over, we helped develop over the last 11, 12 years. Internationally, so that's, that's a piece of it. You see it in our, in our financial supplement. Internationally, we have Australia. As you know, we have a good size, great relationship, and a great, a great presence there. We're very pleased with it. We're also, we're also gaining a little bit more market share there, even though the mortgage origination has slowed down there as well. The other piece that's really, it's really in development is the international, the European, specifically SRTs, which are, you know, 90% mortgage-backed, you know, credit risk transfer. They look a lot like the CRT business that we have in the U.S. Most of it is done because banks need to release capital, the Basel III, you know, led the transactions, and we've been doing it for a little while, and we've partnered up with—actually with another European company who's, you know, very deep in that, in that, in that area. So that's a growing area right now because I think the— there's a lot more need for capital, as, as you know, Scott, not only in the U.S., and the banks in Europe have a similar, you know, consideration. So it helps us, you know, be there for them to provide more capital relief, and that's already something that we're focusing more efforts on. Okay, that's helpful. And then just the risk profile and the credit quality and the default ratios on those, I would assume those are very favorable. But how does that all compare to international, you know, outside the U.S. and internationally versus the U.S. book? I don't want to say too much because you're going to get more competition in the segment. Okay. High level, high level, they're comparable, and sometimes better than the CRT we see. But, you know, we still a little bit more work to be done there. For those who are trying to get in the business, I think you should talk to us first. We'll help you get in the business. All right. Appreciate it. Thanks. You're welcome. Thank you. At this time, I would now like to turn the conference over to Mr. Marc Grandisson for closing remarks. Thank you so much everyone for listening to our, our commentary this quarter. Looking forward to the end of the year. Happy Halloween. See you next time. Ladies and gentlemen, thank you for your participating in today's conference. This concludes the program. You may all disconnect.