Good day, ladies and gentlemen, and welcome to the Q2 2024 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 its 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 at www.archgroup.com and on the SEC's website at www.sec.gov. I would now like to introduce your hosts for today's conference, Mr. Marc Grandisson and Mr. François Morin. Sirs, you may now begin. Thank you, Jericho. Good morning, and welcome to Arch's second quarter earnings call. We are pleased to report another highly profitable quarter due to significant contributions from all three underwriting segments and strong investment results. Our ability to successfully deploy capital into this extended hard market has fueled excellent risk-adjusted returns. Coupling our cycle management strategy with an emphasis on returns and consistent disciplined execution throughout the enterprise resulted in a record $762 million of underwriting income and an annualized operating ROE of 20.5%. Our results are thanks to our teams that work diligently with deep capability and a long track record of experience to earn these results. Broadly speaking, the P&C environment remains excellent, and opportunities for attractive returns are plentiful, even as competition normalizes. The duration and breadth of the current hard market of the last several years has been exceptional, and while rate increases are broadly above trend, disciplined underwriting requires that we keep our eye on the primary goal, shareholder returns. An overly aggressive appetite for growth could come at a cost of eroding underwriting margins. The art of underwriting in this part of the cycle rests on one's ability to know how hard to push and when to pull back. At Arch, we strive to be an active yet disciplined market participant, practicing restraint and patience. We believe that capital allocation is one of our most powerful differentiators. Our priority is to deploy capital into our underwriting units first, where we have the knowledge and experience to better price risk. However, we're always assessing other value-creating opportunities. One example is our previously announced intent to acquire Allianz's U.S. MidCorp and entertainment businesses. With regulatory approval on MidCorp secured, I'm able to share a few thoughts about this strategic acquisition. The addition of a talented team and their client relationships gives us a greater presence in the U.S. primary middle market while expanding our cycle management toolkit. We will have more to say about the opportunities in the middle market as we integrate our teams. I'll now take a few moments to highlight the performance of our underwriting units this past quarter. Second quarter results from our property and casualty segments demonstrate the benefits of our strong leadership throughout the ongoing hard market. The reinsurance and insurance segments combined to deliver $475 million of underwriting income and just over $5 billion of gross premium. Reinsurance generated $366 million of underwriting income, despite higher frequency of catastrophic events from secondary perils, both in the U.S. and internationally. Higher premium rates and our diversified book of business enabled us to report excellent underwriting results for the segment, which has built a resilient, stable platform. Due to our view of heightened overall storm risk this year, we chose not to grow our property cat writings at the mid-year renewal. We've grown property cat meaningfully over the last few years, but as we learned during the 2002 to 2005 hard market, when there are so many good things happening across the underwriting platform, why chase returns and cat exposure at the risk of being unlucky? Property, in general, is very well priced. We just want to have the right balance across our portfolio. As you have heard from others, casualty lines remain an area of interest that we'll continue to monitor as we observe rate increases and ongoing reserve strengthening taking place across the industry. Our insurance segment contributed $109 million of underwriting income in the quarter. Net written premium growth was 7% this quarter compared to the second quarter a year ago. We meaningfully grew premiums in our programs business and in E&S casualty, where rates are improving. In a more competitive market, it's important to be able to quickly reallocate capital to the best relative return opportunities, as we have done in the past and remain well equipped to do in future quarters. Our international insurance unit continues to benefit from its position as a lead underwriter at Lloyd's, where a disciplined market is providing attractive growth opportunities in specialty lines. Moving out of P&C and into our mortgage business. At the risk of repeating myself, the consistently excellent underwriting income delivered by our mortgage segment quarter over quarter, provides significant value for our shareholders by producing a solid base of sustained earnings. MI underwriting has been solid across the industry since 2009, and the current environment is one that rewards the MI companies underwriting the risk. This quarter, the mortgage segment generated $287 million of underwriting income, while increasing new insurance written at U.S. MI by 12% from the same quarter a year ago. The delinquency rate at U.S. MI remains low compared to historical norms, and the credit quality of our portfolio remains high with policyholders in strong equity positions. We're pleased to have successfully closed our acquisition of RMIC in the second quarter. Although no new business comes with this run- off block, it's emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital. Primarily due to strong cash flows generated by our underwriting operations, our investments portfolio increased to $37.8 billion, generating $364 million of net investment income in the quarter, as higher yields continue to move through our portfolio. The eyes of the world are focused on Paris this week as the Olympics get into full swing. One of the toughest events is the decathlon, an all-around athletics test featuring 10 events over a range of disciplines spread over two days. The decathlon is an incredible physical and mental test that requires maximum performance in every event. At the end of the two days, points for all 10 events are totaled up, and the individual with the most points is the winner. Similar to a decathlon, in a dynamic insurance market, the ability to perform at a consistently high level across the enterprise is crucial for long-term success, and Arch is built to excel across a multidiscipline market. Our capital allocation helps ensure that we can focus on the lines that give us the best chance to score points. The first event in the decathlon is a 100-meter sprint, and our ability to get out of the gates quickly at the beginning of this hard market positioned us to score early. Since then, our P&C and mortgage teams have been racking up lots of points. Add in our investments team, clearing the bar in the pole vault, and we have an all-around performance that puts us in serious contention for the gold medal, as you would expect from a world-class leadership team. Before I hand it over to François, I need to mention the passing of our friend, Dinos, this past June. Dinos was not only an industry legend, he was also a mentor and tremendous leader who steered this company for over 15 years. Dinos led these earnings calls with his keen insights, principled beliefs, and trademark humor. He was truly one of a kind. So tonight, please raise a glass, be it ouzo, retsina, or anything of your choosing, to Dinos. You are missed, my friend. François? Thank you, Mark, and good morning to all. As you know by now, we reported excellent second quarter results last night, with after-tax operating income of $2.57 per share, up 34% from the second quarter of 2023, for an annualized operating return on average common equity of 20.5%. Book value per share was $52.75 as of June 30, up 6.9% for the quarter and 12.4% on a year-to-date basis. Once again, our three business segments delivered outstanding results, highlighted by $762 million in underwriting income and a 78.7% combined ratio, 76.7% on an underlying ex-cat accident year basis. We continue to benefit from strong market conditions across our businesses as the pricing environment remains disciplined, giving us confidence in our ability to generate solid returns over the coming quarters. Our underwriting income reflected $124 million of favorable prior development on a pre-tax basis or 3.5 points on the combined ratio across our 3 segments. We recognize favorable development across many lines of business, but primarily in short tail lines in our property and casualty segments, and in mortgage due to strong cure activity. Catastrophe loss activity was in line with our expectations as we were impacted by a series of events across the globe, generating current accident year catastrophe losses of $196 million for the group in the quarter. Approximately 70% of our catastrophe losses this quarter are related to U.S. secondary perils, with the rest coming from a series of international events. As of July 1, our peak zone natural cat PML for a single event, 1-in-250-year return level on a net basis, declined slightly and now stands at 7.9% of tangible shareholders' equity, well below our internal limits. For the mortgage segment, since this is the first quarter end since we acquired our RMIC Companies, Inc., and the subsidiaries that together comprise the run-off mortgage insurance business of Old Republic, there are certain items that I'd like to highlight. First, the acquired book of business represented $3.6 billion, or a 1.2% increase to our US primary mortgage insurance in force at the end of the quarter. Second, given the risk in force is from older vintages and has been in run-off since 2011, its makeup resulted in an incremental 19 basis points to our reported delinquency rate at USMI. Absent this transaction, our reported delinquency rate would have improved slightly since last quarter. On the investment front, we earned a combined $531 million pre-tax from net investment income and income from funds accounted using the equity method, or $1.39 per share. Total return for the portfolio came in at 1.33% for the quarter. Cash flow from operations remained strong, and at $3.1 billion on a year-to-date basis, we have seen material growth in our investable asset base, which should result in an increasing level of investment income. Our effective tax rate on a pre-tax operating income was an expense of 9.5% for the second quarter, with our current expected range of 9%-11% for the full year 2024. As disclosed last week, we now expect an August 1 close of the transaction to acquire the U.S. MidCorp and entertainment insurance businesses from Allianz. At this time, we do not have new information to share on the estimated financial impact of the transaction beyond what we provided in early April. Starting next quarter, we expect to update this information to help in developing a forward-looking view of the insurance segment's results, including this new business. All in, our balance sheet is in excellent health, with our common shareholders' equity approaching $20 billion and a debt plus preferred to capital ratio slightly above 15%. We are well positioned to take advantage of opportunities that may arise as we move forward. Before I conclude my remarks, I also wanted to take a moment to build on Mark's comments and share a word of sincere appreciation for the impact Dinos had on Arch, its employees, and many others across the industry. While he will certainly be remembered for his energetic personality and his ability to captivate an audience, we are truly grateful for his guidance, vision and leadership during his career at Arch. Thank you, Dinos. Mark? Now, so we don't keep anyone from their lunch, which we know was very important to Dinos, on to your questions. Thank you. If you have a question at this time, please press star 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 again, and if you are using a speakerphone, please lift the handset. Our first question comes from Elise Greenspan from Wells Fargo. Hi, thanks. You know, good morning. You know, my first question, you know, is, you know, on the, on the insurance side, right, Mark. I think it's been since probably October, late October of last year with Q3 earnings. You were kind of leading the industry, you know, in terms of talking about this casualty market turn, and it's been slow to evolve. Maybe it's in line with your expectations, but it just seem it's been slow to get price, through those lines. How do you see that transpiring, you know, from here relative to price increases in casualty lines? Well, like I said, well, good morning, Elise. I think the point we made last quarter, the quarter before, is that the casualty turn and realizing, you know, and actually how much or how well or bad you're doing in the casualty line takes a while. You know, it has a tail to it. It could take five or six years. So I think we're seeing -- we're starting to see the early signs of more recent years being a bit more, you know, impacted by the inflation that we saw of late. And I think that it will take a while. People are trying to adjust. We're trying to, you know, look at the numbers in the triangles that are actually not as good as they used to be. So there's a lot of uncertainty in, in the space, and I think it will take us several quarters to come to a more stable or, or a better view of the, of the, the industry. So, you know, the last hard market in casualty started to, to turn, you know, in 2000. And it, you know, and it took until about 2004 to really see the impact and, and, and sort of have running out of, you know, having to price, you know, and rate increase after that point. So it takes several years, unlike the property cat, right, at least 2022, something happened at the bottom, the, in the, in the fall. Well, right away, the people are adjusting because the cost of goods sold or losses are known. So this is not surprising to me. I'm expecting a bit more. We're expecting a bit more. We're seeing it through our reinsurance submissions. I think people are slowly but surely recognizing, you know, some of these bad years, but it takes a while. And then in terms of just, you know, on the insurance side, as you think, you know, the, you know, the underlying, I guess, margin, right, kind of low 90s, in the quarter, given, you know, your views about price and loss trend, does, does that feel like, you know, kind of the run rate level from here? Well, as you know, Elise, we report the numbers as we see it based on the data we see. That sort of seems to be the emerging sort of rough average over the last couple of years. There's also a mix going on, Elise, so things are shifting, as you know, from time to time. So it's hard to compare combined ratio. But right now, based on where we are, it's well within expectation of getting the returns. And our returns on insurance, we believe, are in excess of our long-term target. Then the mortgage releases have held, you know, steady at, you know, Q2 was above the Q1 level. Can you just provide, you know, François, maybe a little bit more color on what's going on there and how we could kind of think about run rate level of potential releases within the MI book? Great question. I think we—I mean, I and many others have been wrong about, you know, taking a forward-looking view of releases on the—or favorable development on mortgage in general. I think, you know, right, stepping back, I, I'd say that early in 2020—you know, late 2022, early 2023, we were more cautious about the state of the economy and took a, you know, a view about, you know, new notices and average reserves that we are attaching to these notices that, you know, was a bit more... That didn't turn out to be the case, right? It turned out to be better than what we had expected at that time. The fact that, you know, we just had another quarter of, of again, a more, you know, better cure activity, you know, I don't think, you know, a lot of these cures this quarter were related to the 2023 accident year. So, you know, we're more positive, I think, I'd say, in general, about the housing market. So the level of reserving that we're attaching to the new delinquencies is a bit lower than it was a year ago. So maybe directionally, we would not expect to have the same level of reserve releases going forward. But again, not knowing for sure how, you know, how quickly people are going to cure unemployment, et cetera, I mean, that'll have an impact on the level of reserve releases. Thanks for the color. You're welcome. Okay. Our next question comes from the line of Jimmy Bhullar from J.P. Morgan. Hi, so first, just a question on reserves. You had favorable development overall, but and so did many of your peers, but a lot of the competitors had adverse development in casualty for both older and recent years. It doesn't seem like you had that, but maybe you could go into detail a little bit on the development in the second quarter. And then also, why do you feel that you're not as susceptible as some of the competitors to all the casualty issues, either in your book or maybe in the Watford block that you inherited? Yeah, let me take a stab at that. I'm sure Mark will have something to add. I'd say on the part two of your question, Jimmy, I'd say, you know, the book of business that we have is... I wouldn't call it a standard commercial general liability book of business that some other competitors have. We don't write a whole lot of commercial auto, for example, so that's another line of business that's been, you know, a difficult line to get a good handle on the trends and how inflation has picked up in there. So, you know, the books that we have in general liability, I think are smaller. We're certainly, we think, underweight in those lines of business. You know, roughly speaking, we're, you know, our insurance book is like, call it, less than 15% what we consider to be of our overall premium, what we consider to be traditional casualty in the GL lines of business. So the mix matters. Certainly, the areas where we write the business matters. I mean, we have an international book within that, so it's not only U.S., where I think we've seen more pain. And in terms of the favorable, you know, the movements in the quarter, I think, yes, in aggregate, we were favorable, mostly in the short tail lines. On the longer tail lines, which is primarily GL, I think we were pretty flat. I think, you know, it's something we look at carefully. Some, you know, some noise here and there, but collectively, in aggregate, we're very comfortable with the level of reserves, and you know, so far our numbers are holding up pretty well. What I would add to what François just said, and as you know, Jimmy, we're a cycle manager. We also, you know, didn't write as much in even, you know, the years that were, that we believe are now, you know, still, you know, very soft years. So that also prevents you from having to, you know, having, you know, outsized, you know, surprise. Okay. And then on a different topic, your capital is building up pretty nicely, and I'm assuming it's enough to fund your growth. And you have done a couple of acquisitions, but how do you think about buybacks and/or potentially instituting a dividend given the capital levels that you have? Yeah, I mean, that the philosophy has not changed, right? I'd say certainly we, you know, we're on track to close the Allianz acquisition tomorrow, so that will certainly be a draw on that capital base that we have. We are also, you know, entering the active wind season, so we'll want to take a look at how that develops. But absolutely, going forward, you know, the fact that we historically have been very, I think, very good stewards of capital, we like to deploy it in the business where we can, but if there are no opportunities beyond what's in front of us, you know, in the coming months, we will, you know, we'll, we'll do what we've always done is, is return the capital, and it could be in the form of, you know, share buybacks or dividends or any other method. Thank you. You're welcome. Our next question comes from Josh Shanker from Bank of America. Yeah, thank you very much. So Mark, sometime in the past, I think one thing you said to me was that the big surprise- ... was from the Hard Market of 2004, that pricing stayed good for a lot longer than we thought it would, and we pulled back too early. I mean, clearly, you're not pulling back here, but the growth has decelerated a great deal. Given that you have that 20/20 hindsight, how are you looking at this market opportunity, and how long it might last compared with what you knew from the past? Yeah. Well, first, Josh, is I tried to erase from my memory what we did wrong in 2004, 2005, but thanks for reminding me. What I would tell you, Josh, is we talk about this at underwriting meetings. Our underwriters and our underwriting executives are acutely aware of that phenomenon. We also have to remind ourselves that pricing is going up as we, as we talked about, specifically now in casualty, which seems to be the more, you know, more acute area. I think it will take, you know, it will take a longer time to, to go down, or it takes longer to take down. But it goes up and, and, and an elevator and goes down an escalator. So that's probably why we would expect the market to be. I think we're aware of this. Now we have more data, we have more experience, we have, you know, an existing platform. Underwriters, many of them have been there through those years. So, very confident that we will be more judicious, if you will, in terms of, you know, holding the line when the market gets a little bit softer. In terms of growth, we still have that close to 11% growth in P&C, which is a big feat. It's still a very, very good growth, but as I said in my comments, and you probably heard already, Josh, the market is a little bit more, you know, reaching equilibrium in terms of supply and demand for the risk. So, the question that we have to ask ourselves all the time is, if we push too hard, we might dilute the broader, you know, margin and return expectations in the marketplace. So we take this... And not only us, by the way, I think the market is broadly, very, very widely behaving the same way. People want to make sure that they get it right, and nobody wants to be the first one running out and, you know, doing something that will probably, you know, jeopardize, or not jeopardize, but maybe, you know, take down the returns expectation. So, you know, it's just, it's just that kind of market, Josh. You know, the equilibrium on the supply and demand for capacity is just coming back more to more normal level. It's still, still on the side of the underwriters, but it's clearly, you know, moving in a more equilibrium state. Then continuing on that thought and follow on what Jimmy asked. I have a very crude capital model, and I wouldn't recommend anyone else use it. But it does seem like at the pace that the premium is decelerating, you're going to be sitting on some sizable excess capital in a fairly short order. Can you, I guess, talk about a little bit about how the Allianz transaction uses capital? That might be incorrect, my assumption, it may be that may be a source that's really causing a capital plug there. Or additionally, am I correct that you have at the current trajectory, a real capital buildup that's going to need to be utilized in short order? Well, I mean, first, on the Allianz transaction, we you know disclosed that the rough number of capital that we were gonna deploy in that transaction is $1.8 billion, which is the premium we're paying to acquire the asset and also the capital that we need to deploy to support the LPT that's coming our way immediately, and then the ramp-up of the new business or the renewals that will end up on our balance sheet. So, you know, sizable number, and, you know, that is, you know, so far, I mean, as far as we know, I mean, things are on track to be kind of at that level. You know, to your point, yeah, we—I mean, returns have been excellent, and we're, we're very, you know, we're, we're proud of that and, but we're not gonna accumulate capital just that we can't deploy forever. So the reality is, if, you know, you don't give us another couple of quarters, maybe, but, you know, I mean, we'll, we'll definitely have, you know, a better view of where things stand by, you know, later this year. And then, you know, Mark's been talking about the casualty kind of pick up potentially. So, you know, if that, you know, accelerates in the third and fourth quarters and early next year, then we want to have the capital ready to deploy there. So that's, you know, certainly how we think about it big picture, but it's an ongoing discussion we have here. All right, thank you for the answers. Have a good day. Thanks, you too. Our next question comes from Michael Zaremski, from BMO. Hey, thanks. I'll keep with the theme on casualty and social inflation, you know, especially since we do value your thoughts on this. I guess can you remind us two-part. I believe you've said in the past that Arch's casualty reserve reviews are more geared towards the summer months and related, you know, now that you've been studying, you know, your book and the industry a little bit more. I recall last year, you know, or not just Mark, you had said, but others have said, too, that they thought that the casualty pressures would be more large accounts kind of than small accounts, but the data we see so far appears to be that the small account players have really added to their reserves more so. I don't know if there's any thoughts there. Thanks. I'll start with the second part of the question. You're exactly right. I think that I said that the large account, they're the ground zero for pressure points on the losses because they're deeper pockets, right? They're larger limits, bigger enterprises, more complex cases, and more attractive to the plaintiff lawyers. But you're right, we've seen as well as everyone else, you know, pressure building, but commercial auto as well, even of all sizes, also going through a similar process, and it impacts, obviously, the umbrella portfolio. But you know, you're quite right. We're sort of a second round, you know, where all the sort of the rippling effect, you know, starting in ground zero, which is always a larger account, and it's sort of slowly but surely ripples through the market, and we're starting to see this impact on the smaller, on, on the smaller packages as well. Smaller policies as well have low- lower limits, so it's probably easier. Well, it seems to be currently in the space, you heard this too, I'm sure, you know, that the a million-dollar limit is, ain't what it used to be. So there's probably more of a, you know, pressure to, to pay the full limit, as opposed to before maybe the industry was, you know, more willing to fight or, or push back. But again, the million dollar, because of all the inflation, has changed. In terms of reserve review, I'll say it, but, you know, we do a quarterly review of our reserving, you know, of every line of business that we do. Our actuaries, you know, review it every single time, and we have a change of loss ratio that we get reported on, on every line of business and subline quarterly for all the units that we look at. The one thing that we have as an added benefit at Arch is we also have the insurance group and the reinsurance company, so we're able to, you know, compare at a high level of the holding company, François and I, as to what the trends are developing and what they're looking like. So it's a constant. I think what we may have said to you is we used to do an annual trend analysis. Now it's becoming a twice-a-year analysis, and it might accelerate as well. And I would assume that most people are using, you know, the same frequency, because as we talk about all the time, reserving feeds into pricing. Yeah, the one quick thing, just to add on, on reserving, we monitor actual versus expected experience quarterly. That's a big part of the process, and not only, you know, not only do we do it against our own expectations, but we monitor against our external actuaries' expectations. So we got two views of, you know, how, you know, independent, you know, groups of actuaries think the business or the reserve should develop over time, and that certainly informs the actions we take every quarter. And to Mark's point, that's done in all the business units, you know, every, you know, regularly. Okay, that's, that's helpful. Understood. Just last quickly on catastrophe levels, since you guys are more open than others, on quote, unquote, "normal." The reinsurance segment, cat ratio, the loss ratio this quarter, is that kind of normal-ish, since you guys have grown into property over the years? I think- Yeah, yeah. No, I think. No, again, repeating what we've said before, and it's always hard to appreciate from your perspective, I'm sure, that the reinsurance has more volatility into it. So we tend to look at this on a longer term, you know, average. So sometimes we have a quarter, I'll remind everyone here, sometimes we have a quarter where, you know, the combined accident year ex-cat combined ratio for reinsurance goes up a little bit, and people say it's a trend, but it's very hard to see to say this in reinsurance. Sometimes it's above, sometimes it's below. I think this quarter, frankly, we had no lower attritional losses across the reinsurance portfolio, and this is what, that's what explains that. But if you look on a 12-month basis, it's not as drastic of a move. Yeah, and I, I'd add to that also, the cat load that we reported or kind of quoted earlier this year, I mean, we have a view on seasonality of when these losses may or may not hit. I mean, it's imprecise. Does it happen second quarter? Does it happen third quarter? It's a little bit of a... You know, there's historical data to support that, but, you know, big picture, again, what we experienced this quarter was not unexpected, was not, you know, was very much within what we thought was reasonable, given the growth and the size of the book, the fact that it's broader, it's not only U.S., a lot of international, and, you know, the different types of exposures that, that we, that we reinsure primarily. Okay, that's helpful. I'll seek one last thing quickly on mortgage. Just on a macro perspective, would, if home price appreciation continues at a healthy pace, or I guess resumes at a healthy pace, would that—is that any factor in kind of the reserve releases? Maybe it was unexpected. Is there anything there, you know, from a very high level we can think about? Yeah, I think it would, right? Because by virtue of having, you know, home price appreciation, you therefore increase your equity in your home, and the equity in the home is by far, the lack thereof, is a leading indicator as to whether you're gonna have a, you know, foreclosure or a loss in your policy. Most of the policies, even if, you know, if you had another 3%-4%, whatever we're expecting next year, maybe 4.5% of HPA appreciation, you know, the equity would build. What happens, and it's very simple, right? The reason why equity matters is because, well, if you're running into trouble, the divorce, you're losing your job, you know, you don't want to lose the equity in the home, you can just turn around and sell it to somebody else and then recapture at least a portion, if not all, of the equity that you've built into it. That's something that people know will do. And then there's a healthy market, supply and demand market, is such that you'll be able to sell your home with and capture that equity even after some expenses. So that's what happens in HPA. You know, if it goes, if it goes too wild, like it did in 2007, 2008, but it, it got into trouble for different reasons altogether. I think the credit space and the way the mortgages have been originated over the last, you know, several years, you know, HPA going up right now would be helpful. It's definitely helpful for us as an MI provider. Thank you. Sure. Our next question comes from David Motamedi, from Evercore. Good morning. I had a question on the underlying loss ratio in the insurance business. It was up a little bit year-over-year. That's despite having a higher mix of short tail business within the earned premium mix. Could you maybe talk about, you know, what was driving the loss ratio up year-over-year? And, you know, was that conservatism you guys are baking in on the casualty lines, or, a little bit of the color there would be helpful. Yeah, it's a pretty small increase, and this is, we don't wanna describe any more precision to those numbers. They're judgment call quite oftentimes. I think it's just a reflection of the mix and perhaps one on the business. Some, you know, the actuaries may take a little bit more of a conservative or prudent stance and, you know, put, you know, a bit more, you know, increase the loss ratio for a certain year, or a certain, you know, line of business or product line. That's really all there is to it. I think the variability around this, even on an insurance level, we're a specialty writer, so there's a lot of things going on all at once in our portfolio. It's not as predictive, I guess, as we wish we could be. But this is also why we believe we can attract higher returns, because there's a lot more uncertainty in selecting the loss ratio pick. I would just attribute it to noise that happens from time to time as well as mix. François, anything to add or good? Yep. Yep. Great, thanks. And then, François, you had mentioned the actual to expected. Wondering if we could just get a little bit more color on that for the quarter. And then, if you guys have changed your view of expected losses, just given it appears like claims payment patterns have been extending. So I'm wondering if that's been reflected as well in your expected expectations. Yeah, I think the, the A versus E work, you know, it's done by line by year. So yeah, there's pockets where, I mean, it's puts and takes, right? There's some that we run favorable, some that, you know, there could be a year for, you know, one claim shows up, and it's gonna show adverse. But both quarter to date and year to date, in aggregate, both by segment, we are, you know, running ahead of expectations, which, you know, we didn't take the full credit for that. Some of that favorable experience is showing up in our, in our actually re- you know, favorable prior development. But the, the, the indications are giving us a lot of comfort that our reserve base and, and our reserve levels are, are adequate to, to pay the claims. Absolutely, your question on patterns, that is, I mean, there's a good attempt, good faith attempt to adjust the patterns with the experience that we have, again, both internally and the advice or the opinions we get from external actuaries. So that's factored into the expectations that, you know, claims may be, you know, may take longer to develop. And, you know, we understand that it's, you know, it's an evolving situation. I mean, it seems that the patterns are changing over time, but that is fully kind of considered in those numbers. Great. Thank you. Welcome. Our next question comes from Charlie Lederer with Citi. Hey, thanks. Good morning. Definitely heard Mark's comments on the reasons for the flattening out of property cat growth. Would you say the weather forecast had an impact on that? And could you - could we see you reverse course and reaccelerate if pricing is still good in 1Q, and you have a better view of how much of the MidCorp business you're keeping? I'm gonna say this is one of the easiest answer, yes, and yes to both your question. Yes and yes. Yes, yes. Yeah, we believe we, we took a conviction that there was a heightened, higher, you know, likelihood of frequency of events. And you're right, and it's-- it could change, you know. This would be of a short-term perspective, and this will help inform, you know, whatever new vision or new projection a new belief we have, will help us, you know, make a decision as, as we get into 1/1/2025, after the wind season is over. Mind you, the business is still very good, even with our increased frequency, so it's still a very, very good book of business. We just wanted to have the right balance. Got it. Thank you. And then, I guess, I'm wondering if you guys have your arms wrapped around the CrowdStrike cyber event yet, and if you can help us frame what the losses might be and if you see any impact on the cyber pricing environment coming out of it? Well, we're. Yeah, on the CrowdStrike, I mean, we're still gathering information in our units, trying to figure out what's out there. And it's not only the necessarily the cyber, but there might be some other, you know, lines of business, so we're just going through it as we speak. It's still kind of hard to disentangle. I mean, some people are claiming some losses. They don't - they're not insured, so there's a lot of things going on. I think we tend to agree broadly with the market view that, you know, $500 million-$600 million to $1.2 billion, that's sort of. It's still a wide range at this point in time. It's gonna take a while to know how it develops. I think I would want to. I mean, it's not a big number in terms of loss ratio points for all the premium worldwide for cyber, but it's certainly there's a reminder that there's risk in the portfolio. It's an and it's early now, we haven't seen that many renewals, but I would expect, you know, rates could still go down a little bit, but probably not as fast as they were going down. And people are gonna probably take a bit more of a pause, if you will, to evaluate what it looks like. It could go either way, right? If CrowdStrike does not, you know, does not create a big loss, that might reinforce the belief that it's, you know, not as risky. Although having that event, which was not malicious, happen out of nowhere, and we were all, like, unable to work for a day, I think it's a good reminder to people that there's still uncertainty and there's some loss potential there. ... Thank you. Welcome. Our next question comes from Andrew Kligerman from TD Securities. Hey, thank you. Good morning. I was interested- Good morning. in the net written premium area in professional lines. It looked like you were pretty much flattish, this quarter, year-over-year at $345 million. Could you share some of the puts and takes? Was public D&O off a lot? Did you see a pickup or a decrease in cyber? What were some of the big lines, and how did they move? Yeah, we're—there's a lot of, there's a lot of things in the professional lines. It's kind of hard to disentangle from your perspective. But at a high level, you know, D&O, you know, we're reacting to what's out there. We're still maintaining our positioning. Cyber, we're still maintaining exposure, rates still go down, so that would go the other way. Healthcare, we like a lot, so we've grown that book of business. This is within the professional lines, and there's been some re-underwriting of some areas, if you will, at a high level, that were not as performing as well. So there's a lot of things going on all at once. I think what you're seeing, it was not the 300 and, you know, the flattish number is really a sum total of many decisions that were independent from one another. That's really what you could read into this. Got it. And along the same lines, in reinsurance, property ex catastrophe, it was up quite a bit at $585 million versus $457 million last year. What did you like in the property area in reinsurance? Well, in there, there's a lot of different lines, but, you know, there's a lot of quota shares, some risk excess. We also have a facultative book in there as well. And all these units are taking advantage of the hard market still to this day and picking their spots. And we think the return expectations is not as cat exposed. Within, there is some cat exposure there, obviously, but we believe the returns are just very, very accretive and very, very favorable. Some of them are opportunistic by nature, right? We might be doing a specific deal and some specific peril because we think the market is hard as we speak, so some of that was also factored in our writing. So it's a really broad line of business. As you can see, we love that line. We love the opportunities there. Yeah, it's a bit more complicated, I would say, to underwrite than a property cat, pure property cat book of business, but we've had the expertise and the knowledge and the willingness to do this for a long time, and we're really like to... We would like to be exposed and do more of that line of business in that current return expectations. Got it. Yeah, and I'll add to that quickly. Just on the accounting side, it's important to remember that the property cat line of business is mostly on an XOL basis, where we write all the premium on day one versus this property, other than property cat line, where the component that is on a quota share basis, the premium is written evenly throughout the exposure period. So it could very well be, you know, there's accounts that we wrote at 1/1, for example, that, you know, the ramp-up of that premium is taking place over the four quarters of 2024 as we write the premium. So a little bit of a different kind of accounting policy on those types of, you know, reinsurance agreements, and that certainly has an impact on how it shows up in the quarterly numbers. Got it. And if I could just sneak one quick one in. On the insurance line, the expense ratio picked up by 70 basis points. Should we be thinking about the expense ratio being slightly more elevated as you take on the Allianz book and invest there? Well, the investments that we made through this quarter were, are not related to that, right? So they are other opportunities, other, you know, efforts that we, we have underway that were predictive analytics, some, some tech, you know, companies that we've invested in. So we feel it's the right time for us to make those investments, given, you know, how strong the returns are, and, you know, we'll see how those develop over time. Maybe, maybe they slow down, you know, down the road, but for now, we're very comfortable with the level of investments we're making. In terms of Allianz, just, you know, we'll give you more information as we move forward, but there, you know, there will certainly be some integration expenses that will come through in the insured segment, specifically going forward. Some of those expenses, though, will be kind of one-time, and we'll probably report those as part of a transaction costs and other. So that, that will clarify that for everybody on- once we close and after we, you know, have a time to, some time to digest it. But, yeah, the investment so far this, you know, this quarter are, you know, for other initiatives. Got it. Thank you. Welcome, welcome. Our next question comes from Brian Meredith from UBS. Yeah, thanks. A couple of them here for you guys. The first one, I'm just curious, do you all still stand by the three-year payback period for share buyback when it comes to book value dilution? That has been our practice. You know, it's not a hard and fast rule. I think it's been the practice historically, but again, that's part of the framework of how we evaluate kind of various alternatives. You know, could we think about extending the payback at some point? And the answer is, you know, maybe. Gosh, that's helpful. Thank you. And then I guess my next question, you know, thinking about M&A here, it looks like you probably have the financial capacity to still do a reasonable amount of M&A, but do you have the kind of, call it management and strategic, or call it management capacity at this point as you're integrating the Allianz business, or Fireman's Fund business, you know, over the next, call it 6-12 months to do anything? You're gonna kind of take a pause here for a while. Well, I think, Brian, it's also dependent on the opportunity that we have ahead of us, and we can certainly attract people to help us do any other, you know, integration. We have a team that between us at, you know, that leading the effort on Allianz, that also were instrumental in integrating, you know, Guaranty way back in 2017, 2018. So we have already some good experience there. So I think we have enough bandwidth for what we're doing now quickly, and if something were to happen, right, François, that was really creative and interesting, we would find a way to do this. I think that we're not there to work half the time. If something is very, you know, favorable to us, we'll expand the effort and the work that needs to be to get this done. These opportunities are, I mean, I'd say geography specific and segment specific. So, you know, the Allianz acquisition is purely insurance North America, so that absolutely has taken, you know, center stage. But, you know, if we were to do some other M&A in other parts of the world in the reinsurance segment, that could be, I mean, it'd be a different team most likely that would contribute. Makes sense. And I wonder, just quick one. I know you're going to give us some numbers on the Allianz thing, but I... Is there any color you can give us with respect to how does it add to your PMLs, as we think about it going forward? Just looking at the map you provided us, it looked like, you know, there's a decent amount of business in kind of cat exposed areas. Not materially, because it's not as much in our peak zone. You know, the book is more diversified, more Midwest, more California, less, you know, Florida, which is our peak zone. So in terms of the 1-in-250, marginal impact. Great. Thank you. Appreciate it. Done. Our next question comes from Meyer Shields from KBW. Great. Thanks so much. Two quick questions. First, Mark, I think you and François both mentioned the elevated frequency predictions for not growing cat premium. Was there any reshaping of the portfolio to move further away from frequency events? No, I think that, I think that if you look at, at a high level, I think our, our exposure was, is, is more stable. It may have grown a little bit even on a growth basis, but what happened is we just, you know, shaped it through retrocession purchases. That's really what we did. And that's, that's how we got back to a more, you know, more, more reasonable and more, you know, acceptable level of PML. Okay. That's helpful. And second, just sort of for the most recent or up-to-date events, as we've seen more capital markets activity come back, and, you know, we've seen that being blamed for pressure on public and D&O pricing. Are you seeing any inflection that coincides with recovering activity? Not really. I mean, the third-party capital that we hear. Again, even those third-party, there's a healthy level of, you know, rationality in the behavior. So we haven't seen, like I said before, you know, crazy players or, you know, mavericks in the marketplace. It's a pretty well-behaved marketplace. Okay. Thank you very much. Sure, Meyer. I'm not showing any further questions. Would you like to proceed with any further remarks? Thank you very much, everyone. We'll talk to you again in October. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect.