Argo Group International Holdings, Ltd. (ARGO) on Q3 2021 Results - Earnings Call Transcript
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Operator: 00:02 Hello, and welcome to the Argo Group Third Quarter twenty twenty one Earnings Call. My name is Alex, and I’ll be coordinating the call today. 00:20 I will now hand over to your host, Greg Charpentier, EVP of Investor Relations and Corporate Finance. Greg, over to you.
Gregory Charpentier: 00:29 Thank you and good morning. Welcome to Argo Group's conference call for the third quarter of twenty twenty one. After the market closed last night, we issued a press release on our earnings, which is available in the Investors section of our website at www.argogroup.com and was filed with the SEC. Presenting on today's call is Kevin Rehnberg, Chief Executive Officer; and Scott Kirk, Chief Financial Officer. As the operator mentioned, this call is being recorded. 00:56 As a result of this conference call, Argo management may make comments that reflect their intentions, beliefs and expectations for the future. Such forward-looking statements are qualified by the inherent risks and uncertainties surrounding future expectations generally and may materially differ from actual future results involving any one or more of such statements. 01:18 Argo Group undertakes no obligation to publicly update forward-looking statements as a result of events or developments subsequent to this call. For a more detailed discussion of such risks and uncertainties, please see Argo Group's filings with the SEC. Also note that we will be referencing certain non-GAAP financial information. More information regarding these non-GAAP measures are provided in our earnings release. 01:42 I will now turn the call over to Kevin Rehnberg, Chief Executive Officer of Argo Group.
Kevin Rehnberg: 01:49 Good morning and thank you for the introduction, Greg. Welcome to everyone on the call. I'm happy to speak today about the strong results we reported. Our operating earnings per share was zero point nine one dollars for the third quarter, despite elevated catastrophe losses, the industry experienced. Argo’s annualized operating return on common equity was seven point three percent. 02:09 Our loss ratio improved nine point eight points to sixty four point zero for the third quarter and reflects lower catastrophe losses at an improved underlying loss ratio, which is directly attributable to the strategic direction we have implemented at Argo. We continue to make progress on reducing expenses, implementing our growth plan and the actions we are implementing are starting to come through in our financial performance as we remain focused on pursuing profitable growth, improved underwriting margins, reduced volatility and disciplined expense management. 02:43 I'm particularly proud of the results achieved given the elevated catastrophe losses facing the insurance industry this quarter. Over the past year, we have highlighted our strategy to reduce the volatility of our underwriting results and allocate capital to businesses with more stable returns. This was evident in the most recent quarter as our efforts to reduce property catastrophe exposure led to a significant improvement in our results. 03:09 We made the decision to exit our reinsurance operations in twenty twenty as we actively adjusted our insurance business to significantly reduce volatility. Given the tougher conditions the reinsurance market has experienced recently, we are very happy with the direction we have taken. We continue to increase attachment points and reduce limits across multiple areas of our portfolio. In our U.S. Excess Casualty portfolio during the first nine months of twenty twenty one, the average attachment point is up twenty six percent while the limits are down eleven percent compared to the same period in twenty twenty. 03:45 Our D&O portfolio, average limits have continued to decrease as well. And over the past two years, commercial primary and excess limits have decreased by forty five percent and eleven percent respectively. Importantly, this leads to increased underwriting profitability well at the same time limiting volatility. We continue to execute on our priority of becoming leading U.S. focused specialty insurer. 04:10 This quarter, we executed on several transactions to exit underperforming or non-strategic businesses, including the recent announcement to sell our Brazil operations Argo Seguros and we closed on the sale of our contract P&C business in October. 04:27 Now, our business is comprised of three main platforms. Our U.S. operations, which represent two-thirds of our business on a go-forward basis, followed by soon to get twelve hundred and Bermuda Insurance. U.S. specialty risks are regularly placed in the Lloyd's market and Bermuda. And these platforms, we are focused on U.S. specialty risks and we are targeting business in which we have demonstrated our expertise. 04:51 Our Bermuda Insurance business has an impressive long-term track record generating underwriting profits in nine of the last ten years, and we have taken numerous actions in Syndicate 1200 on the business to optimize this portfolio and are starting to see them come through our financial results. 05:09 On the investment side, we reported very strong results driven by a significant contribution from our alternative investments portfolio. We adjusted our portfolio to targeted asset allocations based on a study conducted at the end of last year. Our bond portfolio is more heavily weighted to short durations due to the profile of our liabilities, a portfolio with shorter duration for us of three years and eight plus credit quality positions Argo well in an inflationary environment. We also continue to hold allocations in equities and alternatives. 05:44 In terms of underlying growth, our top line in the quarter continued to reflect our focus on growth areas. Overall, gross premium was down one point six percent in the quarter. The decrease in gross written premiums is attributable to the businesses we are exiting, plan to exit or have sold including of sales of Ariel Re in November twenty twenty, Contract Binding in October twenty twenty one and businesses in Italy, Malta and the U.S. grocery business. 06:11 In the ongoing businesses, premiums grew approximately seventeen percent during the third quarter of twenty twenty one, when compared to the third quarter of twenty twenty. U.S. growth was three point seven percent in the third quarter of twenty twenty one. Premium growth continues to be driven by businesses we highlighted in March as grow in invest businesses, and those include Argo Pro, Casualty, Construction, Environmental, Inland Marine and Surety. 06:38 These businesses which represent nearly two-thirds of our U.S. operations gross written premium were up approximately twenty percent in total during the quarter. And more importantly, these businesses remain highly profitable with the combined ratios in the 80s and minimal catastrophe losses. There was meaningful topline impact from our decisions to reduce exposure in property and underperforming business units. On a year-to-date basis, these actions have limited topline growth by over sixty million dollars, but have improved overall profitability. 07:10 In the U.S., we continue to see solid rate increases in the mid-single digits on average. This is a bit less than the increase we experienced over the last couple of quarters, but we feel very good about the rates we're getting in direction of our margins. Our growing invest businesses outpaced the U.S. average increasing in the high-single digits range. 07:29 Turning to international, reported gross premiums were down about ten percent in the third quarter due to the impact of businesses we are exiting, planned to exit or have sold including the sale of Ariel Re in November twenty twenty and the planned exits of businesses in Italy and Malta. In the ongoing businesses, excluding the increased share of Syndicate 1200’s capacity, gross written premiums were up approximately nineteen percent primarily due to the higher rates. Of this growth rate increases and exposure from lines with attractive market conditions, each contributed approximately one half of that growth. 08:06 Pricing continued to be strong in the quarter with rate increases averaging eleven percent in international and continue to remain broad-based. Over the past three years, cumulative rate change for Syndicate 1200 has been thirty two percent and approximately one hundred and ten percent for Bermuda Insurance. We believe these businesses are well positioned to continue to generate favorable underlying margins and market conditions remain attractive across most of our platform. We will continue to de-emphasize or take strategic actions in lines where we believe market conditions are not attractive or where we do not have a competitive advantage. 08:43 Now turning to expenses. We continue to make progress towards driving efficiency in our operations. On a year-to-date basis, our non-acquisition expense ratio continues to decrease and we are making meaningful progress in several areas. We have reduced our real estate footprint as we have embraced the hybrid and flexible work environment, including the divested businesses, our headcount has decreased by sixteen percent or two hundred and forty eight employees since July twenty twenty. 09:10 Additionally, we have consolidated renegotiated or eliminated a number of contracts with outside vendors with additional significant savings to be realized going forward. We continue to target thirty six expense ratio for the full year twenty twenty two. Overall, I'm very pleased with our results for the quarter and the progress we've been able to make on our strategic objectives. 9:33 I’ll now turn the call over to Scott to discuss our results in more detail.
Scott Kirk: 09:41 Yes. Thank you, Kevin and good morning, everybody. We reported strong earnings during the third quarter of twenty twenty one driven by reduced catastrophe losses, an improved combined ratio and a strong contribution from alternative investments. The combination of these factors resulting in operating earnings per diluted share of zero point nine one dollars and an annualized operating return on common equity of seven point three percent. 10:07 I'll turn first to our consolidated operating results. Gross premiums decreased by one point six percent in the third quarter of twenty twenty one. However allowing to the impact of previously announced sales and exits, premiums are up approximately seventeen percent during the third quarter of twenty twenty one. Now while reported grocery premiums decreased net written and net earned premium both grew at approximately nine percent in the quarter. 10:35 As we discussed previously, the key drivers of the net premium growth are related to the sale of Ariel Re and our increased ownership percentage in Syndicate 1200 capacity. We expect net premium growth to continue to outpace the change in gross written premium for the balance of this year. 10:53 In the third quarter on a year-to-date basis, our retention ratio calculated as net written premiums divided by gross written premiums increased seven points to zero point six seven dollars and sixty one percent respectively. This was primarily result of the increased retention in our international segment resulting mainly from the sale of Ariel Re, where we retained very little of the risk on a net basis and our increased participation in 1200 results. 11:19 The U.S. segment also contributed to the retention increase due to shifts in business mix towards focus lines of business where we retain more of the risk and add. In the third quarter of twenty twenty one, we reported a loss ratio of sixty four percent, down nearly ten points from seventy three point eight percent during the prior year period. The improvement reflected lower cat loss ratios -- losses and improved ex-cat current accident loss ratio. 11:46 Our cat losses totaled twenty seven million dollars or just under six points of the combined ratio on the third quarter of twenty twenty one, of which twenty four million dollars related in natural catastrophes and three million dollars related to the impact from COVID. This result compares favorably to catastrophe losses of seventy one million dollars or sixteen points on the combined ratio in the prior year quarter, which included fifty four million dollars related to natural catastrophes and seventeen million dollars related to the COVID-19 pandemic. 12:15 As Kevin mentioned, the successful implementation of our strategy to reduce property cat related exposures has resulted in a significant reduction in our catastrophe losses despite elevated industry cat losses during the quarter. Unfavorable reserve development totaled six million dollars in the third quarter of twenty twenty one. This was driven by a seven million dollars one-time accounting adjustment in our International segment. The prior year quarter included one point six million dollars of adverse reserve development. 12:50 The ex-cat current accident your loss ratio came in at fifty seven point one percent in the third quarter, which represents thirty basis point improvement in the prior year quarter. The improvement reflects the impact of continued rate increases as well as the benefits from our reunderwriting actions. 13:06 Turning now to expenses. Our expense ratio was thirty six point three percent in the third quarter twenty twenty one and was flat compared to the prior year quarter. Acquisition expense and general and administrative expense ratio were in line with Q3 twenty twenty. Importantly, this marks the third consecutive quarter of improvement in our expense ratio and a year-to-date expense ratio now stands at thirty seven point three percent. 13:34 As we said previously, the improvement in the expense ratio is not going to be linear and we remain committed to thirty six percent expense ratio target in twenty twenty two. In the quarter, we also incurred eight million dollars in non-operating expenses mainly related to the reduction in our real estate footprint and we expect the benefits to begin to materialize and expense ratio in twenty twenty two. 13:59 Turning now to our segment results in U.S. growth written premiums were up three point seven percent compared to the third quarter twenty twenty. The growth in the period was driven by our growth in invest businesses that include Argo Pro, Casualty, Construction, Environmental, Inland Marine and Surety.. 14:16 Now our gross written premiums increased just under that four percent. Net written premiums and net earned premiums in the U.S. increased by seven percent, as eight percent respectively versus the prior year quarter. It's worth noting that after adjusting for the fronting business that we write in the U.S. Our retention ratio was seventy two percent in the quarter and zero point sixty eight percent on a year-to-date basis. 14:42 The U.S. segment reported underwriting income of fifteen million dollars at a combined ratio of ninety five point four percent in the third quarter of twenty twenty one. The loss ratio decreased six points to sixty three percent mainly driven by reduction in catastrophe losses. The expense ratio of thirty two point four percent decreased fifty basis points in prior quarter and was driven by improvement by the acquisition ratio and the general and administrative expense ratio. 15:08 Improvement in the acquisition ratio was primarily related to change in business mix and the improvement in the G&A ratio was due to increase in net earned premiums and the execution of expense reduction initiatives. 15:20 Turning now to our International segment. Gross written premiums declined ten percent in the third quarter twenty twenty one, due to the previously announced business exits with the largest decrease in property lines. This is partially offset by higher rates and increased participation in 1200 capacity. 15:37 International net written premium and net earned premium increased by thirteen percent and twelve percent respectively versus the prior year quarter. The increase was primarily driven by growth in Syndicate 1200 due to changes in ceded reinsurance, rate increases achieved over the last several quarters, and our increase of share of the Syndicate results, partially offset by the impact of business exits, and five million dollars of reinstatement premiums in the current quarter. The reinstatement premiums are mainly related to the Syndicate into the third quarter twenty twenty one. Reinstatement premiums were seven hundred thousand dollars in the third quarter of twenty twenty. 16:14 International segment reported an underwriting loss of just under five million dollars in the third quarter of twenty twenty one compared to an underwriting loss of twenty three million dollars in the prior year quarter. The combined ratio decreased thirteen percentage points to one hundred and two point eight percent in the third quarter of twenty twenty one. This declines primarily driven by the reduced catastrophe losses and continued remediation efforts and rate increases earning through the results. 16:39 Current accident year ex-cat loss ratio was fifty one point six percent which increased one hundred and thirty basis points from the prior year quarter. The relative increase compared to last year was primarily driven by the impact of reinstatement premiums on the denominator net earned premiums in the third quarter of twenty twenty one. 16:58 Cat losses during the third quarter of twenty twenty one of seventeen million dollars or eleven percent -- eleven points of the combined ratio compared to cat losses of forty five million dollars or thirty one points of the combined ratio in the prior year. Losses in the current year third quarter included net catastrophe losses generated mainly by Hurricane Ida as well as a reduced level of losses related to COVID-19. The expense ratio of thirty nine point five percent increased eighty basis points in the prior year quarter, driven by the reinstatement premiums associated with the cat losses in the quarter. 17:32 Moving onto investments, we reported net investment income of forty six million dollars on the quarter. The result included twenty four million dollars of income from alternative investments, principally mark-to-market gains and our private equity and hedge fund investments. Although, we are certainly pleased with this result, we recognize that the outperformance and alternative investments in the last quarter -- last five quarters, might not continue for an extended period and could revert back to long time historical loans. 17:58 Net investment income from the reminder of our portfolio twenty two million dollars in the quarter, which was down three point five percent from the prior year quarter. This decline reflects the de-risking action over the last two years as well as the lower overall yield available in the market. Our book value per share was fifty point one dollars as of September thirty and this is flat including dividends compared to the second quarter of twenty twenty one. 18:25 And finally, let me talk about capital. In our second quarter call, we mentioned that our required fund at Lloyd's position was in the range of three hundred to three hundred and fifty million pounds at the end of twenty twenty. This figure has decreased to around two hundred and ninety million pounds, let me say that again, this figure has decreased to around two hundred and ninety million pounds at the end of the third quarter, due to a combination of improved results in our International segment and reduced funding requirements with Syndicate 1910, a little on the half of this is provided by Argo Re. 19:04 And we continually monitor our capital levels determining whether put it to work and the attractive opportunities we see in the marketplace. And against what we need writing agencies perspective. As we've said in the past and holds true now, if we have excess capital automating these requirements, we will look to return this to shareholders. 19:25 Operator, that concludes our prepared remarks, and we're now ready to take questions.
Operator: 19:45 Thank you. We will now proceed with the Q&A session. Our first question comes from Matt Carletti from JMP Group. Matt, your line is now open.
Matt Carletti: 19:54 Hey, thanks. Good morning.
Kevin Rehnberg: 19:56 Good morning, Matt.
Matt Carletti: 19:56 So Kevin, I just had a high level question for you. Back in March, I guess at the Investor Day, it sounded like you largely had the team on the field if you will, in terms of the business going forward. I think there was -- there could be some lifts and talks around the edges but that the big pieces were in place. Since then, obviously Brazil is sold, while you guys haven't said anything, that’s been widely reported in the press that Syndicate 1200 is going through a sale -- has been put up for sale. Is my interpretation from the Investor Day right? Do you have the big pieces on the field that you want or are there potentially still big moves to be made? Just trying to get a picture of kind of what Argo is going to look like going forward at this point?
Kevin Rehnberg: 20:49 Yes, that's -- thanks, Matt. Investor Day, this is a good time to update. It's part of the reason we put the supplement out for some updates on what is remaining because there's been so many pieces that moved around. So, as I mentioned in my remarks, we are in three places now effectively. We're in the U.S. We are in Bermuda and we're in Syndicate 1200. I'm not going to comment on the market rumors because we don't do that. But the point of having the supplement information was to give everybody a sense of what the underlying remaining ongoing businesses look like in there. 21:29 And what the performance has been on those, because we've spent a lot of time working through things and we believe that the potential for continued good results out of what we are down to is in line with our returns and I would suggest that we are in a position where every business we remain in is in no different position than the others have been or since I was running the U.S. all the U.S. businesses have been. If there's an opportunity to make a profit and have some good opportunities for growth given environmental outlook and how we're performing and what our resources are. We'll do so and the business leaders understand that. 22:12 So, I think it was time to help clear out the noise, now there's going to still be some noise in the results, so these things we've recently gotten out of, but this gives you a sense of what it looks like. So, hopefully that helps.
Matt Carletti: 22:28 Yeah. And I think, I appreciate you can't comment on rumors, but would it be safe that I'm hearing you're right that at least as it stands today, Lloyd's Syndicate 1200 is -- you consider an ongoing business?
Kevin Rehnberg: 22:41Absolutely. Yeah. I mean, that's why look, if you go to the supplement and look at page five on the pro forma, what's left in there is actually good and we still have some things that we're moving out, and we're still getting rate. So, like I said, it's all about capital and opportunities and the U.S. businesses that haven't made it and there's been a lot of right. We've pushed out almost one billion dollars over the last ten years in businesses that didn't work out for one reason or another and still continue to grow it. So those things are going to apply to lines of business, and we very recently announced in the Syndicate that we're getting out of the North American bankers business and the property business. So those will have a significant impact on volatility as we go forward.
Matt Carletti: 23:32 Okay. Great. Thank you for the color. I appreciate it.
Kevin Rehnberg: 23:35 Yeah. Thank you.
Operator: 23:39 Thank you, Matt. Our next question is from Greg Peters from Raymond James. Greg, your line is now open.
Alex Bolton: 23:49 Good morning. This is Alex Bolton calling in for Greg Peters.
Kevin Rehnberg: 23:53 Good morning, Alex.
Alex Bolton: 23:55 Good morning. 57 Maybe just first, if you could provide a little more color around the reserve development, maybe the seven million dollars accounting adjustment?
Kevin Rehnberg: 24:08 Yeah. So, I’m going to let Scott take this one because it's an accounting issue. So, Scott, why don’t you jump in here, please?
Scott Kirk: 24:15 Yes. Thanks, Alex. Its Scott here look, that was a result of remediation efforts that have been undertaken through the first nine months of the year. There's really nothing more higher excite other than that.
Alex Bolton: 24:34 Okay. And then maybe going back to the investor presentation, you set out ceded reinsurance ratio targets. I think with sixty three percent in U.S., fifty seven in International. I guess are you still seeking those targets or the targets moved at all?
Kevin Rehnberg: 24:59 Yes. So they're not actually target. Those are actual numbers and that's why we put them out there. And what we're intending to show is that it's on a trend upwards and we'll continue that way based on some reduction in exposure, but more importantly, the reduction in the volatility lines, which are heavily property weighted and had sort of an outsized share of reinsurance, relative to what's remaining.
Alex Bolton: 25:29 Okay. Great. And then lastly, maybe just can you touch on maybe your confidence of the rate environment maybe into twenty twenty two?
Kevin Rehnberg: 25:45 Sure. We are seeing rate that is consistent with what we're hearing from our competitors and brokers in the lines we participate in, right? We're sort of solidly there or right in the middle of pack in some instances you may be a little above or a little below. But there are areas. It’s certainly not as strong as it was in the previous year, but it's still good and it's still above what we've experienced for loss cost increases and what we are hearing others talk about terms of the increases for loss cost. So the fact that inflation on the horizon, the competitive environment is still pretty strong. I think we're going to continue to see rates moving up in certain lines are going to drive it heavily. But we're not looking at or expecting an abatement right now.
Alex Bolton: 26:45 Okay. Great. Appreciate the answers.
Kevin Rehnberg: 26:48 Great. Thank you.
Operator: 26:59 Thank you. We have another question from Casey Alexander from Compass Point Research. Casey, your line is now open.
Casey Alexander: 27:08 Hi. Good morning and thank you for taking my questions.
Kevin Rehnberg: 27:12 Yeah. Good morning,
Casey Alexander: 27:13 Yeah. My first question kind of relates to clearly successfully you took down the property and/or wind exposure and it resulted in a much better outcome this quarter. Are you kind of satisfied where you are or is it sort of underwriting strategy and structural strategy to take that wind exposure down even more when we get to the catastrophe season in twenty twenty two?
Kevin Rehnberg: 27:49 Yes. Really good question. We are -- I'm both satisfied and continuing to move forward, right to answer it very specifically. So, we had anticipated that we would reduce the exposures over the course of the year, over the course of the year and point half, and we managed to get there fast than we hope partly just through driving ourselves out of some of these lines. And so, we're not surprised where we ended up based on what we talked about in June. But the actions I just talked about earlier today, including things like not going forward in the North American binders business, not writing D&F book for U.S. Lines out of Syndicate 1200, the sale of the contract finding book and then a continued reduction in our property exposure across the board. 28:46 What's happening is we're focusing on what we're good at and we're really good at casualty lines, and so we're putting all our resources there. And so the expectation is that there be a continuation of exposure reduction. What that means to the net really depends on what reinsurance program we can buy going forward. But we are happy with the direction we're going in and we're continuing to work on.
Casey Alexander: 29:15 Thank you. Secondly, I hate to get too far afield, but we're getting near the end of twenty twenty one. So from a modeling perspective, we unfortunately have to start thinking about twenty twenty three. Would you expect the downward trend in the expense ratio to continue in twenty twenty three and would that come primarily from expected earned premium growth or from continued expense actions?
Kevin Rehnberg: 29:53 So, we tried to give some color on the expenses so far, right? And I think the key one is that we've reduced the overall headcount of the organization by sixteen percent. And what we've said before was that, look, this is going to -- as we get out of different things in places, we need less of the infrastructure to support it, right? Or we have lines that are not performing well. So that will continue as we continue to take actions that move us out of some of the things that are still underway where they get finalized. So there's an element of that, but at the same time, we're putting a lot of resource into growing the businesses that make a lot of sense. So on the headcount side, I think we've really done a lot, and we'll continue to manage that well. 30:49 Relative to outside services, because of the consolidation of the organization, we were able to get rid of multiple contracts or things that were duplicative and that had a significant savings. And then we'll have some continued effort on the real estate side as we move forward and continue to work in the post pandemic environment. So, we'll continue to do that. We're not just going to sit back and hope it all happens through earned premium growth. There will be an impact from that, but the targets of eliminating things that are unprofitable, redundant or unnecessary will absolutely continue to be a cultural hallmark. 31:33And I think it bodes well for us as we translate that into some of the real life experiences that we’re -- everyone's dealing with the great resignation and with some of the employment inflation that's going on. So, I think all of those things factor into it. And with the mix of business, we're going to see an uptick most likely in our acquisition costs because of the lines we got out of. And that will have an impact too, but again, it's something we'll watch very closely and stay after.
Casey Alexander: 32:04 Okay. I have two more questions for you. And I think these are questions that are confronting a lot of organizations in these days. My first question is, how do you have to manage differently in order to create culture in an environment where a lot of your employees are not on-site? I'll bring that first question out. I mean, it's difficult issue. I'm curious what your thoughts are?
Kevin Rehnberg: 32:37 Yeah. It's a difficult and great issue to talk about. So there's two pieces to this. For the folks who've been around a while and have worked together, it's really not that hard. People go through personal issues at times, but for those who have worked closely together for a while. It's not that difficult, but we have a lot of new employees, right? And we've got people who have joined and never met anybody or we've got people who have joined and had limited interactions. So, we're taking an approach based on businesses or regions of trying to find a way to connect people, whether it's through Zoom meetings, whether it's through some kind of front event that people can do or whether it's actually getting together if that's possible. And all three of those things have happened its imperfect, but we're looking to what others are doing what outside resources are there and there's a lot of communication going on. So the business is going in the right direction, but it's something that we watch and work on every day.
Casey Alexander: 33:41 The reemergence of the off-site pot lock, I think is where we're going to end.
Kevin Rehnberg: 33:49 That’s pretty creative stuff people are doing.
Casey Alexander: 33:53 Yeah. Here's my last question. I think that investors really appreciate the strategic streamlining and the much tighter focus of the business effort and whatever you can do to continue that and even tighten it further, I think, investors really like it. But is there a piece that's missing, is there something that that you would add here that you don't have that you think could be highly accretive or strategically important and I think it would be helpful to communicate that just so that it didn't catch investors by surprise and feel like a strategic change.
Kevin Rehnberg: 34:32 Okay. No, that's a good point as well taken. Let me just start to answer that question by saying that the feel of the business and the leaders that are left running what we have is better than I've ever seen, right? And on the international side, we've got people that are clear on what their direction is and they're excited about it and they know what lanes are in and they're the ones who have been doing the business that's been the underlying piece it's been successful or they remediated it. So, they feel good. 35:06 On the U.S. side, our last operating review, I have never been to one that was as good focused solid with opportunities, optimism, happy about where we are in the marketplace and how it's working with our technology. So, I walked away from that meeting feeling great and that translates into or a U.S. special carrier. So there's a number of specialty lines we are not in. And I have a group of executives dedicated to research on some lines that some of us have hands on experience at multiple companies and know the market and it's getting to the point in some of these areas where we can find people with the right fit culturally, who understand what we're about from an underwriting standpoint and exposure standpoint and have the right market contacts. And so you may see in the future us entering a few areas that we haven't been in or haven't been in for a while.
Casey Alexander: 36:10 Right. Well, I'm way over my quota for asking questions. So I'll stop there, but thank you for taking my questions. I appreciate.
Kevin Rehnberg: 36:17 Yeah. Appreciate your interest. Thanks.
Operator: 36:22 Thank you, Casey. Our next question comes from Ron Bobman from Capital Returns. Ron, your line is now open.
Ronald Bobman: 36:31 Hi. Thanks a lot and good morning.
Kevin Rehnberg: 36:33 Hey. Good morning, Ron.
Ronald Bobman: 36:36 Hi. You gave us I think again sort of specificity on the expense ratio estimate for next year twenty two. And I recognize an estimate or guidance for a loss ratio is far more complicated, particularly with the mix changes and of course, sort of the changing loss environment which no one ever knows. But how long or trying to maybe you plan on giving us greater specificity city at some point between now and the start of next year. So maybe you could sort of let us know maybe is there intention to provide some loss ratio guidance for next year. But maybe separate in the apart, how long will these mix changes and the exits of certain geographies and/or markets or lines of business or books of business be sort of a friction or a drag on the loss ratio and thus the combined ratio? And I know you've laid out sort of what the underlying combines are on the go forward mix, but that's really what I'm getting. Can you help there, please?
Kevin Rehnberg: 37:53 Yes. So, we have traditionally not given guidance. However, the last two years in the fourth quarter call, we have given some sort of direction about where we thought the business would go on a combined basis. So while we haven't given the expense, I'm sorry, the loss ratio specifically, we're probably going to do the same thing and since we've been pretty candid about what the expense ratio is. The loss ratio is pretty easy to define. So it's premature right now to talk about what that would be, but I think your point about before the end of the year, we'll try to find a way if we can do it that early, we will, if not will do it when we did -- when we do the fourth quarter call. 38:38 But secondarily, and then more importantly, your point about what I'll refer to as noise that is going to continue to come. We will do our best to quantify that and it was really hard last year just given the magnitude of different moving parts and you got to see what happened based on our net being between fifty million dollars and sixty million dollars for cat the early part of the year and then dropping down to where they are now. So, in between, I know some people were frustrated because we couldn't tell exactly what it was because was moving, but I think the numbers that we have are a bit more discrete, and we'll try to do our best about timelines on certain things. It’s a good request and we'll work on that for you because that noise is complicated. Thanks.
Ronald Bobman: 39:29 Yes. Understood. Moving a field, the contribution in the quarter, the underwriting contribution from a profit or loss. How did Syndicate 1200 and how did Argo Bermuda contribute to either operating income or underwriting profits in the third quarter or year-to-date separately not lump together as international.
Kevin Rehnberg: 40:04 Yeah. We haven't broken that out. And I don’t think we set a precedent here, but on the international lines from an operating income, you can see in the release it was seven point four million dollars.
Ronald Bobman: 40:21 So, in the past, you've commented on 1200s underwriting profitability. How did that do in the quarter?
Kevin Rehnberg: 40:32 Scott, do you have the final number there?
Scott Kirk: 40:36 Ron, can you -- could you run the question for me again, exact what we're looking for exactly?
Ronald Bobman: 40:44 Was 1200 from an underwriting perspective profitable in the quarter.
Scott Kirk: 40:50 Look, you can see that the contribution overall was not huge, so we're in and around a breakeven or thereabouts.
Ronald Bobman: 41:03 Okay. Thanks.
Scott Kirk: 41:05 more specific than that because I don't want to.
Kevin Rehnberg: 41:09 But as a reminder, we didn't announce we're getting at in North American binder and the D&F business, which was impacted by Ida. So, those are -- I'm just pointing out facts. I'm not trying to make excuses for it, right? We're focused on what's the underlying business going forward.
Ronald Bobman: 41:31 Okay. I'm not sure. Okay. I can ask offline. I'm must try, fully understand the last comment, but… Thank you.
Kevin Rehnberg: 41:39 Okay. Thanks.
Operator: 41:43 Thank you, Ron. We have no further questions. So I hand back over to Kevin for any closing remarks.
Kevin Rehnberg: 41:50 Yeah. Thank you to everyone for joining us today. I want to thank the employees for the great work they've been doing to get us where we're going, the shareholders for supporting us, regulators and rating agencies for your interest in us and anyone else who's part of the family here. Appreciate your interest and look forward to seeing you soon.
Scott Kirk: 42:10 Thanks.
Operator: 42:12 Thank you all for joining today's call. You may now disconnect.
