Lancashire Holdings Limited

Alex Maloney - Group CEO Paul Gregory - Group Chief Underwriting Officer and CEO, Lancashire Insurance Company (UK) Limited Elaine Whelan - Group CFO and CEO, Lancashire Insurance Company Limited

Xinmei Wang - Morgan Stanley Kamran Hossain - RBC Thomas Seidl - Bernstein Andreas Van Embden - Peel Hunt Ben Cohen - Canaccord Philip Kett - Macquarie Andy Broadfield - Barclays Jonny Urwin - UBS Frank Cawood - Frank Cawood & Associates

Okay. Thank you, everyone.

Thanks for dialing in today. I am pleased to report that we grew fully converted book value per share by 3.5% from the fourth quarter with an excellent combined ratio of 67.1%.

This brings our 2015 year growth and fully converted book value per share to 13.5%, and that’s excluding any impact of the warrant exercises. Our full-year combined ratio is 72.1%, and we believe this demonstrates the quality of our underlying book.

Every line of business we underwrite at Lancashire or Cathedral, made an underwriting profit in 2015. We therefore wave goodbye to 2015 absolutely delighted with result which we believe is more than acceptable in this challenging time in the insurance industry and the current near-zero yield investment environment.

We had a positive start to the year with both, Lancashire and Cathedral receiving excellent support from our brokers and clients. The rating environment is where we thought it would be.

So, there is no surprises and the group has purchased excellent reinsurance protections. So, I think we are in good shape for 2016, although again this will be very challenging.

Kinesis, our third-party capital manager, run by Darren Redhead, continues to attract new investors who want to partner with someone who underwrites them, not just deploys capital. We run a small fund that matches to the current market opportunities and believe our returns demonstrate the focus on quality underwriting, and offering bespoke products offer our investments a better opportunity for yield.

This is very much in line with the group strategy of quality returns, not just capital deployment for the sake of it. In terms of investor returns for 2014, we have generated a return in excess of 15% on the capital deployed for Kinesis.

We expect the same for the 2015 draws. And although these numbers are net of fees and losses, it should also be noted that these returns are not enhanced by any leverage.

It’s a fascinating time in our industry. Every day seems to bring news of poor results and reserve strengthening for some of our larger competitors.

As we have said, many times, there are distinct advantages of having a short-tail business where you control your underwriting and expenses. We also believe coupled with -- conservative investment strategy is exactly where we want to be.

We do not believe that big is always beautiful. I wouldn’t try to call the bottom of the market as no one really knows where the floor is until it starts to harden but there are signs that not all is well, particularly if you look at the industry results for a year where not much has happened.

You have to wonder what results would look like with any kind of normal loss experience. Maybe, I’m in the minority but I believe that once capital is impaired, things will change quicker than people think.

You have to be in good shape once the opportunity comes in order to take advantage of it. And our strategy at the moment is about capital preservation and patience.

So, we continue to trade on. Our strategy is clear, and we continue to focus on areas where we feel we can add genuine value and stay away from speculative opportunities.

Again, I would like to thank our shareholders for their long-term support and also all the people that work for our group, as we continue to navigate these choppy waters. And I hand over to Paul.

Thanks, Alex. 2015 has been a relatively benign loss year for the industry.

Other than the exception of energy, loss activity across classes has been light, which has helped the market produce respectable underwriting returns. We’ve also been able to produce a more than respectable combined ratio of 72.1% for 2015, which in any year should be viewed as a success.

Pleasingly for us, the underwriting profitability has been delivered from all our platforms, and all classes underwritten by the group have contributed to profit. In what has been a challenging market environment, I’d like to thank all the teams across the group for delivering yet another year of market-leading underwriting results and successfully defending our core portfolio of business in the face of fierce competition.

As the benign loss environment continues and with no obvious or significant retrenchment of industry capacity, the soft market endures. In some areas, the pace is slowing but rates continue to fall.

In such an environment, our focus is on underwriting profitability, defending our core portfolio, and then managing the volatility as underlying earnings are less in this weakened environment. We’ve been really pleased of our trading at the 1st of January renewals across all our lines of business.

Whilst the writing environment remains challenging, it was broadly in line with our expectations. And importantly, we’ve been able to maintain those client relationships and positions that we aimed to.

Kinesis deployed marginally lower limits at one-one but has expanded both, its client and investor base. And Kinesis continues to contribute nicely to group ROE and remains ready to deploy more limits when the opportunities arise in the future.

The group also renewed a significant number of reinsurance protections at one-one, and were able to continue longstanding relationships with reinsurers whilst improving the balance sheet protection with broader and more comprehensive coverage, helping us to manage our portfolio volatility. Our outlook for ‘16 is for continued softening across most lines of business, albeit at a somewhat slower pace.

But we remain confident that our disciplined underwriting approach, combined with our strong client and broker relationships will continue to deliver outperforming and market-leading underwriting returns. I’ll now pass over to Elaine.

Thanks, Paul. Hi, everyone.

Our results are on our website as usual. It was another relatively quiet quarter for losses and further favorable development on our prior accident year reserves with a strong performance in the fourth quarter.

With a loss ratio of 18.3%, an accident year ratio of 30.6%, and a combined ratio of 67.1%, we produced an ROE for the quarter of 3.5%, bringing it to 13.5% for the year, after adjusting for the impact of warrants. Cathedral contributed 1% to the ROE for the quarter and 3.4% for the year, and Kinesis contributed 0.8% to ROE for the year.

There is a reduction again in our gross premiums written this quarter compared to last year. That reduction comes mostly from our energy book and our Lloyd’s platform.

In our energy book, reduction is driven primarily by multi-year deals that we wrote in 2014. Although the fourth quarter isn’t typically a major renewal period for energy book, of the $7.6 million of offshore energy multi-year deals were written in Q4 2014 and aren’t up for renewal yet.

The remaining reduction in that line of business is mostly due to risk exposure reduction, reflecting the impact of oil prices. There is also a reduction in the energy book and our Lloyd’s platform for the same reason.

Overall, in 2014, we wrote $180 million of non-annual deals which were not due for renew in 2015. We earned just over $100 million from those contracts over 2014 and 2015, and we’ll have about $40 million of earnings from its settlement in 2016.

In the property cat and energy offshore lines of business, we wrote $35 million of 2014 multiyear deals that are due to renew in 2016. With only about $35 million of multiyear deals written in those lines in 2015, I therefore expect the 2016 top line to be much more stable compared to 2015.

There will undoubtedly still be pricing pressure, particularly in the energy book, so clients will continue to rationalize their insurance budget but there are always some new business opportunities around. Acquisition costs for the quarter and year are in line with our previously communicated expectations of 25% to 26%.

With an increase in the ratio year-on-year, given the changes in our reinsurance program and business mix 2015, in addition to impact of profit commissions received in 2014. On losses, we had a few smaller losses.

So, as I said, it was a very light quarter for losses and we had more favorable development on prior accident years with most of that again coming from the 2014 accident year. As in previous quarters, there were no specific drivers of the releases, just general IBNR releases due to lack of anything reported coming through.

The level of reserve releases this year is not indicative of a change in trends or expectations or methodologies. We reserved the best estimate for large losses and events and had loss attrition, we just didn’t have much reported coming through in 2014.

We had a small loss on our investment portfolio this quarter, as you’d expect, given the Fed’s decision to raise rates. We’ve been prepared for that for a long time though, so our short duration positioning and interest rate hedging strategies meant that the impact of increasing yields was minimal.

Our loss for the quarter was 0.2%, bringing us an overall positive return of 0.7% for the year. So far in 2016 with the volatility seemingly ever present, our portfolio is essentially flat.

For the immediate future, we’ll continue to focus on interest rate risk but may hold a little more cash to provide extra liquidity and also to take advantage of any opportunities that may arise. Otherwise, our duration positioning and risk asset allocations are unlikely to change significantly in the near-term.

On KCM, we earned $5.56 million underwriting fees for the year with $1.5 million of that falling in fourth quarter. The loss of $0.2 million in the fourth quarter of 2015 was the result of some mid-sized claims and the property risk and offshore energy books in relation to the January 2015 underwriting cycle.

We’ve received $1.8 million in the first quarter of 2016, in relation to the 1/1/2015 underwriting cycle with further PC expected later in the year. KCM’s expenses are reflected within Lancashire’s other operating expenses and the fees are included in other income.

In terms of actual returns to investors, we currently expect around 50% return in the 2015 underwriting year draws. Remaining other income as managing agency fees and proper commissions from Cathedral, these tend to be higher in the fourth quarter as underwriting years close out obviously depending on underlying performance.

$3.4 million was received in the fourth quarter and $7 million for the year. Our G&A ratio was higher than normal this quarter due to a combination of the year-end bonus pool adjustment, additional compensation expense for the Cathedral execs who are leaving the group, and more earned premium.

In 2014, we had $8.4 million of amortization expenses in relation to Cathedral acquisition. If you adjust for that and the additional compensation expense in 2015, the year-on-year dollar spend is roughly the same.

I’d expect our run rate on G&A to continue around those levels for the coming year. The movement in our stock compensation expense is due to vesting and performance assumptions and it can move around a bit quarter-on-quarter.

Our financing expenses were favorably impacted by the mark-to-market on our interest rate swap. Ignoring the swap, our financing costs tend to be around $4 million a quarter.

We have a tax credit this quarter and for the year which is a bit of a one-off benefit due to a group release recovery on profits on pre-acquisition underwriting years at Cathedral. The acquisition completed in November 2013 and since then the group has been restructured a bit.

So, I would expect tax impact to be smaller going forward. For those looking for guidance for models, our tax charge or credit will obviously be driven by underlying performance, but I’d expect it to be immaterial to results going forward.

Finally, on capital, we’re declaring a final ordinary dividend of $0.10 per share that’s about $20 million in total. With the 2015 interim and special dividend, total capital return for the 2015 financial year was $218.3 million which is 128.6% of comprehensive income and a dividend yield of 11.9%.

As we said last quarter, we’re targeting around $1.35 billion to $1.4 billion of capital for 2016. So, we’ll continue to monitor that closely as the year develops.

With that I’ll now hand over to the Operator for questions.

Hi, good afternoon. I have two questions.

My first is on capital management. You’re taking down your net exposure by buying more reinsurance and your P&L has also reduced.

Could you link that with respect to how you think about capital management in 4Q 2015, and also to that $1.35 billion to $1.4 billion number you gave for 2016? That’s my first question.

Secondly, my question is on the loss ratio. You’ve guided towards 34% attritional losses.

Would you be able to update us on how to think about that given the increased reinsurance cover at Cathedral and Lancashire please? Thank you.

I’ll start with the loss ratio first. 34% is what we’re guiding to.

And we have had a few more mid-sized losses coming through this year. So, there would be no reason to think about changing that guidance for our attrition.

We’ve had a few losses [indiscernible] impact on the loss ratio but nothing that significant. And when we back those out, we still end up kind of thinking about 34% is about the right level.

And you might want to price adjust that going into 2016 a little bit, but as you heard, the rate of price change declines is going a little bit slow. So, I wouldn’t adjust that too much.

On capital management, our primary capital driver is A.M. Best.

So, we do a bit different from some of the UK companies that you’d be following. So, we look at how much capital we need to keep the A.M.

Best happy and then we stress that and then we put a buffer on top of our stress test as well. If we have anything left after that then we’ll see if there’s other opportunities.

If there aren’t any, then we return that. We do have a bit of a buffer in there coming into this year just given the market environment and hopefully that gives us some opportunities for this year.

Okay. Thank you.

And just, would you be able to make that to the capital around 4Q and dividends around that as well?

In what regard?

In terms of how you thought about the capital returns in 4Q?

Well, we did do a big capital return at our November board meeting, and our outlook for 2016 has been pretty much bang on this year. So, that’s why there’s no additional special there.

We have bought more reinsurance; we have brought P&L down. So there may be a little bit more of a buffer in there but we’re quite comfortable just to claim our orders and see how the rest of this year goes.

Two questions, the first one is -- I guess it’s a two-part question but it’s on Cathedral. So, you set out you had $5.6 million of expenses in Q4 related to I guess payments to the old CEO and CFO of Cathedral.

Is that 5.6 totally for paying them off? That’s kind of part one.

And the second part, in terms of staff morale at Cathedral, are you needing to pay any kind of retention bonuses in order to keep people happy, keep people at Cathedral? And if so, how much do you think that might cost this year?

And the second question, just coming back to some comments that Alex made about being near the bottom of the market and things might move quite quickly, it sounds like you have a scenario in mind. Would it be possible to kind of share with us what will change the market from here because it seems like it’s going to take an awful lot?

Kamran, I’ll start on two and three. I think on the Cathedral morale thing, it’s -- personally, I’d say it’s more like an industry morale.

So, I think most people in the industry at the moment, there are pressures everywhere and everyone is looking around the market and everyone understands it’s a difficult environment. So that’s just a general industry thing.

We have retention, things in place for everyone within the group. It’s not just a Cathedral thing.

And there’s various things that we have to do to keep our best people over the time and sometimes we can do that and sometimes we can’t. And obviously the pay and rations is one part of keeping people happy.

I still believe we have a very good group of companies with good books of business. And if people leave here to go somewhere else, the environment doesn’t really change.

So, I think it’s about having a blend of money, happiness. But whether you like it or not the market environment doesn’t change wherever you are.

I don’t believe we have a massive problem. Obviously, it’s bonus time here.

So, if we were to lose anyone, like we do every single year, you probably would expect to lose people now just because everyone’s about to get their bonuses. But that’s kind of normal business for us.

And we have record of demonstrating that this business is not built on one person. We have a number of things in place.

I’ll tell you the rest about that. I think on the general market comments, I mean it’s incredibly hard to call the bottom of any market.

I’m definitely not saying this is the bottom of the market. I suppose my comments are really based around, if you look at people’s results for ‘15 including ours up to a point in a world where on the underwriting side, not much has happened at all.

I don’t think they look that sparkling for the industry. And then, if you just see some of the behavior that’s happening now, it does appear that people are really thinking quite cautiously about can they give an another reduction.

We are seeing some kind of pushback. And that kind of feels like to me at the end of the late 90s, that’s what happened.

People did slow down a bit and people did question things a bit more. That’s not to say the market’s going to go up, but I’m still in the minority that thinks that the second you get some meaningful losses and you overlay them on the industry’s results, there is just not much margin for error.

So, people could be in the red quite quickly. And then if history repeats itself, which it probably will, you’ve got a number of events quite quickly.

And then you just look at the investment markets, there’s just so much going on. I think you’d go from -- I think the industry could go from looking vaguely okay to pretty awful quite quickly.

And then you just overlay the human element of any market. So, our strategy, as we said earlier, at the moment is all about trying to be there for that market whatever that may be.

And I think we all agree it won’t last very long when it comes. And you have to be in the best shape you can to take advantage of it and that at the moment whether it’s investing or underwriting, means capital preservation.

You’ve got to have the capital. You’ve got to be ready to go.

You’ve got to be in the best shape. That doesn’t mean we wouldn’t lose money.

We are part of the market. We would surely expect to lose money in a very large event.

But if we’re in good shape, we think we could take advantage post-loss. So, you have to be patient; it’s quite boring.

We’ve been saying it for a long period of time. But I’m more interested in trying to make more money in the future than what I am today because it’s incredibly hard trying to do anything today and reaching for any kind of yield now; there’s a huge risk associated with that.

That was fantastic. I really appreciate the really detailed response.

Thanks very much.

On the G&A question, the number that you are quoting I think is the overall increase in employee salaries and benefits. So, there are a few things in there, one of which is the packages for people leaving, the rest of it is an increase in headcount and just Q4 bonus adjustments on both Lancashire and Cathedral sides as the results start coming through.

So, there is a bit more lumpiness around our G&A quarter-on-quarter now because of the way the bonus pools work. But if you go back to the guidance and the overall number, if you look at where we’ve been last year and this year and adjust out the amortization for the one-offs, you get about $100 million to $103 million.

I think that’s about the right level for us.

Three questions, one on the top line excluding multi-year deals. I think I understand you have been thinking 12.5%, now given the rate reduction is in line with the expectations and excluding the multi-years that are renewing this year is basically what we should think in terms of top line reduction is in the order of 10% to 15% again this year?

First question. Second question, attrition loss ratio; I hear your comment on the guiding 34% but with the rate pressure being 10% and already attrition rising last year, of course I appreciate there were some large losses, but still, why should we not think that the falling rates should bring up the underlying loss ratio?

And the third question is, I noted your share of IBNR reserves has gone up. Question, is this an indication for being more conservative on reserves and what is the driver for this?

Right. Thomas, I’ll take the first one and then the other two I’ll pass over to Elaine.

On top line, we’re pretty confident, albeit we think that the rating environment will still soften this year. The fact that it’s slowing down and the fact that we’re pretty much back to our core book, whether that’s Cathedral or Lancashire, we’re pretty confident that we can keep it relatively flat year-on-year.

I think ‘15, particularly for the Lancashire book was probably the most challenging year we’ve ever had, mainly due to the oil price and all the effect that you had there. So, ‘15 was brutal.

We’re much more confident that ‘16 will be much flatter and obviously with the impact of the multi-years coming out, so we’re reasonably confident that there will be some new business around, not a huge amount. But as I said, we just don’t think the market is going to be as aggressive as what it was in ‘15 and we’re taking most of the pain from our energy account where clients just don’t actually have the money to buy as much insurance as they used to or they don’t need as much because their values have reduced.

I’ll just add to that. I think the impact of the multi-years is more normalized now as compared to when we went into 2015 off of 2014.

So, it’s about the same level renewing and non-renewing, so it’s much more stable. On the loss ratios, as I said, still pretty comfortable with the 34%.

We’ll see a little bit of price adjustment on that. As Alex has said, we’re pretty much down to core book now.

We’ve done a lot of work around reinsurance and we’ve done a lot of work adjusting our books. I’m pretty comfortable with that attritional guidance.

Could you repeat your third question for me because I didn’t catch it?

The third question was on the reserves. I noted in your commentary that you have a higher share of IBNR as part of your reserve.

But the question is, is this an indication of being more conservative now or what is driving the higher share of IBNR reserves?

Some of that is just timing really, it tends to kind of be in the 30% to 35% range. So, I don’t think there’s anything necessarily to read into that.

It’s what happens towards the end of the year, we might have a higher percentage of IBNR.

Maybe one follow-up on the top line, if I may? Do you have a flavor for how much of this underlying 12.5 is driven, as you say by lower exposure, as opposed to giving up market share because of price?

Can you gives us a sense; is it 50-50 or is it mainly lower exposure or mainly market share?

So, in that one, did you say -- I didn’t quite get what you said there. Sorry.

I heard your comment that -- it seems to be that a big driver of the lower top line in energy is simply the lower exposure driven by the oil price. My question was could you give us an indication; is that basically 50-50 off the top line shrinking or is it the main cause or is the top line shrinking mainly because of market share reduction due to the price pressure?

Yes. Hi, Thomas.

I’ll take that. So, excluding the impact of multi-year, which obviously did have an effect on energy, the reduction in premium is effectively -- you’re right, it’s 50-50.

There’s about 50% that’s driven by the softening market and the rates that have come off and then about the other half is reduction in exposure/demand with clients buying less insurance because they’ve got lower values at risk or just trying to save money.

I’ve got a few questions around Cathedral. The premium volumes declined quite materially in 2015.

I think you mentioned around 13% year-on-year. How much of that was pricing?

Because it seems to me that pricing pressure at Cathedral was much higher than I would have expected for the type of book that Cathedral writes. It’s sort of small, medium-sized enterprises in the U.S.

Yes, it’s very property focused but it’s property insurance, not reinsurance. And it’s all very much Midwest.

I’m just surprised about the high level of rate declines. If you could just comment around that please?

And then the second question around Cathedral is now that there’s been sort of a change in management within Cathedral, is there an opportunity to integrate Cathedral more within Lancashire; could you just maybe discuss what your plans are going forward?

So, just a general point on premium, I think Paul’s got a few more details as well. I think we would expect prudent underwriters in this environment in the classes of business that we underwrite, coupled with the commodity issues to reduce their top line.

I would probably question any business that was increasing their top line or -- it’s very difficult to even keep your top line flat in 2015 because so much happened. And yes, part of their book less immune to the rate decreases but other parts are very much like in the sort of standard lines of business that we write as well.

So, Cathedral is much as Lancashire are in the same market. And so you’ve of course got the right pricing pressures and those guys are good underwriters; they’re not just going to write business to maintain their top line.

So, that doesn’t surprise me at all. I think on the front of integration, I think we’ve made some changes.

I am sure going forward, if there’s things where we believe as a company that we can change things that make sense, we will do that. But there is no grand plan to do anything dramatic because quite honestly, we think we’re in great shape for 2016 already.

We’ve got good business at Cathedral, good business at Lancashire, good business at Kinesis. So, I don’t feel the need to dramatically change things.

If you think about some of the big companies and then their integration plans or the reason that they’re in M&A is generally because they’ve got too many people in the first place. There has never been too many people at Cathedral.

There’s not too many people at Lancashire. There’s no expense synergies on a big enough scale that we would consider doing that.

And these things are incredibly unsettling. So, there is no way we would do that when we’ve got two great businesses at the moment.

So, we want people focus on their day job and making money for our shareholders, not worrying about their jobs. There’s far too much of that going on in our industry at the moment.

But look, if there are things where we can work closely together -- what’s quite fascinating about the industry at the moment is when the brokers come through the door, I’ve never seen the brokers as joined up as what they are and I think as a group we’re incredibly joined up already. If we can get more joined up on areas that make sense, if we can drive more value about group reinsurance purchasing or things like that, of course, we would look at that.

But we’re definitely not going to do things for the sake of it because that would be illogical and too unsettling.

Andreas, just to give you a little bit more flavor on the Cathedral numbers, I think if you look at it in the class of business that’s written there, if you take the reinsurance book reduction, that’s broadly in line with the rate reductions in the market. So, it’s primarily driven by rate.

If you look at something like marine cargo, that’s come off a bit. But you’d expect a commodity driven book, that’s to an extent driven by price but also demand.

You have also got the energy part that fits in 30/10 which plays out to the same story that we’ve seen at Lancashire. On the other lines, it’s pretty much driven by price other than property D&A.

You’ll recall the portfolio that’s written in 2010 is approximately half binders. That’s been very stable, both on demand and price but the other half is open market D&A that has quite frankly been very, very competitive.

So, that’s driven by price but also some prudent underwriting by the team that I think has just become a little bit too cheap. Overall, the 13% is primarily driven by price but there are a few other small moving parts within that.

I wanted to ask two things I guess related to premium. The first was could you maybe just say a bit more about your experience in the January renewals maybe in the context of the rating index that you provide?

I guess that was the Q4; when we see that for Q1; would you expect an improvement on the sort of last number that you gave? And the second question was in terms of the outlook for net earned premium.

Obviously earned premium decline lagged the gross written premium decline in 2015. Would you expect that to reverse in 2016 and can you give us some indication as to how big that effect might be, given all the different multi-year deals and everything else going on?

Ben, I’ll take the first question and then Elaine the second. So, at one-one pretty much all lines were broadly in line with expectation when it came to rating, most classes were down.

But pretty much where we expected. So, if you look at the treaty portfolio, and this applies to both Lancashire and Cathedral platforms, the U.S.

was broadly in line with what you’re seeing in the press which is 5% to 7.5% off. International was a bit more competitive, probably closer to 10% to 15% in some instances.

The energy book was around what we saw across the whole of last year, so 10% to 12.5% off, absent a couple of loss affected deals which will help bring that up a little bit. But no real government business renewing at this time of year; that’s later in the year.

Terror book, again broadly in line with what we saw last year, circa 10% off and the same applies for aviation. So, the trend is broadly similar.

There’s definitely a slowing of pace on the treaty side, particularly in the U.S. And it will be interesting to see as we come up to one-four, one-five, how the market continues.

And in terms of net earned premium, as you’ve heard, we think our top line is going to be more flat going into 2016. Our net premium earned to net premium written for 2015 is about 118%.

That should come down a little bit, but not too drastically.

I just had a couple of questions, firstly in terms of credit risk. I note that the group’s exposure to BBB rated cash and fixed income securities has risen from 9% of the total to 12%.

I was wondering what the reason for this was. Is it a change in investment strategy or perhaps a downgrade of investments that have already been held?

Secondly, on capital requirements, you’ve mentioned a capital buffer a few times. I was wondering if you’d be able to quantify how much that buffer was; whether it’s increased recently, just a bit more color on that please?.

On the first one, those percentages do move around a little bit and sometimes it’s just driven by the dividends we’re paying out. That makes a big difference when we pay a big dividend to the percentage in the portfolio and even in terms of just what we liquidate to pay the dividend and then we rebalance afterward.

So, I wouldn’t read an awful lot into that. We don’t disclose our capital buffer.

We do have a little bit more than we would typically have at this time of year but not enough that it would make us want to think about a special dividend.

Just one question please, just around your tax position. I’m conscious there is obviously lots of broader discussions around tax and taxability.

Some years ago I think you [indiscernible] UK which had a tax. You were given a special dispensation, I think which I think has expired.

Could you just give us an outline of where you are on your tax position and where you see the mid to longer term future from your taxable position please?

In terms of future, I’d love to have the crystal ball that tells you where the tax rules are going. They’re changing all the time.

We do monitor them. And they’re just constantly moving.

We did move over to the UK taxes a number of years back with the CFC exemption which was then converted. So, that’s all quite stable.

In terms of the future, if you’ve got any insight, I’d love to hear it.

I guess that’s not my expertise. Just there are no discussions in place or anything you’ve had recently with [indiscernible]?

No. We look at domicile quite regularly.

It’s kind of in a rolling cycle with the board that we have those discussions but there’s nothing in the pipeline at the moment.

Just two quick ones from me today. Firstly, back to your capital buffer, I’m afraid.

It’s interesting to hear that you’re holding a bit back for 2016. I’m just wondering do you feel like you’re just gearing up for a big event to take advantage of it or are you thinking about other things, potentially like convention al bolt-ons or any M&A?

And then secondly, a bit more of a philosophical question is where does the price of oil need to rebound to for things to look a bit more rosy for you guys? Clearly 2015 has been a pretty tough year.

But if I gave you one wish and you could tell me what the price of oil you’d like, as a bare minimum I suppose, what would that be?

[Indiscernible] dollars a barrel. On the first part, when we think about capital, obviously there is the mechanics that come out of the machine.

So, we look at our exposures, we’ve got about -- we buy our reinsurance program, and Elaine runs her numbers and then we start the debate. At that point there’s a huge amount of debate, particularly at the board at the moment about the world in general, the insurance environment in general and we just feel it’s prudent to hold a little bit more capital than what we would do.

I mean, we’re definitely not sitting on a huge special dividend that we could do tomorrow but we just feel it’s prudent to just have a little bit more capital. We haven’t squirreled that money away for some transaction.

As we said before, we would always be very cautious about any transaction. That’s not to say we wouldn’t do it, if the opportunity came up.

Equally, if there was a market moving event, the amount of capital we have here additional is not -- hopefully we would need a lot more capital than that to take advantage of the event. But we just feel -- it’s always a judgment call, but we just feel at the moment, there’s quite a lot going on in the world so we just want to be a little bit more conservative.

The oil price has been brutal. So, if you look at the last 10 years, this Company has made a huge amount of money out of energy insurance and our clients have made a huge amount of money out of the oil business because the oil price has been so high.

And that’s changed rapidly and obviously we’ve taken that pain along with our clients. I don’t think anyone knows what will happen to the oil price, although I still believe it’s a cyclical market.

And if the oil price increases, our insured assets will increase in value and they will need more insurance. And obviously we will ride that wave as well.

But until that happens, I think we’ve taken the majority of the pain already in 2015. Our clients are incredibly good at themselves managing the cycle, and they’ve taken some drastic action.

And obviously part of that action involves what they spend on insurance. So, I don’t believe it will get much worse from our point of view from this point.

And any increase in oil price over time, we should benefit from that because our customers will need more insurance. But until that moment comes, I can’t see much changing.

Hello. Congratulations again I think on a very good quarter in the midst of what would be potential turmoil for a lot of other insurers.

And Elaine, particularly on the conservative portfolio, can I just have a little remark and question? I think it’s really gratifying as a shareholder to see reserve redundancies.

There’s a lot of talk about the industry in general running out of any possible, I mean not necessarily actuarial redundancies, but just having a little more conservative nature of how you reserve. I think that’s encouraging that we’re not seeing a declining slope in those things.

So, any comments on that?

I think as we’ve said many times, running a short-tail on an uncomplicated business does help you. And I think if you look at some of the reserve and issues others have at the moment, that’s always very hard reserving a casualty book.

I think you do have to wonder, don’t you? Let’s be honest, if some of those people have been raiding the cookie jar and there’s not much -- there’s not many cookies left.

So, I think our reserves will always be easier, you would think. We’ve always taken a conservative view on reserves.

We definitely hope not to have to strengthen those reserves but for me I think it’s quite an interesting time in the industry where there doesn’t appear to be a number of large companies propping up reserves. And again, as I said earlier that kind of feels like the past.

So, we’ll wait to see what happens there. And I think particularly when you look at energy, it’s fascinating, what’s happening now.

There’s a lot of big companies that are going to have to do a lot of things to get the show back on the road. So, we’re quite happy being small at Lancashire at the moment, nice and simple, hopefully keep our head down and hopefully things improve.

Great. From this shareholder, keep up the good work.

Thank you.

Thanks for your time and questions. And we’ll talk to you next quarter.

Thank you.