Lancashire Holdings Limited

Alex Maloney - Group Chief Executive Officer Paul Gregory - Group Chief Underwriting Officer and Chief Executive Officer, Lancashire Insurance Company Limited Denise O'Donoghue - ‎Head of Investments & Treasury Natalie Kershaw - Chief Accounting Officer

Xinmei Wang - Morgan Stanley Olivia Brindle - BAML Jonny Urwin - UBS Andreas Van Embden - Peel Hunt Kamran Hossain - RBC Joanna Parsons - Stockdale Securities Ben Cohen - Canaccord Genuity

Okay. Thank you, everyone.

Thanks for dialing in. Today, we have some different people on the call.

We have Paul Gregory, Group CUO. We have Denise O'Donoghue, who is Group ‎Head of Investments and we have Natalie Kershaw who is Chief Accounting Officer.

And unfortunately, Elaine Whelan can’t join us today. She has had [indiscernible] for a personal matter.

I’m pleased to report a strong set of results for our fourth quarter where our underwriting investment strategies have continued to add value for our shareholders. Our full year return is an excellent achievement in challenging markets.

With return on equity of 2.8% and a combined ratio of 79% for fourth quarter, our underwriting result remains healthy against a backdrop of continuing weakening of risk pricing and overcapacity in all classes of business. Our investment strategy was put to the test this quarter with the expected increase in US Treasury yields, so again we have come through that test and we are happy that we can demonstrate we have the right investment strategy for our business.

Our 2016 return on equity of 13.5% is an excellent achievement and remarkably constant with the return we generated in 2015. I said at the start of 2016 I felt we had the right underwriting and investment strategies to navigate our way to a sensible risk-adjusted returns for our shareholders, which we have delivered.

We have maintained our relationships with our core clients, reduced our risk levels and proved we can recruit excellent people. So as an executive team, we’re happy with the progress we have made in 2016.

Our 1 January renewal was in line with our expectations. We renewed our core portfolio of clients as we expected we would do and we are seeing new opportunities through the new underwriters we’ve hired as well as our existing underwriting teams.

The quantum of rate reductions for reinsurance business has definitely slowed, but specialty lines can be patchy, which is disappointing. It just means we need to listen to our underwriters and continue to navigate our way through this difficult part of the cycle.

We have renewed most of our larger reinsurance placements at 1 January. We have continued with our strategy of reducing risk through purchasing of low price reinsurance across all lines of business.

We have in some cases broadened coverage at reduced premiums but we have, if anything, chosen to spend a similar amount on insurance in 2017 as we did in 2016. We think the strategy makes sense for the current conditions we find ourselves trading through.

2016 was a year of operational change for us, particularly at our Lloyd’s business Cathedral. I’m delighted we’ve been able to attract so much new talent to the group and very much look forward to working on new opportunities with our senior leadership team.

We still have lots of work to do, but we fundamentally won’t change our DNA. We continue to focus on generating the best risk-adjusted returns that we can for our shareholders.

We see little change to the overall outlook for 2017. So, our strategy remains constant.

We continue to see declining pricing with underwriting margins thin in most, if not all classes of business. Our view hasn't changed, in that we do not believe the pricing environment will improve until capital was impaired and capacity decreases.

So, our story is consistent as we see no immediate change in the underwriting environment, but we have demonstrated that Lancashire, Cathedral and Kinesis business models continue to produce excellent results for our shareholders in challenging times. Finally, I would like to thank everyone who worked for our company for their huge effort in producing these results.

I’ll now pass it over to Paul Gregory.

Thanks, Alex. At the start of 2016, we said our underwriting results continue with our core portfolio business maintain underwriting discipline and purchase adequate reinsurance protections.

The aim of this strategy was to ensure as best we could that our underwriting profitability was maintained throughout the challenging market conditions that we face. Throughout the course of 2016, I’m pleased to say that we were successful in achieving all our aims.

And as a result, we've been able to produce combined ratio of 76.5%, which in any environment is more than respectable. We do appreciate that the loss environment was not overly testing, albeit natural catastrophe losses were up compared to 2015 and there continue to be significant losses in prior-year developments in the upstream energy market g.

Given these are two of our most prominent business lines, it’s pleasing that we’ve still been able to generate a combined ratio in the 70s. This certainly gives us a degree of comfort in a continued soft market.

We have gas in the tank to help us navigate through the cycle. Unsurprisingly, given the changes at the Cathedral underwriting teams during the year, there’s been a focus on how we would perform and retain business.

I think the best demonstration of this is within property reinsurance. The entire team has been replaced during the past 12 months and the premium for this portfolio in 2016 has reduced by less than 5% against the portfolio RPI of 94%, demonstrating that the book has simply been renewed.

More pleasing, at 1/1 this exact same trend has continued. Simply put, it was just a normal renewal season.

Premium and other areas of the Cathedral book such as energy, marine and aviation did experience a larger year-on-year reductions, but these are teams that were unaffected by personnel changes. So, the changes are purely as a result of market conditions and disciplined underwriting.

Premiums across the rest of the Lancashire platforms were also in line with expectations as we maintained our core portfolio across all lines of business. Premiums were marginally up year-on-year, but this is primarily a function of renewal timings on non-annual multi-year contracts.

At 1/1, there were no real surprises. The market behaved in line with expectation.

Across most lines, the pace of change has slowed and there seems to be a realization that there really isn't much margin to cater for any significant level of claims activity. That said, as we’ve always stated, until capital retracts, there will be no material improvement in market conditions.

We remain well placed to weather further rate softening if we stick to our disciplined underwriting philosophy, given the underlying profitability of our portfolio. We’ve been really happy with how we’ve performed at 1/1, both at our inwards portfolio across the group and also the reinsurance protection we’ve been able to secure with long-standing trading partners.

Our broader and more comprehensive reinsurance programs means that our risk levels are down again, allowing us to carry more of a capital buffer than we typically would at this point of the year. We continue to show our underwriting discipline in declining business that does not make sense.

This is something we always will do in order to maintain our underwriting result. And we've also taken the decision to exit the contingency cost of business that was underwritten within Syndicates 2010, which has now been placed into run-off.

Our underwriting teams across the group have once again proven their ability to underwrite profitably whatever the market conditions which provided us with confidence for 2017 and beyond that whatever challenges come our way, we continue to provide underwriting results that deliver strong and acceptable returns to our shareholders. I’ll now pass over to Denise.

Thanks, Paul. Hi, everyone.

We had a few losses in the last quarter, although nothing of any great significance. We also had some moving parts in our prior accident year reserves, but overall still some decent net favorable development for the quarter.

With a combined ratio for the quarter 79% and 76.5% for the year, overall underwriting performance continued to be pretty good considering the market conditions. While we had a mark-to-market loss on our investment portfolio in the quarter with increasing yields, our risk assets performed well and provided good diversification for the portfolio.

A return of negative 0.1% for the quarter is a really good result in a volatile market. Our ROE for the quarter was 2.8%, bringing us to a full year ROE of 13.5%, which is exactly the same trend as we produced last year after adjusting for the impact of warrants.

Cathedral contributed 1.3% to the ROE for the quarter and 3.6% for the year and Kinesis contributed 0.3% and 0.8% respectively. The contributions from our three platforms are consistent with our contributions last year, further demonstrating our ability to manage the current stage of the cycle.

Our top line and net premiums earned were both in line with Q4 last year. There were some minor reductions in gross premiums written in a few lines of business due mostly to market conditions and the timing of renewals, but these were offset by adjustments to prior year contracts, primarily in the energy book due to changes in exposure.

As these are prior year, we see the benefit of those earnings coming through almost immediately. So, our net earned premiums got a little boost from that.

While our 1/1 renewals went well, as we said previously and as Paul noted, we expect the current pricing pressure to continue in 2017. We therefore expect our top line to come off in 2017 although there are always some opportunities around to write new business.

Multiyear and non-annual deals do always have a little bit of an impact, but we expect this to be much less than in some prior years. And we do still have the benefit of the contracts that have been written earning through.

Our acquisition cost for the quarter have popped up a bit, as driven by the increased reinsurance spend year-on-year, reinstatement premiums and general changes in business mix. But this quarter, energy book in particular saw some higher PCs coming through on offshore worldwide business.

That’s increased our acquisition cost ratio for the year. going forward, with our current business mix and reinsurance spend, we would expect our acquisition cost ratio to be around 26% to 27%.

On losses, as we said last quarter, we expect to have losses Hurricane Matthew. While there hasn’t been a great deal reported so far, we have booked some reserves at both Lancashire and Cathedral.

We’ve had a few other small property losses in the quarter, although as noted earlier nothing individually significant. As for last quarter, we had some deterioration on individual claims on prior accident years.

But we saw some favorable development on other claims and we again had general IBNR releases due to lack of any report coming through, particularly on the closeout of the 2014 year of account on Cathedral. Overall, there was net favorable development on prior accident years of 22.9 million for the quarter.

As noted and in line with expectations, given the Fed’s decision to raise rates, we had a small loss on our investment portfolio this quarter. We have been positioned for interest rate rises for a while and benefited from that.

We had positive returns on all our risk assets, plus our interest rate hedge, but we’re very pleased with the way our portfolio has performed. We're happy with our current investment strategy and don't envisage any significant changes to that in the near term, although we will [indiscernible] out a little bit and we’re in the process of repositioning our hedge fund portfolio.

We expect to maintain our hedge fund portfolio around similar levels to last year. In other income, as we noted last quarter, we expected profit commissions from Kinesis to come through this quarter.

There is therefore an increase compared to Q4 last year, but the full year commissions are broadly in line with a slight reduction this year due to a small amount of collateral still held on January 2015 underwriting cycle. The remaining commission on that underwriting cycle should hopefully come through in the first half of 2017.

With a significant amount of 1/1/2016 underwriting cycle already released, we expect to receive most of the profit commission on that cycle in the first quarter and that should be just under 6 million. Other income also got a nice boost from profit commission on the closeout of the 2014 year of account at Cathedral.

That was largely timing as the overall level of profit commission received was pretty consistent with the previous two years. We had a benefit from the decline in sterling in our G&A in the second half of the year.

Well, there has typically been an uptick in Q4 for bonus provision adjustments, our costs are lower than the fourth quarter in the prior year, primarily due to FX. With about 60% to 70% of our cost base in sterling, we have a meaningful savings in expenses.

As we noted last quarter, our stock compensation expense is impacted by vesting and performance assumption. But the significant reduction in the quarter’s expense compared to last year is largely due to the departure of certain Cathedral employees earlier in 2016 as awards granted on acquisition lapse.

We will see that trend continue for a few more quarters. We had another gain this quarter on mark-to-market of our interest rate swap as yields grow.

Ignoring the swap mark-to-market and any one-off costs, our financing costs still tends to be around 4 million a quarter. Lastly, on capital, as stated in our press release, we’re declaring a final ordinary dividend of $0.10 per share or about $20 million.

With the 2016 interim and special dividends, total capital returns for the 2016 financial year is 178.9 million which was 113.3% of comprehensive income and a dividend yield of 10.5%. As we saw last quarter, we’re targeting around $1.3 billion to $1.35 billion of capital to support the book we expect to write in 2017.

We’re starting the year with slightly more than that, which is bit of an insurance policy in the current uncertain political climate. We want to make we have enough capital to take advantage of any opportunities that come our way.

If we don't see those opportunities, we will turn that back – excess capital post win season. With that, I’ll hand it over to the operator for questions.

Hi. Good afternoon.

It’s Xinmei Wang from Morgan Stanley. I have got two questions.

My first one is on your comment about keeping more of a capital buffer to take advantage of any opportunities. And I was just wondering if you can tie that in with your comment on market conditions remaining the same because, on the one hand, with the capital buffer, it sounds like you could be more positive with regards to the outlook, but on the other hand there’s still commentary about pricing pressure etc.

And then my second question is on the capital impairment, the capital leaving the industry. And I was just wondering if I could get your thoughts on how you see that playing out this year because we’ve really seen a couple of instances in the industry of – the surcharges, for example, and whether you think that could start turning in the market this year with capital leaving the industry?

Okay. So, I’ll start and then if Denise wants to comes in.

So, I think it’s a fair comment to say that our capital position is better than we thought it would be. Clearly, Q4 was better than we thought it would be.

We renewed the major reinsurance programs that we do at 1 January and we brought in some coverage and that freed up some capital. So, I think our capital position is better than we thought it would be.

So, we have a larger buffer than we expected. On the question about what could we do with that capital, it would be lovely to use that capital to underwrite some opportunities and who knows when those opportunities are going to appear.

I suppose I would say, like I always say, as every day goes by, the margins get more difficult. And if you look at the whole industry, there appears to be cracks appearing now and a lot of the signs that you would expect are starting to come now.

Clearly, we don’t write casualty, but there’s clearly some problems with some companies with casualty reserves. And it just feels that the margins are so tight now, any kind of loss could push a lot of people into the red, start impairing capital and that’s when we’re going to see things changing.

So, I think what everyone needs to step back and remember, including our result which I’m absolutely delighted with, there have been no losses really. There have been midsize losses and energy losses and day-to-day losses, but there have still been cat losses and that’s why we still believe when those losses come, which they will, which is probably the only thing we can guarantee, that could change the market quite quickly.

And the people with good numbers with available capital can take advantage of the opportunity. So maybe we’re being more cautious than what we normally are, so that’s clearly always a good thing to have more capital than less capital.

And as Denise said, if you come through this year and we have no losses and there’s no cat losses and it’s another clean win season, we’ll look at our capital position again and assess that and what capital dividend we can pay to shareholders.

Okay, great. Thanks very much.

Hi there. Two questions from my side.

The first one, just linking into the discussion around capital, what are your thoughts on the ROEs that we should be bearing in mind at this point for the coming year? Obviously, you’ve talked about difficult market conditions and probably carrying more capital than you think is necessary, so what does that mean for the likely returns?

And then the second point around your reserving position, which I guess is usually quite difficult to assess from the outside, but one thing that you do show is the ratio of IBNR to total reserves, and that’s been trending down for the last couple of quarters, a reasonably steep reduction, I guess, at the full year compared to the second and third quarters. Just your thoughts on that and how you think about that would be helpful.

Do we see that as a trend? And what should we expect going forward?

Okay, Olivia. So, on the – we don’t give formal guidance on ROE.

Clearly, our returns are always going to be affected by loss activity, but we are still more than confident that we can – with the portfolio we have that we can provide an acceptable return for our shareholders. So, we are relaxed about that.

And the additional capital we are holding doesn’t really drag a huge amount on ROE, so we think it’s worth keeping. On the reserve part, from where I’m sitting, I’m really seeing it a different way, I don’t really think our position has changed massively year-on-year.

I’m not sure what numbers you’re looking at, but if you look at the…

It’s gone from 35.2% as a portion of total reserves to 34.6%. So, I consider that pretty consistent.

Yeah, I’m not sure we’d agree with that one.

Just if you look at the second and third quarter numbers, they were a fair bit higher. So, do you have a sort of – how do you think about that?

Do you steer that at all? Just given that you have, obviously, released quite a lot of reserves in the last few quarters, so is that being replenished to the same degree basically is what I’d like to understand.

Yeah. Look, quarterly reporting for us is something we have to do, but we don’t take a huge amount of notice of individual quarters just because things can change quite a lot.

And as we’ve said on numerous occasions to everyone that quarters can be bumpy and reserves can move one way or another. So, I would focus on the year-on-year more than anything if I was you.

That’s the way we look at it. So, an individual quarter to us is not really a fair reflection of the way we feel about the business.

But if you look at the year-on-year, we don’t think the change is material.

Okay, thank you.

Hi, guys. Thanks for taking my questions.

Two from me. Thinking a bit about the loss ratio, so firstly just on the attritional loss ratio guidance, so I know you guys have been talking about sort of mid 30s, does that still hold given the continued pricing pressure that we’ve seen come through, especially given I guess the premium base is going to be a bit more stable from here.

So, does that imply more pressure should work through? Secondly, just thinking a bit about the large loss and the cat float, in my model, I use about 7.5 points at the moment for large losses and for nat cat.

I’ve taken that down a touch over the last few years just because you bought more reinsurance, but I just wanted, in a sense, check that number and ask how you’re thinking about that as well. Thanks.

Okay. Denise will take that one.

Sure. Yeah, we still believe that the attritional loss ratio in the mid-30s is a good guidance on go-forward years.

And, unfortunately, we don’t give guidance on where we think cats or large losses will be. That’s pretty difficult for anyone to take a crystal ball.

So, we won’t give guidance on that. But definitely our attritional loss ratio is expected to remain stable.

Just on the second point, is it sensible to be taking that load down just given the amount of reinsurance you’ve bought in recent years? I don’t know.

How much should we be thinking about taking that down if that’s correct?

[indiscernible].

All right. It was worth a try.

Thank you.

Hello, good afternoon. Two questions from me.

First of all, what is driving the reduction in the gross PMLs? Is it the risk capital has declined on a gross basis pretty much across the board?

Secondly, on your Gulf of Mexico energy book, you’ve seen some growth in 2016. But if I just compare the portfolio at the end of 2016 versus 2012, it’s just shrunk to about a third in terms of premium volume versus 2012.

I’m just curious of what your expectations are for renewals in the Gulf of Mexico in the first half of 2017. And then, finally, on Kinesis, can you just mention what the AUM was, assets under management, at the end of 2016 and whether there’s any change in your underwriting strategy within the fund?

I guess we’ll go to Paul for the first two and then I’ll pick up Kinesis at the end.

Hi, Andreas. So, on the gross PMLs, as we’ve always said, if deals don’t make for us on the inwards, we’re not focused on the top line.

We’re focused on whether the deal makes sense. So, there were some things that – most things at 1/1 were pretty orderly, but there was the odd thing here and there that in our minds didn’t make sense.

So, at that point, we’re always perfectly prepared to walk away. Where we were fortunate is there were some other business that wasn’t quiet as PML heavy that we were able to write, which obviously is going to help premium levels in 2017.

Obviously, on a net basis, definitely you see the impact of revised reinsurance programs, broader reinsurance programs that we [indiscernible] purchased at 1/1. On the Gulf of Mexico premiums, they’re always going to be a touch lumpy just because if you recall and I think it was around 2012 we had started writing the multiyear deals.

The impact from 2015 to 2016, if you look at it, in terms of clients, it’s broadly the same. It’s just really impact around that.

It’s not really a change of appetite or anything like that. So, hopefully, that answers your question.

And on Kinesis?

So, Andreas, on Kinesis, Baron has had his sort of his main renewal. We’re relatively flat year on year.

He has – some of the deals have changed not that materially. So, he’s has had successful season.

But he hasn’t really sold that much more, which is quite hard to do. He hasn’t had to give up too much rate as we’ve said.

Kinesis is the same as most reinsurance products, so he hasn’t really given up much on rates. And the product we sell is still relatively unique.

So, his client base hasn’t really changed much. He’s kind of renewed about the same and that’s probably in line with what we expected.

We would have liked to sell more, but it’s very hard selling new products in this market, so it’s pretty much the same year-on-year.

So, the assets are, what, $340 million, $350 million?

It’s under $300 million. But it’s very similar to what it was the year before.

Around $300 million, okay. Just going back to the Gulf of Mexico, is there any change in terms of the appetite to ensure more in the Gulf of Mexico going into the second quarter?

[indiscernible] sort of at the bottom of the market?

Our appetite at the moment, Andreas, based on what we expect to happen is broadly the same. So, we’ve got a very niche book portfolio of business in the Gulf of Mexico and we would happily renew that portfolio as long as the market is relatively sensible.

We, obviously, lead almost all of that market. So, some of that is in our own hands which is helpful.

So, long story short, not a huge change in appetite assuming that the market behaves sensibly.

All right, thanks.

Afternoon, everyone. Two questions.

First of all, just coming back to the market turn scenario, if prices do – if we do get a loss event, it does push people into the red this year. What’s the kind of strategy on additional cash?

Obviously, you’ve got a bit of a buffer here, but do you still kind of raise into Kinesis and then maybe look to kind of tap shareholders, so any kind of thoughts from that, first, would be really helpful. And secondly, just on the Lloyd’s business, obviously, last year was a time of kind of great transition for the business.

Premiums came down kind of I guess in line with market. Looking to 2017, should we expect the top line to stabilize all or grow?

Directionally, what should we think about that? Because I know market conditions are still pretty soft at Lloyd’s.

Any thoughts would be really helpful.

Okay, Kamran. So, just on the sort of what turns the market, that’s the question everyone wants the answer to.

I think, as I’ve said many times recently, not much has got to happen for people to go into the red. And even then, things may not change.

But, clearly, I’m a huge believer in human behavior changes once people lose enough money. And I think when that happens, things could change quite quickly and none of us know what that loss may be.

But I think the days of people talking about $50 billion events and numbers such as that, I think the markets were very much in the red way before that. So, I think it could be a smaller event than what people think.

And I think you saw some of that when we had the Canadian wildfires this year. You had even some pretty large companies not making underwriting returns for an event which was sub $5 billion.

I think that kind of says a lot about where we are in the cycle. I think whether we need capital or not depends on the event and where we raise capital depends on the event.

In all likelihood, it would be a cat event that is the opportunity and what changes the market. And we could raise capital for our own shareholders.

If we have a preemption that, we could raise capital through Kinesis. We have lots of old family and friends that would be – that would love to give us capital if the opportunity was there.

So, I never really worry about raising capital. I always worry about us getting our numbers right and having the appropriate amount of risk in our business at the appropriate time, which is why we bought so much reinsurance compared to what we used to.

But we would love to assume more risk. We would love to expose more of our capital if the event came along.

But, clearly, you have to be there in a good shape to take advantage of when it happens. On Cathedral, yeah, 2016 was a big year of operational change for us.

I’m delighted with the people that we’ve been able to attract to the business. And one of the big sales pitches, if you like, to get people to join the group is our underwriting plus fee.

We have a sensible board and we have a sensible bunch of shareholders that understand this business is cyclical. So, being able to attract good people and not everyone subscribes to the bigger is better mantra that some people do at the moment, so that plays to our advantage.

But saying all that, even with the good people we have, growing is still very difficult. So, I’m not going to sit here and say, we’re going to grow Cathedral.

We always look at opportunities to bring in new teams of underwriters and Paul Gregory spends his life looking at these things. Again, it’s quite difficult.

There are lots of good people around, but some of the margins just don’t make sense. So, we will always look to grow the business.

We’ve always wanted to do that with Cathedral. We haven’t done so far very much.

We did add one aviation team. We look at constant opportunities.

But as we’ve said on a number of occasions, we are only interested in trying to improve our returns for shareholders. So, we’re not going to grow unless we feel there’s a positive benefit for our shareholders.

And at the moment, it’s about protecting our core account and then protecting that core account with the reinsurance we can purchase.

Fantastic. Thanks very much, Alex.

Thank you. Just a quick question on the gross premium written.

Firstly, you say in the statement that a good percentage of the growth in the property book was on political risk, which you say and you’ve mentioned before is quite lumpy. So, I just wondered if you could give us a feel for how you see that portfolio developing in 2017?

And just perhaps a little bit more color behind why you’re saying you don’t see the gross premium written coming off that much. I know you said you retreated to your core book, but we’ve still got margin pressure.

And the multi-year deals in the past have caused quite a lot of noise in the topline. So perhaps just a little bit more of a color, as I say, around how you see the premiums feeding through in 2017 please.

Okay. So, Paul will talk about your first question about political risk and then we’ll go to Denise or Natalie on the second one.

Hi, Joanna. As you rightly say, on political risk, it’s a very lumpy class and there’s often a long lead time into any deals.

So, you may be looking at a deal now and you may not see it bind actually another six to nine months. So, they always make it very difficult.

So, whatever I say now, it’s probably going to be wrong. I’ll caveat it with that.

But we would expect – if you look at 2015 and if you look at 2016, something in between those kind of numbers is a premium. But as I say, huge caveat on – it’s very – each deal, we have quite a significant premium and it moves around every single year.

So, it’s very, very difficult to give you any real guidance. But I think 2016 was a good year and there was a few things that bound.

It may not be at those levels through 2017. But it can change on the basis of three deals.

Sorry, that’s [indiscernible].

So, it could be anything basically.

It could be anything, Joanna. It’s a very politician’s answer.

Yeah.

I’ll take the multiyear contract renewals. Pretty much, we see there’s lot less of an impact now and don’t see that much going forward.

There are a number of multiyear deals that are not up for renewal. And some that were written years ago that are coming up and we sort of see on a year-on-year basis that it should become more stable.

I think where you’ll see a little bit of movement is between the quarters because the non-annual deals that are 15 months or 18 months can come up to the quarter, but then over the years you should see it stabilize.

Okay, thank you.

Good afternoon. Hi.

I just wanted to ask a question on Cathedral please. It was just – if you add back the reserve releases that you had in 2016, I guess the combined ratio was just below 100%.

I just wonder the degree to which you think you can kind of hold that line, if you like, in terms of something maybe akin to an accident year view, although I appreciate you’re going to be putting some margin in there and maybe just comment on sort of how exceptional or otherwise you saw the year from a sort of attritional loss point of view with regards to Cathedral in particular?

I think that’s a broader question for the whole industry. I think if you look at everyone’s results and you start taking out reserve releases, I think that paints quite an interesting picture.

From where I’m sitting, Cathedral is wonderfully consistent. And if you look at what happened this year, you had the kind of the wildfires, you had some other losses and the return that Cathedral made still exceeded what we would expect it to make.

So, I think the beauty of the Lloyd’s business is it’s very well-deserved. We haven’t changed any of the reserving there.

And if you look at the percentage of it, the best estimate, we are at Cathedral, again, that’s consistent. It’s just wonderfully consistent.

So, I don’t think there’s any real change for us last year. It’s a well-reserved business.

There’s not much else I can say there really.

Yeah. I would just add they contributed 3.4% to our return last year and 3.6% for ROE this year, so I’d say pretty consistent.

Okay, fine. And presumably, your comment on reserving, you’ve still got quite a lot of held over from the 2015 accident year that would be released into 2017.

We have you change anything on reserving at Cathedral.

Okay, thanks. Thanks very much.

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