Lancashire Holdings Limited

Alex Maloney - Group, CEO Paul Gregory - Group Chief Underwriting Officer and CEO Elaine Whelan - Group CFO and CEO, Lancashire Insurance Company Limited Darren Redhead - CEO, Kinesis Capital Management

Jonny Urwin - UBS Kamran Hossain - RBC Nick Johnson - Numis Securities Andreas Van Embden - Peel Hunt Faizan Lakhani - Bernstein Edward Morris - JPMorgan Thomas Fossard - HSBC

Okay, thank you. Good afternoon, everyone.

Thanks for dialing in to our fourth quarter conference call. For an active third quarter, the fourth quarter didn't have any respite, we witness small events this time in California which I did a further burden to a very challenging year for the industry and the Lancashire Group.

We've made a small loss for the quarter and generated a negative return for our shareholders during 2017, which is disappointing. This year's events have been difficult for the industry and the Lancashire Group to resolve due to the high level of frequency we have witnessed and the aggregate estimates of insured losses which are now in excess of $100 billion.

2017 - we'll now join 2005 and 2011 is one of the costliest years in recent history for insured losses. As a group, we have demonstrated that our risk management, underwriting picks and efficient reinsurance purchasing have minimized the erosion of capital for our shareholders to a level, which is where we're going to state tolerance for such events.

We must remember that cat losses have a history of deteriorating and I can't see why this series or events would be any different. It's way too early to our final cost on each event, previous events have crept up [ph] considerably and taken many years before the true cost of the industry is known.

So, the Lancashire Group will continue to learn - to try to learn from the mistakes of the past and take a cautious view on yet unproven declarations of improvements in the loss positions. I firmly believe that we have turned the corner in the rating cycle and I witness positive rate movements in virtually all classes of business, that the group underwrites.

I wouldn't describe the current market as a hard market, as there appears to be enough capacity to service most risks, I mean that pricing can only be pushed so far, but we are traveling in the right direction. But the sentiment is clear, we're seeing a more disciplined underwriting environment and we are seeing for a number of years, which we expect to continue throughout 2019 as the true cost of 2017 materializes.

We are seeing more underwriting opportunities borne out of years of rate reductions, where underwriters are starting to address unsustainable writing levels with varying degrees of success. It's a patchy market, but if you have the right underwriting talent, you can navigate these voters and carve out opportunities.

It's not a broad hard market, with a rising tide lift all boats, as if it was we would have raised additional capital to service the opportunity, but we have sufficient capital to underwrite the immediate opportunity, and we always assess our needs on a regular basis. It's the first time, we have been able to grow the size of Kinesis in a number of years, again like the overall thing for the marketplace not as much as we would like to due to the competitive pressures that Kinesis is growing by 30% at the 1st of January underwriting cycle.

So, in summary, we are in great shape, we have three underwriting platforms which we've seen them have underwriters positioned in a class of business where we are currently seeing the largest positive rate movements. We are carrying no more net risk levels for 2017 than 2017 and has sufficient capital to execute our business plan.

And we have access to capital if the opportunity kicks on from here. I'll now pass over to Paul.

Thanks, Alex. It's been a number of years, since we've been able to talk about positive rating environment.

As Alex has already explained, we start 2018 doing exactly that, while the efforts is more positive and it's been for a while, we must also remember the events which brought the markets to this point and the impact it had upon the Group's underwriting performance. As we would expect, having a high rating catastrophe risk, the Group's underwriting result was negatively impacted by the loss events of 2017.

For the first time in our 12-year history, we've produced a combined ratio in excess of the 100%. While this is obviously disappointing is not unexpected, given the type, quantum and frequency of events and also, I'm putting the context of the original Lancashire business plan is making underwriting profit every four years implied.

Following up these losses, the negative rating trend, we've been experiencing as a market at the past few years have stopped. And more encouragingly, the number of our significant premium generating classes, the rating is now increasing.

Approximately, 75% of our 2017 portfolio of managed premiums is now achieving rate increases of some magnitude. As a group, our expose to line such as Proxy [ph], Retro, D&F, energy and cargo positions us well to take advantage of an improved rating environment and also any new business opportunities that might present themselves.

The group has an established from the catastrophe exposed reinsurance lines, while our Bermuda, Lloyd's and third-party capital platforms by varying degrees rates across all major insurance lines improves in one month [ph]. By Lloyd's we also have access to the D&F market, which is certainly a market where we see a better rating environment and some small pockets with this indication.

A number of the loss impacted areas, we have detracted from in recent years, so we now have a natural headroom in which to grow back. We have a long-established history in the upstream energy market, with access for our London company and Lloyd's platforms, with rates increasing and all price stabilizing at a sustainable level, we are incredibly well-positioned to benefit from any increase in market premium flows.

Our cargo portfolio in Lloyd's is also seeing positive rate movement and can grow should the market conditions continue to be favorable. Our [indiscernible] classes such as aviation, terrorism groups and marine are now all relatively stable as the rate in environment is flattening.

It's also worth noting that all our major direct insurance lines might help the underwriting profits in 2017, despite the depressed rating environment. In addition to our existing classes, we have recently added further underwriting talent to the group.

We entered the downstream energy market at 11 following a higher downstream energy underwriter in November. And pleasingly by an encouraging start in this new line.

We'll be joined by new power underwriter later in 2018 to create a new power portfolio within syndicate 3010. Fortunately, these are also two classes of business that is announced in rates move in the right direction.

These new classes are in areas you would expect to see Lancashire. Classes that are short tail niche sometimes volatile that required genuine underwriting expertise in which to generate superior cross-cycle underwriting returns.

There are attractive opportunities to hire new underwriting talent in other specialty classes in the future than we will do so. We are right between all of our core insurance protections at 11 with our long-term reinsurance partners.

At this time today, we have the capital base to support the underwriting opportunities we currently foresee, but we retain the flexibility to act quickly should market condition shift again. What is positive about market conditions, we're also realistic.

As I've already mentioned, rate is improving in a number of our core portfolios. However, as always, we'll be looking to match risk and return appropriately, so in current market conditions we would not be looking to add significant amounts of additional net risk unless it's in areas where we'll be inappropriately rewarded.

We've always said the market will not substantially improve until there is a demand supply and balance. And once the conditions are undoubtedly better, the shift in demand and supply is not yet material to both into a proper haul market simply a better market.

As we look forward to 2018, our underwriting philosophy remains unchanged. We're aim to match risk and return appropriately for the first time and the long time, we have large portions of our underwriting portfolio expires supposed to positive rating movement.

And we'll strive to access whatever opportunities manifest in order to deliver the appropriate underwriting return to the market where we're in. I'll now pass over to Elaine.

Thanks, Paul. Hi, everyone.

As Alex said, during the third quarter hurricane and earthquake [indiscernible] 2017, the California wildfires. The wildfires and isolations would [indiscernible] particular and significant impact on the group.

One of the costliest natural catastrophe years on record, [indiscernible] tally. We've recorded a net loss after recoveries of $34.5 million across the northern and southern wildfires.

Our ROEs for the quarter was negative 0.9% bringing us to negative 5.9% for the year, a combined ratio of 119.5% for the quarter and 124.9% for the year. Although, we've made a loss for the year, we remain pleased with the way we have performed across the [indiscernible] of event.

Our capital and reinsurances strategies paid off and while we have a small capital impairment for the year, our balance sheet remains strong. As Paul has said, pricing is improving across the large portion of our portfolio, albeit not as much as we'll wait and see.

We're well-positioned with distribution capital to take advantage of those industries and any other opportunities that come our way. On results, our gross premiums written have decreased this quarter.

That's primarily due to some prior year pro rata business and the worldwide offshore group where we saw construction project unlikely canceled. We therefore adjusted the premiums in line with the remaining exposure on those contracts.

While they adjust pro rata premiums every quarter it stands by a bit more this quarter given the fourth quarter is typically our lowest premium volume. As these are prior year contracts, they have fairly immediate impact on gross earned premiums written.

As based on those adjustments, plus the additional reinsurance purchase has also impacted net premiums earned and their acquisition cost ratio for the quarter. For 2018, I would see no reason to change previous guidance we've given of an acquisition cost ration around 27%.

As you know, we don't provide premium guidance, however we do expect to see the benefit of the pricing as mentioned, plus any new business opportunities on our top-line in 2018. Bear in mind, we also have an impact in the timing of multi-year and non-annual deals plus those non-renewing life of business like [indiscernible].

In 2017, the net reduction on gross premiums written on those types of contracts with the 65%, I would expect roughly around impact in 2018. On losses for the individual wildfires are not significant, with [indiscernible] impact of the combined events in our press release.

The net loss of $34.5 million contributed 36.7% total loss ratio for the quarter. On the third quarter's event, it is clearly still very early days that we did adjust our reserves slightly based on updated information received.

We reduced our net loss reserves in the hurricane and earthquakes from a $153.8 million [ph] to $147.3 million. Similar to last quarter, we had few other losses that I've characterized as larger that attrition [ph], they are not significant enough individually to [indiscernible].

Our attrition for the quarter and the year does look like it's higher than normal, but that's not indicative of a trend and there is no change [indiscernible] our normal attrition in the mid-30's. We have some deterioration on individual claims in prior active years, but we again had general IB&R release due to lack of - coming through and overall net development on prior active years of $7.4 million for the quarter.

As a reminder, Q4, 2016 has strongly [indiscernible] from the closer as [indiscernible]. Investors returns 4% of the quarter driven strong returns from our risk asset, given the modest increasing years in the quarter, our fixed maturity portfolio generated flat returns.

I don't envisage any significant changes in our asset location in our investor strategy for 2018. We'll continue to hedge our interest rate risk to the expected rate height.

Other income is impacted by the timing of profit commissions from Kinesis, which we received earlier this year than last and the underlying year of [indiscernible] cathedrals. We see in cathedrals in 2016 [indiscernible] 2014 [indiscernible] claim [indiscernible] relative levels of premium and performance of those years.

With the loss event of 2017, we did expect [indiscernible] Kinesis and new PC's on the one month 17 cycle. Our G&A ratio has increased this quarter primary the function of net premiums earned.

In dollar terms and has decreased relative to Q4 2016 as the additional catastrophe event in the fourth quarter impacted variable conversation further. Our stock compensation costs for also further impacted by performance with a small credit according to the quarter.

Lastly, on capital as stated in our press release, there is no change to our dividend policy and we're declaring a final order of dividend of $0.10 per share or $20 million. We previously stated that we were targeting around $1.3 billion to $1.35 billion of capital to support the [indiscernible] and that hasn't really changed for the loss event of 2017.

Our favorable monitor underwriting opportunities adjusted our capital accordingly. With that, I will now hand over to the operator for questions.

Hi guys, and thanks for taking my question. Just two, my first thing how should we be thinking about the great opportunity if you guys through 2018.

On the one hand you mentioned pricing is going up across in three quarters your book or so, which is good, and you see that well-positioned, which is good. But on the other hand, you are still talking about challenging year.

So, I guess how positive are you guys? And then just thinking a bit more about your comments, so it sounds like you're going to get some margin improvement on a good chunk of the book, but are you also going to increase new business as well to the extent that you've got line of sight into that.

And then lastly, can you update us on how you are seeing the attritional develop through 2017, are there any other areas that were perhaps better or worse than you expected, I know Elaine you said there was no trends in the Q4 deterioration, but just to get a feel for the way you are running versus expectations that would be helpful. And then how you would see that change with 2018 price increases.

Thank you.

Okay, Jonny I will take one and then I'll hand off to Elaine. So, I mean clearly, we've got a big percentage of that portfolio.

We are well-positioned for the product lines that are seeing biggest rate increases, so clearly, we've got growth there on our existing book. I mean new businesses was a little bit more hard to calculate by definition, but obviously we are starting to see opportunities where product lines or even business of product lines is finally being underwritten and that could be an opportunity for us, but what I would say is - I think it just consistent - other sensible people has said is demand seems relatively, it doesn't allow - it's huge amount at the moment and maybe we have growth in the U.S.

and the old price stability, we are going to see more of that come through towards the end of the year and into 2019. But I think anyone who think it is huge amounts of new business around is probably kidding themselves a bit.

There are definitely opportunities, we will clearly take bunches of those opportunities, it's quite hard to gauge, but equally as pointed in his script, people have reloaded capacity at the same as it was in 2017 really. So, I won't move a number in it, but as usual we'll make some more - comes through the door if it make sense.

And on there just if I add a thing yeah you're right there isn't a change there, we did a little bit more in terms of smaller loss at cathedral, nothing really significant [indiscernible] what commented about really and on the line segment we picked up a few business in the energy portfolio and [indiscernible] down as well, but nothing I would say is indicative of any sort of change in terms of the [indiscernible] underwriting it. So pretty comfortable with the mid-30s range that we kind of guiding into over the last for a while if anything - and price improvements in 2018 to improve that.

Thank you. And to just a follow-up on the growth, can you give us a steer on the net of the 2018 net earns given this as always there'll be some multi-year effects.

Yeah, I think net earns depends on how much extra new business we manage to put on, it's managed sort of good chunk then then we wouldn't expect it to be [indiscernible] 2017, generally a bit half of our net earn comes on the current year's underwriting portfolio and then the rest is made up from prior year stuff coming through, so all of multi-years we have in previous years will still give us some benefits, our earnings there and any new business that we write this year there will be a lag on that earned premium into next year, so we'll get the benefit that's coming through there at the better pricing.

Great. Thank you.

Hi, everyone. Two questions, the first one just coming back to, I guess January renewals.

Could you give us some idea of what you achieved at 11 and any thoughts on whether this improves as the year goes on? And secondly, in terms of the business plan I guess you said that you expect to deploy all your capital this year, what does that plan seem on for an ROE, I know you're probably not going to give a number, but kind of I guess direction?

It would be helpful. Thank you.

So, you're correct we're not giving you a number. We - so just to give you a sort of a background I mean clearly after the events, the first we would try - we probably had about six business plans on the go at once at one point and we come out with various different scenarios, some of that was based on - should be based capital, what was the opportunity but where we actually got to in the end, I think we got it right, so we talked about capital in September, we saw that capital again in probably mid-November, but where we got to the end, because we didn't need additional capital to supply business our plan and that was the right call because that's where we're at.

So, I think as I said in my script if something happens in the year and there's opportunities we probably haven't got tons of excess capital, I would love to be in that situation where we had to go to market and raise capital and I'm very confident we could do that, but we've got enough for the current opportunity and actually remember for us, it's capital that drives your capital need so if to specialty, we're still quite heavily specialty line of focus, so if we see better improvements in those lines that doesn't cheer up as much capital, so we should be fine this year.

What other thing I'd just add capital side of things is that we talked last year quite a lot about the excess buffer that we were carrying and so, we still got plenty ahead and some of that was in loss of absorption if you like that there's still a plenty ahead in life there for us to use.

And then Kamran one other thing I said was, we bought exactly the same reinsurance for 2018 as we did in 2017, so we haven't dropped any caviar - position is exactly the same.

Okay.

Kamran in terms of what we saw 11, I'll just guide for kind of RPIs we saw on the major lines of business. So, if you look at the reinsurance lines that was out Bermuda, which is - think about [indiscernible] D&F Retro et cetera, the blended RPI was about 10-point rate increase across that portfolio.

I would caveat that with there was not impacted business renewed at 11 to be - our cap excel book, it was about plus 7 which is pretty consistent with comments you're seeing in the market. And in cathedral that reinsurance book was around plus, so again pretty consistent.

Energy we've being seeing just below plus five at 11 and things like D&F was around plus 6 at 11 [indiscernible] again caveat the D&F book at 11 is only about 25% of the portfolio most of which is binder, which is a much steadier book of business and there is lot of facultative risks to renew through Q@. So, there is kind of major lines of business seeing it rises obviously a big part of our portfolio and all the other lines per aviation, marine et cetera are all broadly flat.

That's great. Really appreciate the color.

Thanks very much.

Hi. Afternoon all.

Just on the new highs you mentioned just downstream energy and power, if you could talk a little bit about the origins of that, is that what you see in the opportunity to have some of the good people or that in response to market opportunity and perhaps you can just add whether there are any other areas that some e-mails [indiscernible]. Thanks.

Sure, I would like to say it was also on our part and we saw the market rates about to improve in both of those lines, but it wasn't - we just identified some individuals that could come and stick within the group well that we had a lot of respect for areas as I mentioned in my script, their niche short out specialist kind of things that we do areas of our portfolio really we should have a presence in that we were just fortunate, we are able to identify some - on what we deemed to be really good individuals that would fit in the team well. So, it was more about the individuals and availability and then we've just benefit from the fact that it looks like those lines are now experiencing positive right movements.

In terms of other lines, we've always - we're always looking other lines of business we can be in and we'll continue to do that. There is nothing eminent on the horizon but as always, we just - we're having conversations with various people and something, sometimes they come to fruition and sometimes they don't.

Okay. And on the downstream you empower, is it possible to perhaps quantify sort of free income numbers that might be achievable in 2018, possibly 2019 for those two segments?

Yeah, first we will not really give guidance on that just yet given. Well, power - the power won't turn off until mid-2018, so 2018 it's not going to be really any impact.

It all depends where the market ends up going at the moment, they are not going to turn into seeking [indiscernible] cost as a business, there are going to be nice additional premiums. Obviously, we have the ability of those markets with change dramatically, the better and we can ramp up quite quickly.

Okay. Thanks very much indeed.

Thank you.

Hi, good afternoon. Just few questions from my side.

First of all, on your outward reinsurance program, you mentioned you are going to [indiscernible] by the same amount of reinsurance in 2018 as in 2017 but could you may be comment on the mix. I noted in your press release you've put more cover for your energy book and additional limit within Lloyd's.

Are you trying to protect more of your peak risks into 2018? And then also ties in with your PMLs, I just noticed that your PMLs came slightly down in January?

It seems you've lowered your risk profile, so I assume you're putting capital work on 2018 but with the same risk or lower risk, could you maybe comment on that? And then finally on Kinesis, could you comment on what was the level of access under management at year-end 2017?

And whether it's 30% increase at 1, Jan with it's just a start of further sort of increases in assets under management in 2018. Do you have some target AUM for Kinesis by the end of the year?

Thanks.

Fine, OK. So, just excluding PMLs and modeling, we'll make a comment on that at the moment.

We had same reinsurance program for the group where that's a cathedral or Lancashire as we did in 2017, and I suppose one last I - that's a clear indication of our view of the opportunity for 2018 and a clear view of the availability of reinsurance thought for 2018 as well. So, we are all disappointed that rates didn't go as higher at the 1st of January, but clearly the opportunity, the benefit of that the availability of reinsurance.

So, our retentions are exactly the same, we're not retaining anymore, risk at the bottom and we're buying the same cover as we hop onto 2018. We do know going through some of the transcripts and the conference calls that some people have retained more risks for 2018 and we don't think the markers move enough to do that, otherwise we would have done ourselves.

I think on the PMLs that was just probably modern change noise. I wouldn't take too much notice of that.

And clearly, the PML commitment around anyway on the portfolio. The Q4 reinsurance [indiscernible].

And this is something to the press release [indiscernible] was looking something we did in Q4, so a little bit, in light mostly to the course here and the rest on the energy side that's [indiscernible] and could cover a place for them.

Hi Andreas, this is Darren from Kinesis and as Alex mentioned we grew to limit so from 11 to 11, 30% you still have more money, to utilize if you want. At the moment, we have, we might give some of that back to investors, but we will be looking for opportunities during the year.

One of the things, I would say is kind of be mentioning as a general thing mention, it's a general thing, yes, rates were up, but not as much as we anticipated so that's. We would like to grow more than 30% but to-date we haven't.

And what is the AUM right now at Kinesis?

Yeah, at the moment limit so - it's 30% more than last year, so you can book value, but we haven't finalized at what limit we sold for the year, so, we're not going to comment on that.

All right, thanks.

Hi. I just have one question, it was regarding the reserve releases, that you benefited from lower CapEx range from hurricane, from about $9 million in Quantum, and then stripping that out.

It seems like the reserves releases are actually 1.5 million strengthening. Is that a change in reserves plus for you or have you now changed the reserves however?

There is no change in our reserving methodology, the change in the reserves for the hurricane is going to [indiscernible] if you look at the prior year development, it is not going to impact that, it's the entire quarter developments. And quarter-on-quarter, I mentioned this is a little bit more of an uptick and attrition we saw from 2016 year on both Lancashire and cathedral site.

And if you look at Q4 last year, we did have some big releases for cathedral and that was some specific claims being releases just to closer of 2014, and just a lack of report coming through. And then we've said in the past, not too much potential happens within an individual quarter can be lumpy some quarters we get more reported, some quarters we get less.

Thank you very much.

Hi, two questions. First one is actually just coming back on reserves, one of your payers was explaining that when they end the year with best surplus in the short tail classes, and they typically expect lower reserve for leases in the next couple of years.

Can you just explain, whether that might be the case for Lancashire or should we expect similar situation to any other year, perhaps for 2018? And the second question is on tax, can you just confirm, no expected change to a tax rate as a result of tax reform?

Thank you.

So, again we haven't changed our reserving methodology, we don't give any guidance, whether we expect reserve releases to go, purely because nature of our book, it's pretty hard to predict, but sometimes we get nice releases, sometimes we get no releases. And we don't stick away a surplus and mark value for future process.

So, you can mark a number in the same basis that you have been previously. In terms of tax, it's obviously a lot of stuff changing in the tax world, we don't expect to have any significant impact and it will get a little bit less really going forward.

Nothing too significant, [indiscernible] whether it's charge or a credit,

Okay, thanks.

Good afternoon all. Two questions on my side, on the reinsurance and position - so obviously you mentioned that everything was almost unchanged compared to 2017.

Can you quantify how much more you have to pay in order to get that cover in places for the year? And second point, I think that Alex in your introductory remarks, you explained that you are expecting some loss report that the loss reporting on the aim to go higher or potentially transform the deterioration.

Have you got any early sign of these since the start of the year overall what is your background loss reporting especially in Q3 and Q4, have you - is there any wearing you've got around that? Thank you.

Sure, OK. So, I think what I am always trying to explain on the HEM losses were, we haven't added significant cat losses for a number of years in this industry.

And when you look prior cat events, if you look at the life of the cat claim, we have got cat claims on our books that will move into five years. So, I think there has been some commentary and there has been some movements in - HEM losses that just from my personal point of view seem a bit strange that such a short period of time, those events some people are reducing those HEM losses already.

And I would like to be, or we are as a group more conservative. We have lived through these losses before, there is still not a huge amount of information coming through the system, we have seen some Irma deterioration from a number of claims recently, there is still not a lot of Maria information coming through.

So, look, reserve it's always difficult for these classes of business, if you are publicly traded you have to go to the market with virtually no information, so I don't want to be sitting on these calls with HEM loss going out, that could happen, it could happen to anyone, but clearly, we are trying to best service we can just for the [indiscernible] and so I suppose our reserves haven't move much, we don't play games on our reserves, we are little bit surprise that some of the HEM losses are coming down, so quick and if you look at any of the original PCS numbers on every single cat claim, no cat claim has ever got better. So, there is varying different degrees of how close the short PCS guys are and those agencies get to, well they think the funnel is going to be, but probably the series of events were little bit more complicated as well, just because you had so many.

So, adjusting these early days, I am usually the one complaining about nothing happens good in the insurance and I think this time I am saying, let's wait and see where these claims get to and we'll have a much better view of that in the next 12 months.

In terms of the outwards of 11 Thomas, it really did vary per program, I mean we have a number of non-cat, non-loss effective programs and you were seeing anything between flat to plus five, on those kinds of contracts. If there were cat renewals then obviously you have seen a bit more of that and is that loss impacted lays and again, you would see a bit more than that, so it really was very dependent upon the program.

But all in line with our expectation and broadly in line with what you are seeing around market coming through certain lines of business.

I mean clearly if you look at inwards right and how much of that inwards premium we spent on reinsurance when that positive even after the reinsurance, increases we pay this year.

Thank you.

Thanks. Really quick one, just on the investment return outlook, can you just give us a stick given we've got slightly higher yields.

Thanks.

Yes, I mean we are still pretty short duration and our yields has gone up of course three years, rates have gone up and we expect them to increase little bit again throughout market-to-market environment to that fit. I think we could the current yield to the company that can maintain through 2018.

If not increase a little bit but all the way, it takes.

Hi again. I am just struggling a little bit to square the comments that the market has turned the corner with the other comment you made this give you another chance in the industry I think you sort of said something perhaps you spin up a bit could you just clarify on that a little.

please. Thank you.

So, the first thing we've turned the corner because we're not getting reduction anymore, so that is a completely true statement and a number of classes of business are in positive territory. But everyone just needs to be a bit realistic about where we we're at in the rating cycle and yes, rates are up in those, clearly and I'm happy about that.

but if you look at where you are coming from, it hasn't really moved it on massively headed. So, I think everyone, once a hard market everyone wants rates to go up, no more certain [indiscernible].

But the fact of the matter are is great to be in positive territory that we just not - rates need to go up to a more sustainable level over a period of time that clearly everything can have if you have enough capital and the returns that we need to give to our shareholders and all the time there's plenty of capital that we can match, allow return maybe that's okay, but despite just a realistic comment of yes, rates are up, but you've just got appreciated on where we're coming from. So, I still think 2018 will be a challenging year and most classes of businesses is still difficult to manage.

So, I think we're just being incredibly honest about 2018 and we're not getting ahead of ourselves.

Okay, got it. Thank you very much indeed.

Thanks.

Okay, thank you for dialing in and we'll talk to you next quarter.