Good day and welcome to the Chubb Limited Fourth Quarter Year End 2016 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. For opening remarks and introduction, I would like to turn the conference over to Helen Wilson, Investor Relations. Please go ahead.

Thank you. And welcome to our December 31, 2016 fourth quarter year-end earnings conference call. Our report will contain forward-looking statements, including statements related to company performance, investment income expectations, pricing and business mix, economic and insurance market conditions and integration of our acquisition of the Chubb Corporation and potential synergies and benefits we may realize. All of these statements are subject to risks and uncertainties and actually, results may differ materially. Please refer to our most recent SEC filings as well as our earnings press release and financial supplement, which are available on our website at investors.chubb.com for more information on factors that could affect these matters. We will also refer today to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most direct comparable GAAP measures and related information are provided in our earnings release and financial supplement, which are available at investors.chubb.com. Now I would like to introduce your speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer; followed by Phil Bancroft, our Chief Financial Officer. Then, we will take your questions. Also with us to assist with your questions are several members of our management team. Now, it is my pleasure to turn the call over to Evan.

Good morning. Chubb had a very good quarter that contributed to an excellent year, in both financial and non-financial results. We set big agenda for ourselves and accomplished most all of what we set out to achieve. Financially, we produced record annual operating earnings per share, world-class combined ratios, strong book and tangible book value growth and a good operating ROE. We accomplished these results despite elevated catastrophe losses and soft P&C market conditions globally. Operationally, we completed the largest merger in insurance history and managed a transformational companywide global integration effort all while staying focused on our core business of underwriting and servicing customers and distribution partners, retaining our commercial and personal lines customers at or above all time high. We launch new products, and entirely new businesses, made investments in our people, technologies and capabilities, began to harness the complementary strengths of the organization, cross selling and other revenue initiatives. We achieved or exceeded substantially all of the financial and non-financial targets we established when we initiated the merger. After-tax operating income for the quarter was 1.3 billion or 2.72 per share, compared to 2.38 per share up over 14%. For the year, net operating income was over 4.7 billion or $10.12 per share, up about 3.5% and illustrating the accretive nature of the merger. Earnings in the quarter included one-time 113 million pre-tax benefit related to the harmonization of our U.S. retirement programs. Phil will have more to say about the retirement program changes and both one-time and ongoing income benefits they will produce. As a reminder, when discussing our underwriting results and premium growth, I will compare our results to the 15 year as if we were one company back then and excluding the effects of purchase accounting from the 16 year underwriting results. That is…

Thanks Evan. We have come to our first year of the merger with excellent and stable ratings, a strong balance sheet and substantial of capital generating capabilities. Our operating cash flow was 1.5 billion for the quarter and 5.3 billion for the year. In the quarter, investment income was 845 million, which was higher than our previously expected range of 820 million to 830 million, 8 million was due to a one-time positive merger related adjustments. We also had increased call activity on our corporate bond portfolio and we are benefiting from the changes we have made to the management of our portfolio. Where there are always a number of factors that impact the variability and investment income, we are raising our expectation for our quarterly investment income run rate to range of 830 million to 840 million. Net realized and unrealized losses after tax for the quarter were 1 billion comprising a 1.3 billion loss from our investment portfolio, primarily from rising interest rates and a foreign currency loss of 300 million. These were partially offset by 275 million gains from our VA reinsurance portfolio also from rising interest rates and 350 million favorable adjusted related to our retiree plans. Net loss reserves decrease 687 million for the quarter on a constant dollar basis. This reflects the favorable impact of the agriculture book of 339 million. Favorable PPD of 238 million and 60 million of amortization of the fair value liability adjustment established in purchase accounting. On an “As If” and constant dollar basis, net loss reserves increased 1.2 billion for the year adjusted for the items discussed above. The paid-to-incurred ratio was 99% for the quarter and 92% for the year both also adjusted for items discussed above. We had positive prior period development of $238 million pre-tax…

Thank you. At this point, we’ll be happy to take your questions.

[Operator Instructions] We’ll go first to Ryan Tunis, Credit Suisse.

Hey thanks, good morning. My first question just on the pension. Is the 100 million that you expecting to recognize over the next five years or so additive to the $800 million expense save guide you have given in the past?

Yes, it is. The $800 does not include the incremental benefit from the past.

Okay. Understood. And then I guess just going back to Evan’s discussion about the positive impact on ROE from higher interest rates. And just thinking about how to balance, how to think about balancing underwriting returns, ROE and growth, I guess due this next cycle. If you have got higher interest rate, lower tax rates, arguably more competition. I mean should we be more focused ROE is the metrics are pricing around or should we continue to be thinking about kind of underlying combined ratios that are sub-90? Thanks.

I think, with the exception of your final comment, I think you should be focused on underwriting combined ratio. And we look at underwriting independent of investment income. We underwrite around here to an acceptable combined ratio. And yes, we do look at senior most levels in terms of capital management; we do look at how much capital each business draws and at certain combined ratio hurdles, what kind of ROE we’ll produce. And that sort of sets to a degree targets that we establish for our businesses that combined ratios we don’t want exceeding. If that helps you.

That’s helpful. Thanks, I’ll get back in the queue.

Elyse Greenspan, Wells Fargo.

Hi. Good morning. I was hoping first to get some, in terms of the potential for corporate tax reform in the U.S.I know Chubb is in a little bit of a different position given your split domicile. But how do you just high level see tax reform impacting Chubb and when you think about the potential for tax reform, do you think it gets competed away, meaning if a company is operating at a higher tax rate, they can potential push for lower prices as they manage their book to a certain ROE?

Yes. I’m going to answer your first part first. Anybody who runs a decent business, they don’t run their business based on tax. Tax does not drive how you make your fundamental decisions and how you operate a business. I have worked in more than one company and I have never, that kind of conversation is never entered into how we think about our business. So we think about underwriters, underwriting which is what we do for living and combined ratios, there is hardly does tax ever enter the discussion. As to the first part of your question for our U.S. sourced business, look our U.S. business represents over 60% of our company's business. And our U.S. sourced business has the tax rate in the 20%. Tax reform is important to us and it's important to our country. And as the U.S. economy would improve at my judge over tax reform that would benefit the insurance industry, because that would mean faster economic growth and faster economic growth means more exposure, more exposure means faster growth for insurance. So I am in favor of tax reform. Right now, they are discussing, as you know it's a long way before we have tax reform and we are at very early stages. What Republic and Congress has put on the table so far revolves around border adjustment. How border adjustment will be interpreted for financial services is not yet clear. And in fact to those who are writing tax policy who we are very engaged with it is not clear to them. When it comes to insurance, the question on the table right now revolves around two, reserves, how reserves will be treated, number two in particular, how reinsurance will be treated. In my judgment border adjustment tax, reinsurance is clearly an export of risk. You're exporting risk and you don't know the profit and loss so that risk ahs ultimately been earned through. It is hardly an importing of capital. So I would expect that would be treated in a reasonable way in tax policy and that would be the advantage of the U.S. We are taking the advantage of the world balance sheet where insurance has benefited corporate America and consumer America just greatly over the years.

Okay thank you. Last quarter on your call, you alluded to some initiatives on the small commercial side. Can you just talk to the receptivity from agents in that business? I know it's still early days, but any kind of takeaways from kind of the fourth quarter and into 2017?

It's very early days. And we'll talk about it a little bit. But I'm measuring this so that at least we stay on would be swear on perspective. I'm measuring this over years given the nature of it. These are relatively small policies and it takes a long time to build something. Paul Krump love to tell the stories. I know he is from the Mid West and I'm going to turn it over to him for a moment.

Well thank you Evan. Elyse thanks for the question. Small commercial I think we very much on-track but again as Evan said I can't overemphasize. But this is what building this over years, but to your direct question, the receptivity by the agents and brokers has been outstanding. First of all, they love the platter of products that we are bringing into bear. They know and they have seen what we are building for the CSR’s so that it’s easy to do business with us. There are some really strong competitors in this space, but this is a very fragmented marketplace and we are beginning welcomed and it’s just going to take some time to continue to build it.

Thank you. And just one last question if I may. As you alluded to Evan in your comments about the prospects for higher inflation. As the industry deals with inflation, I think its some people start to think about potential reserve picks to be tested on some of the longer tail lines. Now that the company has been merged for about, a year and you have gone through both the legacy company reserves. Can we just get high level of view about the condition that you have in the fixed and some of your longer tail lines, as we think about potential inflationary trends picking up from here?

Yes. It’s very simple. The last number of years, most recent past inflation has been benign, lost cost inflation has been benign. But both companies have continued to use historic trend factors and we have done that right through our current year in our casualty related lines that’s what matters. And so with that, I think we are comfortable if we return to a higher loss trend.

Okay. Thank you very much.

Our next question comes from Charles Sebaski, BMO Capital Markets.

Good morning. The first question is on the North America retail, I think Phil mentioned 14% of the new business synergies are from that. Just hoping to get a little bit more clarity on where the synergies are coming from and if that includes the A&H within that synergy line or how you are thinking about that?

Sure it does. Let’s see. Who would like to take this? John.

Sure. I’ll take a crack. So thank you for the question Charles. In terms of that cross-sell coming from all forms of synergies mainly in our specialty lines. The great hallmark of Chubb was in the phenomenal distribution and the agency network, ACE brings a lot of specialty products. So we have been spending the better part of the year making sure that product breadth is getting introduced into that agency of course and into our core customer base. So specialties like environmental, like A&H that we are selling, builders risks, all through the industry verticals, it is driving that cross-sell. In addition, the strength of the organization where we are bringing our core product to a new distribution of course we are measuring that as well. So between growth initiatives, specialties, strength of the organization, we really do see the power of the group coming together.

Okay. I guess on a broader base on product line. Evan, a lot of the rate commentary you gave seem to be that a lot of lines are reasonably managed in a couple of points plus or minus. Are there any lines that give you pause, I have seen some stuff recently that there has been some pullouts of political risk. Is there areas where things are just, maybe needing to take a step back or the market is not where you think it should be rational, reasonable?

Yes. Charles sure. There is not lines of business where we need to step back, because we see trouble underwriting. We will see that. We are really on top of it and vigilant about that. We always look for early signs. Obviously, with the merger, there are businesses that weren't meeting our standards that we have cancelled and - some we cancelled put them in run-off and I have spoken about that. Beyond that, I think the message is pretty simple. We don't like a lot of the market pricing for new business. And so we are willing to take the new business penalty. The numbers I gave you were the numbers - the rates and the rate movement was for our renewal portfolio. And we measure relativity of the new business pricing against our renewal rates. And our new business pricing is very similar to our renewal pricing. But to be able to achieve that we have to be willing to write less business, we are seeing more submissions. The first quarter our submission activity was up substantially, but the amount that we will right is down and that reflects the competitive market conditions where we are just simply not going to dumb stuff for growth.

Okay. And as just finally, I think at the very beginning Evan you made a comment that you said you have accomplished most of the things that you wanted to with the merger and integration of Chubb. Curious on what may not have gotten to par.

I didn't want to use the word everything, so I thought that would just sound a little arrogant. And we always are vein hopeful about things. When I step back I got it tell you and really look at it. It's always a little crap on the margin, but we have accomplished what we set out to achieve in the year. Our revenue growth was a little less than I wanted it to be, but when look at it, sure in the early part of the year there was market distracts - there was internal distractions emerging, but we expected that. It was the market itself I think just given the nature of competition, we didn't write as much new as I would like to have written. But okay, that's it. Don't worry about it.

Thank you very much for the answers.

And we lost a handful of people, we wish we hadn't lost. But we planned; we knew we were going to lose people we didn't want to lose. We lost far fewer of those, but still each of them breaks your heart.

Thank you very much.

Our next question comes from [indiscernible] Barclays.

Thank you. With regard to the comment that growth should improve looking ahead. Does that mean we should expect positive growth in North America commercial and personal lines?

Yes. For 2017 in total, I expect that that’s what we are going to see that’s our objective. And remember there is going to be - so I just give you a little more color. The re-underwriting, the underwriting actions we took due to the merger break into two pieces, business that we cancel and that runoff will have an impact through the year. So that impact will diminish. The additional reinsurance we purchased that will have an impact fundamentally in the first half of the year and should be about gone by the end of the mid-year. And then, we have underlying actions that we already see the power building in our core business or core middle market in our A&H business, specialty casualty areas. I expect in our large account business more of a slight to safety and quality, which we are seeing in our risk management and our multinational business. I expect our industry verticals and the power of that to produce the better result or high net-worth business. The two legacy companies together with the core portfolio will do better. And I expect specialty, personalized, internationally and small middle market around the world to contribute. And A&H I said that I mean that globally.

Okay. Evan you just mentioned [FICO] (Ph) safety and quality, there has been a number of large global property casualty insurers facing ongoing turmoil. Can you update us your thoughts in terms of what that means for Chubb?

Yes. Chubb is a steady as she goes going from strength-to-strength. Our product offering has never been broader and beyond that our ability to coordinate all of the skills of the organization and bring it to bear for a customers, honest to god it’s never been more compelling. The technology that we have to service the large account business and bring total solution, but manage it through the customer. We are really distinguishing ourselves, our service and our service reputation in both underwriting and claims is a breath of fresh air for most who have experienced some of those companies that are having issues. We have been very predictive going steady for our customers and for those who might be interested in trying us out. That’s what they want. They want predictability and steadiness of both breadth of product offerings, because we offer as broad or broader product offering than any other competitor to our customers from risk management to access casualty to professional lines, to environmental, to their international needs around the world. And very few can do that and we do it in a very steady predictable way, we are not changing year-to-year in our appetite or in how we approach the underwriting of that business. That has just caused us to gain more customers, we continue to first of January was very good for us that way. We are gaining more customers; we are gaining more who are taking a look at us. Particularly as they are more uncomfortable with where they have been. And it's easy to see why they were uncomfortable. Some of those companies appeared to be wrong.

Interesting. And my final question is on asbestos trends, a number of other large companies with legacy asbestos exposures have had to raise the reserve estimates this year. Chubb didn't, I believe, can you discuss that?

No, no, we have raised our reserve estimates; we did take a charge this quarter. The net amount was about $87 million I believe. $78 million. And that was a net of both branding wide taking a bit higher charge and we put the federal reserves on a life basis. And they had some favorable development. The two of them together produce the 78 million. But we are not seeing importantly a change in trends in asbestos. It was very case specific for us. The one place where we have seen a bit of an increase in cost is in defensive cases. We are defending cases rigorously and the cost of the defending those has been more inflated.

Thank you for the answers.

And we recognize that in our reserves.

Our next question comes from Sarah DeWitt, JPMorgan.

Hi good morning. Talk about inflation picking up in an earlier question. But there is a difference between general U.S. inflation and insurance claims inflation. I was wondering if you just talk about your outlook for the factors that drive claims inflation under the new administration and Congress. And if you could also just elaborate on your comment at professional lines claims inflation was picking up.

Yes, professional lines claims inflation is an obvious that everybody can see who book into business its public information. I will come back to it. Look, Congress and the new administration all speculation. I have no idea and you have no idea. Its one thing they have in agenda, but what are you actually going to pass and how long is it going to take to accomplish. And then what will be its impact ultimately well that's pretty far down the road. So we don't speculate and in our lost text, we don't speculate. Insurance inflation is about parts and labor. It's about legal cost, medical expense and that is up to what we called social inflation. And those cost inputs are different than general inflation as I'm sure you know. When it comes to professional lines, there have been more security class action suites, there were number of sources of that. And in particular, and we have noticed that in claims reporting and development. How many of those notices turned on to actual claims and what are the size of those claims. The severity has been fairly constant. It’s been an increase in frequency this year. And we are vigilant about that.

Okay. Great. Thank you. And then secondly, if interest rates go up, do you think that benefit get competed away by the market?

You know to a degree. You have always seen that. There are companies who cash flow underwrite and underwrite to total return, they usually are great underwriting companies, I have never noticed that they are. And then good companies remain more disciplined about that and don’t compete it away. So, it’s a chaotic world. You will see all varieties.

Okay. Thank you.

You are welcome.

Our next question comes from Kai Pan, Morgan Stanley.

Thank you and good morning. First question Evan you mentioned about the given pricing pressure, the industry combined ratio is under pressure. So if you look at Chubb, actually you are underlying combined ratio has remained largely stable. I was just wondering, can you see your underwriting actions or the more realized expense savings from the merger could overcome the pricing pressure to maintain or improve the margin in the coming years?

What I see is that it will ameliorate a rise in combined ratio. Expense ratio will ameliorate a rise in loss ratio, the merger expense benefits. The underwriting actions we taken and portfolio management and mix of business will also ameliorate loss ratio. But does it eliminate it? No. And overtime, I expect naturally if the market remains as it is and I think the market you see is the market you get. I think it various by line of business et cetera, the dynamics but in total, I expect that it rises. We have certain lines of business like agriculture, like high net-worth, like A&H that really aren’t subject to that at all. You have other businesses like middle market commercial and traditional business that is less impacted by that. So the mix of the portfolio and how we have selected our portfolio and constructed it and the geographies in which we conduct different businesses have a way of ameliorating. But each individual line by itself has this pressure of loss ratio in a market where rate is flat or down and trend continues. And of course, we are of the market. What I am confident about is that we will continue to distinguish ourselves and outperform.

Okay. Thank you. And my second question is on the capital management, the Board recently authorized $1 billion programs through 2017. I just wondered when they discussed at this topic, how do you allocate that the size of the buyback relative to your $5 billion annual earnings and relative to your dividends, as well as potential growth and acquisition opportunities?

Well, if you know. First of all, look at earnings on an after tax basis and we have dividend policy that we payout roughly 30% we say it took a 30% in dividends. We then look at opportunity both internal growth and potential external opportunities to grow over a period of time and capital flexibility. And so through that discussion, we determine what a comfortable target is for company need and then what remains is how we determine what to return to shareholders. Then we have a discussion of what is the best for the return to shareholders. Its dividend related, is it one-time dividend or is it share repurchase, and that's how we come to it.

Okay great. Well thanks so much.

You are welcome.

Our next question comes from Michael Nannizzi with Goldman Sachs.

Thanks so much. Just I want to get a little clarification Evan you were talking about growth and you talked a little bit about reinsurance changes in the 2016 and the fourth quarter. So do your comments imply that you expect growth on a gross basis than just to step out of the whole reinsurance conversation?

Yes, but we also have business and we have been very transparent with you about that. Business portfolios that in the merger when we pull the companies together and went through the business we said there are business portfolios that are not meeting or standards we have talked about some of those and that we cancelled those. Well those when you cancelled them you are eliminating gross as well as net. So you got to keep that in mind.

Okay got it. And then just quick on the Ag book. So the last couple of years have been below and well below at sort of 80 to 90 range. Just trying to think about that business, and the last couple of years have been both below the range especially the last one 2016 being that. How should we be thinking about whether it's your use of reinsurance in this line or what the profitability should look like, should we get back to that more normal level, or it’s just a good starting point to think about what that business should be able to contribute?

I think you guys have short memory. This year was a very good year. Last year was a good year, but not that far off the normal trend by the way, it was a good year but not that far off. And we look over it 10, 15 and 20 year. We put the business on level, because there were things that impact loss ratio in the current year that didn't impact 20 years ago, because prices have changed, yields per acre and how seed and fertilizer behaves changed to the positive in that, growing seasons have changed a bit because of weather. So we actually consider all of that and put on level that come the historic combined ratio. And that historic that you cite of that 89,90 is where we have remain. And that's why we are saying to you, I don't wait for a bad year to say, this I will say it in a good year. It’s a Cat like business and it has a volatility to it and so you measure it over a period of time. But, I think it’s not excessive, we get a reasonable risk adjusted return on that business and I think we have very clear competitive advantages in our franchise, that just put us light years ahead of, fundamentally, anyone else in that business. Particularly around our analytics, our deep distribution and spread of business, our knowledge and insight of data and people with experience that go back so many years. And we have a cost advantage and a technology advantage that is very hard barrier to leap.

Great. Thanks for that. And then maybe if I could sneak in one last one on maybe for Phil on the legacy Chubb municipal bond portfolio. How are you thinking about that? Do you expect to sell that down or just reinvest once those bonds mature? And just Evan, one more clarification, I don’t have a short memory, I have a bad memory, that’s totally.

So if you look at any portfolio, it’s very highly graded at AA, 80% of its graded AA or higher. It earns a pretty attractive book yield, it’s over 3.3% and it’s got a duration of about 4.8 years. And I guess what we see now, I mean we talk about the changes of interest rates and the impact that may have on our choice to hold that portfolio, we are running scenarios at different tax rates to determine the impact on the portfolio. The ultimate allocation will depend not only on a tax rate, but also relative value of the municipals to the other possibilities in the portfolio. So we are evaluating it, we will look at it in light of the tax developments that emerged over the next months.

Thank you so much for the answers.

Our next question comes from Paul Newsome, Sandler O’Neill.

Good morning. I was hoping you could just run me through the accounting through the negative combined ratio in the Ag business, just so that of we know what went on there, because it’s a little strange to have a negative combined ratio for a quarter.

Yes. We are not going to run you through it. But Phil will take, if you want to get more detail, take it offline. But it’s pretty simple. In this business, remember it’s a public private sector sharing program, this is a Federal Government Sponsored Program. So there is a very clear formula that you follow, because the government takes a certain amount of the risks and both individual risks and excessive loss protections that they provide. And so depending on the actual year and how it comes out, you apply the formula of how you share with the government. In this quarter, you have to give premium to the government. Therefore, your earned based goes down substantially and that’s how you end up with the negative combined ratio. They take premium, they take a certain amount of losses and so it’s the denominator that is driving that. You are following me?

I am. That’s getting me where I want to go. Thank you.

You got it.

Our next question comes from Jay Cohen, Bank of America Merrill Lynch.

Thank you. Yes just looking at I guess the U.S. business as North American businesses. You did say in personalize side was that the accident year loss ratio excluding tax did jump up this quarter relative to the past four relative to the past seven. I'm wondering if there is any kind a unusual items in there whether a large loss activity. And then similarly in the commercial business again North America that accident year ratio ex-Cat wasn't quite as bigger jump, but it did go up from where it had been and I am wondering what is happening there as well.

Yes, I'm going to ask Paul Krump to talk about one of them the personal lines. And then I want to make a comments to you. And then I am going to have John Lupica just talk about the commercial lines what happened one-on-one.

Well thanks for question Jay as Evan said I am a bit of a storyteller. So let me just backup here a second. The 2016 fourth quarter combined ratio for PRS is 82.1 excluding Cats and PPD. That compares to 80.9 in the fourth quarter of 2015, so up a little bit. However, the fourth quarter of 2015 underwriting income benefited by $18 million from back holiday related to the purchase of prior funds. So if we reduced the 2015 underwriting income by that one-time adjustment, we actually end up with an 82.4 current accident year combined ratio ex-Cat and PPD compared to the 82.1 that we had. So all up you actually saw on a combined ratio basis is 0.3 point improvement in the current accident year's combined ratio obviously mainly due to the expense ratio is often to the synergies and impacting the new reinsurance agreement that Evan just touched on numerous response. So the lost ratio was up a little bit. And as you said it was due to some losses and they were the non-Cat weather area, in particular we saw some more water damage claims and some burst pipes. But as Evan also said in his earlier comments that's a bit of noise. The reinsurance business goes up or down a little bit quarter-by-quarter.

Yeah that's helpful Paul.

And John, actually the opposite.

Yes Jay and thanks. On the commercial side, for both Paul and I are all in North America that the year-over-year change is really just the fact that our 2015 current accident year have a fewer amount and lower large losses than we saw in 2016. I wouldn't say 2016 was above average I would just say 2015 was probably below average and that's really the change.

Yes and it make sense to you Jay?

Yes. Thank you.

And I just want to - I have read a number of that analysts early reports and talking about this questions. And I don't want to make comment about that. We had simply an outstanding quarter, our calendar year combined ratio reflects all the good and all the bad. i.e. there were more Cats, there was flat PPD. We had outstanding crop we had excellent global P&C results. Looking at the business as sort of well but for this, well but for that, except for one-time items like the pension benefit, which is fair is misleading in my mind, because all these businesses are ongoing businesses and it makes contribution. We are in the risk business, and there you are going to see noise always from one quarter to another quarter. We didn’t reach in our current accident year reserving, whatsoever, and how we post loss ratios, we didn’t suddenly grow optimistic and I remind you that we are conservative in how we manage our business. We recognize bad quickly and we are very slow to recognize good. So as you look at the individual pieces, I wanted to give you a bigger perspective on it.

Got it.

Our next question comes from Ian Gutterman, Balyasny.

Hi. Thank you. First, a quick numbers one and then a question reserves. So could you just clarify that the 60 million in VA. Is that just for 2017 or is that sort of recurring thing well into the future?

It will go into the future. I mean, unless we change our view of interest rates or change other assumptions. But based on what we feel now that would be a continuing adjustment.

Got it. Thank you. And Evan just to flush out a little bit more sort of what is going on in the industry and where things maybe heading on reserves and so forth. I was hoping we could flush out a little bit more I think you alluded earlier. But, specifically the topic of adverse development coverage, whether they be just people buying a little bit of protection for align that they are a little nervous about to some of these gigantic unprecedented deals. It seems ADCs are back and away we haven’t seen an almost 20 years now. And last time when they were prevalent, it seems to be a pretty good tale, right? I mean the buyers where the smart ones and the sellers where the dumb ones. And does it feel like that’s happening again this time? And maybe a better way to ask this, would you guys sell an adverse development cover to anybody right now?

I am not in that business. What you see is soft versus the hard part of the cycle. People, as you get into, some are better underwriters and more disciplined in a competitive environment and they are to in this business than others are. And some are aggressive to growth and they sell very broad covers and they sell them at cheap prices and they don’t have the command and control in underwriting and so they get surprise. And you put those two things together and now and again, there is a derivative business for garbage collectors, who come around new collection. And they collect the garbage out of portfolios and that’s what you got here. I am not a buyer nor a seller. I can’t imagine that we would be in a position where it would make sense for us to give up a substantial percentage of our loss reserve asset and its future income. Because we didn’t have the risk management and the control and knowledge of our business that we would have to that will be so unsecure, we have to give up on our portfolio that way. Shrink our balance sheet that way. It makes no sense to me and for us how we run our business, but you seen it, this is a business that has grown over the years. There are couple of guys have been pretty good at and they have done a pretty good job. So not everyone I would say gets burned at it. But it is, this is an industry if you look at the ROE of the industry. And the mean is poor and there are both sides of that mean are those who outperform, on the other side those who underperform. And the ones who underperform they generate a lot of garbage and so the garbage collectors come around.

Very apt analogy. Thank you Evan.

We have time for just one more person to ask question. Thanks.

Our next question comes from Brian Meredith of UBS.

Hey thanks a couple of questions for you. first one Evan I'm just curious, are you at the point in the Chub integration where you are kind a comfortable enough that if something else comes up that you think you have got the not only the financial capacity but the management capacity to absorb a small mid-sized acquisition.

I want you to know, I am looking at room full of colleagues will absolutely taking out [indiscernible]. You know what, we are focused on integrating and getting the power of the promise of all of the capability against - matched against the opportunities that this organization has right now. and I'm going to leave it at that except to say we have management bandwidth.

Okay great. And then my second question is just the VA volatility is almost like a nonsense. Is there any opportunity potentially to get rid of that at some point. Are you think you just going to stuck with it forever?

No, but the VA and we are going to do this in 2017. We are going to split the life business into three pieces that you could see. Our international life earnings in total - I don't know the exact number. like $27 million this year and will grow they ought to grow substantially in 2017 and that's for our international life insurances. Our combined underwriting income for the combined insurance company that's in the life division that part of it produces good earnings. And you will see those pieces. The VA was producing [indiscernible] at one point about $100 million, $150 million or $160 million year of operating income. It's come down to about $120 million or $130 million. and now it's coming down to like $60 million going forward. And keep in mind this is that it hasn't produced good income for us, but with obviously the book value volatility that has gone with after the market.

Great. Thank you.

Thank you everyone for your time and attention this morning. We look forward to speaking with you again at the end of next quarter. Thank you and good day.